Like it or not, and irrespective of our personal political ideologies, corporate social responsibility has gained in popularity in the past decade. In this article, we’ll discuss what Corporate Social Responsibility (CSR) is and what it means for private business owners from an exit strategy perspective.
The Four Pillars of CSR
CSR is often thought of as having four pillars: the community, the environment, the marketplace and the workplace.
- Community. This pillar refers to the manner in which a company contributes to the greater community. Contributions can range from simply providing good jobs for people in your local community to donating money for a new playground or public art project.
- Environment. People around the globe are becoming more environmentally conscious. Increasingly, consumers want to know that the companies that they patronize have sound environmental practices. These practices range from recycling, to using low-emission high-mileage vehicles, to using biodegradable packaging. The more your company can demonstrate how it is protecting the long-term health of our environment, the more customers will be attracted to your product or service.
- Marketplace. Proper corporate social responsibility includes adopting fair treatment policies towards suppliers and vendors, contractors and shareholders. It’s critical to view all stakeholders in the company as partners. The marketplace aspect of CSR means rejecting any exploitative business practices that you may have in favor of fairer and more equitable business practices.
- Workplace. With respect to workplace, CSR encourages the implementation of fair and equitable treatment of employees. It makes sense that having a healthy, financially secure and committed workforce with a strong corporate culture and a safe work environment improves the desirability of your company. Profit sharing, medical coverage, retirement and wellness programs are all part of this mix.
Are socially-responsible companies better investments?
In my experience as an M&A advisor, I have to answer yes, all other things being equal. It’s not the most important factor, but today’s acquirers prefer to buy companies with a culture of social responsibility. Owners considering selling or recapitalizing should plan for this. Being able to demonstrate a strong CSR track record should serve to increase buyer and investor demand and therefore selling price.
Our M&A advisors to small businesses have noticed that older (baby boomer) owners in particular are surprised by the importance of good CSR practices to the younger generation of buyers. With the advent of social media, its easier than ever for them to get a sense of your company’s social responsibility.
It may be time to to gather your management team to explore the value that CSR can bring to your organization and assess your CSR performance. Here is an HBS white paper on Why Every Company Needs a CSR Strategy and How to Build It.
Al Statz is Exit Strategies Group’s founder and CEO. For further information or to discuss a current need, confidentially, Al can be reached at 707-781-8580.