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4 Reasons Why Startups Committed to Social Responsibility Succeed Difficult though it is to calculate ROI on doing good, startups find social responsibility connects them sooner with customers, investors and committed employees.

By Alicia Lawrence

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

In the past decade, we have seen startups rise to success from just a few dollars in their pockets, an idea and the will to do good. Their success has taught us there is no longer just one bottom line but a triple bottom line, or the three P's –people, planet, profits.

Social responsibility, the act of companies giving money or time to further social good and sustainability efforts, has become an integral aspect to a startup's success.

Harvard Business School Professor Michael Porter saw the profit potential in companies focusing on all three bottom lines, writing in the Harvard Business Review in 2011 that "businesses must reconnect company success with social progress....It is not on the margin of what companies do but at the center.''

Porter predicted this type of business model is the future of successful companies. He was right. Social responsibility has evolved from simple check-writing gratuity to creating company values, encouraging ingenuity, and providing opportunities for employees to impact society as a whole.

Related: How Purpose and Social Responsibility Can Set a Startup Apart

Case studies show social responsibility can have a positive impact on a startup's growth and profits.

1. Startups connect with customers on a deeper level and develop stronger relationships with vendors by incorporating social initiatives within company values. Participating in social good in your community can drive new business opportunities.

Social initiatives have a significant impact on a product's earning potential. According to consumers surveyed by Havas, 53 percent of consumers would be willing to pay a 10 percent premium for products when companies use a portion of the profits to contribute to social good.

Meditek, an established startup that sells medical equipment to hospitals, has found their social initiatives help differentiate their company in the mind of prospects. Meditek donates used medical equipment from their trade-in program to international aid foundations in developing countries such as Haiti and Uganda. Meditek created brand loyalty through their social initiative.

"Hospitals have more of a desire to work with us and trade in their older equipment, as they know it is going to good use,'' said Brad Samuels, Meditek's marketing manager. According to research by Edelman, 68 percent of global consumers would remain loyal to a brand if the organization practiced social responsibility.

2. A startup's involvement in philanthropy attracts and retains employees. We all want to do something worth-while in our life. That's why many companies have found abiding by the triple bottom line philosophy effective in boosting employee morale.

A social initiative within the company builds pride, motivates employees and creates cohesion among the staff at all levels. This makes employees ultimately more productive when they have a feeling of purpose and self-worth at the task they are performing.

Salesforce.com, a successful startup and global leader in CRM and cloud computing, has pioneered the philanthropic 1-1-1 model of giving. The Salesforce.com Foundation devotes 1 percent of their time, 1 percent of their products and 1 percent of their equity to improve the communities where employees work and live. Employees are also given six days off each year to volunteer at a cause of their choice.

"Allowing our employees to spend time on something meaningful to them plays a key role in our recruiting and retention efforts,'' said Suzanne DiBianca, president of the Salesforce.com Foundation.

3. Social responsibility enhances a startup's reputation. As a startup, it's difficult to get your name out there and have people trust you enough to become a customer. Social responsibility will help you get that competitive edge in marketing.

WebpageFX, a successful Internet marketing startup, has found their social initiatives help build trust with potential clients. Their #FXbuilds program rewards employee goal completions by donating money to build a school in a developing country.

"Giving back and being generous is a great way to start building that trust,'' said Trevin Shirey, WebpageFX's senior outreach strategist. "Clients like to see there are real people working here who care about others. It's a powerful way to start building emotional connections with people while also getting to give back to others.''

Related: Corporate Social Responsibility Done Right: 5 Ways to Help Your Company Shine

4. A startup's philanthropy can impact their stock value and shareholders' interest. While the bottom line value of social responsibility is not easily quantifiable, shareholders often view sustainability efforts and social good a sign of company health and future profitability.

Investors are also more willing to put money into a startup if they have the personal satisfaction of knowing the startup is heavily involved in social responsibility. Once a startup goes public, social responsibility initiatives can improve the company's stock price by getting listed in indices like FTSE4Good and Dow Jones Sustainability.

Social responsibility won't override the importance of profitability to an investor but it can create favorable rankings with shareholders. Shareholders often see an increase in company philanthropy as a sign that profits for that company are on the rise and, therefore, so will their stock returns.

One of the top startups in 2013, Ranku—a marketplace for online degrees from traditional universities, has incorporated social responsibility at the core of their company. Philanthropic strategies and strong shared values were particularly important when it came to finding investors who would want to work with them. Today, Mark Cuban and Microsoft are some of their largest investors.

"I think it [social responsibility] should be a part of every business, even in the smallest way," said Kim Taylor, co-founder and CEO at Ranku.

Social responsibility is a strategy for the long term health of a company. While the benefits of building your startup on philanthropic strategies might not be evident at first, remember the value and satisfaction of adhering to the triple bottom line often surpasses the cost.

Many startups put off social responsibility till they get their "house in order" and begin making a profit as a company. But this is only the case if you view social responsibility as curb appeal, not as a core element of the company where philanthropy has the greatest impact and can produce the greatest results.

Related: Why Milton Friedman Could Love Social Entrepreneurship

Alicia Lawrence

Entrepreneur and Content Coordinator at WebpageFX

Alicia Lawrence is a content coordinator at WebpageFX, an Internet marketing startup in Pennsylvania. She's a frequent contributor to PR Daily, SEMrush and Spin Sucks.

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