By Marilia Assis (B-Hive)
During the last century, many scholars attempt to define and create theories around corporate social responsibility (CSR). From Morrell Heald, who differentiated philanthropy from social responsibility, to Professor Marc Orlitzky, who is widely respected for his meta-analysis to measure the corporate social and financial performances. However, it was during this century that we have seen a growing number of companies creating a business model based on CSR. Financial institutions, first sceptical, are now discovering the financial value of it.
In 2003, Prof. Orlitzky took a granular approach on CSR, he rejected the vision of the neoclassical economists, in which CSR is not consistent with shareholder wealth maximisation. Furthermore, he proved that CSR is likely to pay off. The results of his studies can be considered as an archetype of our time. Nowadays people (especially millennials) buy what brands represent for their own personal image, supporting socially engaged companies (this was explained in the article about influencer marketing), placing the companies that understand this concept in the forefront.
One example of a scaleup that embraced CSR is Aspiration, a California based fintech, which serves to be a socially-conscious and democratised investment platform designed for the middle class. Aspiration allows members to set their own fee, even if it’s zero. Furthermore, Aspiration donates a dime of every dollar they make to charities focused on bringing economic opportunity to people. Against the belief of the neoclassic economists: this company is profitable and already raised more than $20 million. Last but not least, the positive image generated by its concept is growing, as the company is one of the finalists from its category for the international fintech awards Benzinga 2017.
Another interesting example is the New York based CommonBond, an online lending platform that helps lower the cost of student loans. By their own words: “We're people just like you, who were frustrated by the high rates and poor service that cost us extra money and caused us extra stress. We knew there had to be a better way. So we created one.” The CEO of the company, David Klein, credits their success to their CSR in an interview to the website TearSheet. He said that 50 percent of his customers reach the company through word of mouth - the largest figure of anyone in the student loan industry, according to him. Klein’s affirmation proofs once again that customers are choosing to invest in companies that stand for their personal values and beliefs. Their outlook is strongly positive, as their financial performance develops with the same pace as their marketing outreach. And also the investors acknowledge these results: CommonBond raised already $78 million.
Our third CSR lesson comes from the Paris based HeoH, an omnichannel digital donation platform. The company collects microdonations from people paying at thousands of merchants partnering with HeoH to help a multitude of charities and social projects around the world. The startup is well renowned in France, being constantly mentioned in the newspapers and television. The positive reputation was also responsible for them to receive more than $ 2 million of investments in Series A.
With the previous examples, we could observe how effective it can be when companies develop a business model based on CSR. These startups are showing enhanced access to capital and improved brand recognition, creating a feeling of loyalty and partnership with their users. However, this is just the beginning, as according to researches the number of such companies will drastically increase in the next year. Let’s be ready!
Corporate Social and Financial Performance: A Meta-Analysis. Marc Orlitzky Frank L. Schmidt Sara L. Rynes. 2013. Available Online.
Corporate Social Responsibility: It's All About Marketing. Corporate Social Responsibility. Forbes. 2009. Available Online.