NFP: Ethical view benefits

Companies that integrate corporate social responsibility practices into their business operations benefit from a significant reduction in staff turnover, new university research has found.
The Curtin University Graduate School of Business research also found that CSR practices were associated with an increase in customer satisfaction and company reputation.
“The findings are provocative and suggest that CSR is linked to all three dimensions,” the study concluded.
“This paper demonstrates that CSR is valuable to organisational performance; namely, with respect to non-financial indicators of success.”
The study, by Curtin research fellow Jeremy Galbreath, surveyed a sample of established businesses with over 50 employees to study the non-financial benefits of CSR.
Mr Galbreath defined CSR as a business approach that seeks long-term value through the management of risks and economic, environmental and social developments.
His research found that the focal point of success for businesses has been drifting away from purely financial measures to also include non-financial factors.
Mr Galbreath said several studies over recent years had shown CSR to have a positive effect on the financial performance of firms. However, relatively little is known about the impact of CSR on non-financial performance, such as employee turnover, customer satisfaction and firm reputation.
Mr Galbreath said CSR was important for three main reasons.
“[CSR helps businesses to] gain strategic advantage and leverage within the target market, which means that consumers are more readily prepared to pay a premium,” he said.
Mr Galbreath also said that CSR helped firms to avoid disadvantage; stakeholders expected a degree of social responsibility, and defying this may “burn up goodwill”, which had an especially significant impact in corporate crisis situations.
Mr Galbreath said the final and most significant importance of firms practicing CSR was that there was a contract between businesses and society to adhere to certain explicit and implicit moral obligations.
He said firms had a right to earn money and make profits, however “it’s how you go about making that profit that counts”.
In the few studies performed in this area, findings have shown a link between CSR and employee commitment, customer loyalty, consumers’ purchasing intentions and their perceptions of a company’s products, and attracting prospective employees.
The Curtin survey expanded on this by asking questions that measured each firm’s economic, legal and ethical practices against their perceived reputation and customer satisfaction.
Mr Galbreath said the most significant and exciting finding from his study was that CSR had a significant effect on reducing staff turnover rates within firms.
The results also indicated that CSR was associated with a significant increase in customer satisfaction and company reputation.
“The results suggest that being a good corporate citizen has implications beyond a financial payoff,” Mr Galbreath concluded. 
Mr Galbreath said one of the main challenges in conducting the study was the phenomenon of ‘survey fatigue’. Although 3,000 surveys were sent out to chief executives (1,500 to manufacturing companies and 1,500 to services companies), there were only about 300 responses.
This number of responses was still considered statistically significant.


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