A business is an establishment that seeks profit. It can be a small sole proprietorship, or it could be an enormous global corporation. In either case, a business is the property of its owners, and their right to profits is inviolate. This means that when a business diverts resources for social purposes it risks alienating stakeholders, or it may even be found to have engaged in unethical behavior.
Some companies have managed to balance their goals of fostering social good with the needs of their brands, but they are few and far between. More often, C-suite executives are forced to choose between a focus on corporate social responsibility (CSR) and the ruthless pursuit of profit growth. This pressure comes from shareholders who have little patience for short-term losses, and the need to meet quarterly earnings estimates that often result in a punishing stock market.
In the case of a significant social risk event, such as an oil spill or the collapse of a building that leaves many people homeless, managers can be subjected to intense public scrutiny that has long-term implications for their brand and reputation. A company can lose its customer loyalty, face lawsuits, and even experience a loss in investment appeal due to the negative press.
It’s not just the reputational damage that businesses face when they divert their assets for social causes; they can also risk a loss of investor confidence and regulatory oversight. Despite the many benefits of CSR, the evidence suggests that managers should focus on initiatives that support their strategic objectives. Otherwise, the efforts can be more of a burden than a benefit.