Each year, according to a 2014 report by the economic consulting firm EPG, Fortune 500 companies in the US and UK spend more than $15 billion on activities related to corporate social responsibility, or CSR.
In addition to doing good work, they’re likely boosting their bottom lines: A 2015 study showed that 66% of consumers are willing to pay more for products and services made by morally upstanding firms.
That’s one route to an improved bottom line — one warmly embraced by some contemporary brands, like Patagonia, the outdoors outfitter whose marketing has focused almost exclusively on conservation and discouraging customers from buying its wares – only to see its sales rise.
There may, however, be another. According to work by Vanessa Burbano, workers’ wage demands are lower when working with firms that prominently signal their commitment to CSR, and top performers are those most willing to forego wages to join the enterprise.
Burbano draws her conclusions from data from two experiments conducted in online labor markets. In one experiment, freelancers given CSR messaging submitted bids 44% lower than those who weren’t privy to any information on positive corporate behavior.
Her findings also point toward a possible reason. Socially responsible firms are thought to be more trustworthy, leading workers to believe they’re more likely to be treated well. That’s peace of mind evidently worth paying for.
Burbano conducted her experiments via Elance, a freelance platform for service professionals, like graphic designers and programmers and Amazon’s Mechanical Turk (AMT) — a web platform that enables users to farm out quick, easy tasks, like taking surveys or interpreting images, for pennies. Some workers received messages about corporate social responsibility (CSR); others did not. Everyone was given the opportunity to specify the lowest wage they would accept.
“These are real labor marketplaces,” Burbano says, explaining why online platforms lend themselves well to this type of research. “You’re not working with students or asking people to act like they’re in the job. They’re actually working.”
To find out what might drive people to submit lower bids, Burbano had the workers submit a survey detailing their attitudes toward CSR as well as their history of volunteering and making donations to charity.
Workers who equated charitable practices with overall trustworthiness in the survey were more inclined to ask for less money, but volunteer experience and donations both failed to predict greater responsiveness to CSR messaging.
Burbano explains: “What workers value is the signal of the likelihood they’ll be treated well. It’s not necessarily the people who are altruistic in nature who are going to care most about that.”
The fact that the highest performers in both experiments proved especially receptive to CSR messaging proves the point further. As Burbano says, these people care the most about their AMT and Elance ratings, since employers can scan for people with impeccable records. They’re the most concerned about getting a fair shake and coming away with a positive review.
“All of these are suggestive results, but taken together, they provide some evidence there’s something going on here with signaling employee treatment,” Burbano says. “People who have the most to gain from the signal value it the most. Therefore, they have the highest willingness to pay.”
Burbano acknowledges in the paper that the online “gig economy” isn’t indicative of the overall job market — freelancers, or independent workers, account for about 33 percent of the US workforce, according to the Freelancers Union. Still, there’s reason to believe that individuals with full-time jobs would behave similarly and perhaps be even more accepting of lower wages.
In traditional full-time employment settings, Burbano explains, people derive extra value from working for socially responsible firms because it affects their self-identity. They feel good about themselves and find their work more meaningful and fulfilling. “If you can find an effect here,” Burbano says, referring to temporary freelance jobs that, by nature of their fleetingness, offer no such identity benefits, “you can certainly expect to find an effect elsewhere.”
“What this study shows is prospective employees really do value social responsibility at companies, and it shows the highest-performing workers are the ones who care about it the most,” Burbano says. “To the extent that that’s a population that companies really care about, it elevates the importance of doing this kind of work.”
Vanessa Burbano – Vanessa Burbano is an Assistant Professor of Management in the strategy area at Columbia Business School. Her research is on topics at the intersection of corporate strategy and social/environmental issues, and on employee motivation.
Ivy Exec is proud to announce its partnership with Columbia Business School, to bring an insightful collection of thought leadership pieces for the modern-thinking strategist in finance, leadership and more to its platform.