The purpouse of a company is to create value for its shareholders.
Value is generated when the company is able to invest its
capital at a return greater than the cost of capital.
Its that simple, now you maybe wondering what all of this CSR stuff is all about then. It again is simple, to disguise this cold hard fact from you. CSR is in fact just a part of the company's PR plan, its purpouse is to make you feel warm and cuddly about to company and only for the reason, you guessed it, CSR has been proven to generate bigger returns.
A few examples, those Pink Breast Cancer Awerness ribons, have fairly little to do with breast cancer, but a whole hell of a lot to do with rates of return. Ladies you can bet your oh so sweet asses that some guy, a little bit like me, went through some data and came to the conclusion that by generating x% of extra sales the company could afford a price cut of y% and if the sales would increase above x% then generate a higher return on investment. Then some ruthless marketing person came up with a concept where by donating a portion of the sales price to a charity(breast cancer) that the main focus group (women) are interested in the company could achieve the new sales targets and maybe in few years they might be actually be able to charge a higher price than before. Lo and behold the Pink Ribbon campaign was born, now they are selling the product and making you feel good about spending money, since your not really spending it you are donating. If you are serious about helping to cure cancer donate to a freaking cancer charity or better yet to straight to a goddamn University Hospital.
More positive examples are how treat your employees and customers. The first chapter of every Customer Service textbook always deals with how good customer service leads to high return on investment. Its a proven fact that repeat customers offer higher returns than new customers, they provide a steady stream of revenue. The same goes to treating employees, employees and their know-how present is the most important intangible asset the company has, Google is a good example of this, they treat their employees like Gods with spectacular results.
Now you maybe wondering how can business be ethical if the only thing they should care about is the rate of returb? The anwser is simple, you. While the corporations don't have any moral guidelines, you do. The companies are there to make money by fulfilling your wants and needs, how you choose to fulfill those wants and needs is entirely up to you. If you don't care about things like child labour or the destruction of the environment, businesses will provide you with cheap products by using child labour if that is the way to the highest shareholder value. If on the other hand you refuse to buy a brand that is associated with the use of child labour then the returns on investment for that product will go down and the shareholders will lose value. The key to ethical business are ethical consumers. So if you are pissed at a company, don't buy its products and tell your friends about it, on Facebook or Youtube.
Final words to the ones reading this who have their own business or are planning on starting one, should note that the rule at the beginning also applies to you. If I would ask you, what your required return on equity* is, how would you anwser me? I would be interested in hearing your anwsers.
*(return on equity is the "cost" of capital for the money you put into the company aka how much profit you want to make on your investment into your own business)