Looks like the Stick still beats the Carrot

I don’t know how many of you saw the Business Insight piece in the WSJ on Monday, Does Being Ethical Pay? Here is another link to a summary just in case you don’t have access to the WSJ site.

Of course being ethical pays! Especially when you compare it to being unethical! I think they should have titled the story something closer to the title of this blog. The story included several interesting, if crude conclusions based on a couple of scenarios tested with groups of 97 and 218 people respectively.

Go take a look at the article – it is much better than my quick take-aways here.

1 – People are willing to pay a little more for a product produced in a socially responsible way.

2 – People are even more willing to punish a product (or producer) by paying less or avoiding the purchase if they believe that product was produced in a socially irresponsible way.

And, 3 – perhaps most importantly for business – there seems to be a threshold of goodness at which point the rewards from consumers reach a point of diminishing returns.

To be honest, I think all three of these outcomes are fairly intuitive, but it is still very interesting to see actual examples prove them out. Much of the early genesis of CSR was born from managing risks. It is this 3rd generation of CSR that has shifted focus to the business opportunity.

There is much more in the story including some great links to resources and forums for those with more interest. I guess if my 4th grade daughter had to summarize this story for future business leaders, it might go something like this.

1 – Don’t do bad things.

2 – Take care of the environment and people when making products.

3 – Be sure to communicate #1 and #2 to your customers.

4 – Be smart on your CSR investments to maximize long-term sustainability and shareholder return.

Ok, #4 is mine. She hasn’t fully grasped consumer psychology, business and CSR yet. Clearly I oversimplified. If you have your own views – add them to the comments.

One Response to Looks like the Stick still beats the Carrot

  1. Dear Mr. Stangis,
    I enjoyed your post and thought you might be interested in receiving a review copy of a book we just published at Columbia Business School Publishing. When Principles Pay: Corporate Social Responsibility and the Bottom Line by Geoffrey Heal, Garrett Professor of Public Policy and Business Responsibility at Columbia Business School. (see link above for more information).