Return on investing in social sustainability

Nowadays, many companies engage in social causes that are aligned with the social concerns of their customers. In the Strategy Blog “Business sustainability and cost of equity” it was shown that social sustainability has a more indirect effect to business performance. In the November edition of the Strategic Management Journal Fosfuri et al. (2015) show the effects of social event sponsorship in relation to the timing of new product release, product lifespan and pricing.

The research shows that products that were introduced in a month in which the company also sponsored social events, remained longer in its product portfolio. When however the pricing of new products increased this positive relationship decreased and for high priced products there was even a reduced lifespan.

There seems to be an interesting trade-off for a firm when it comes to investing in the sponsorship of social events either:

  • to create value, which leads to a longer product lifespan or
  • to capture value in the short term as a result of higher pricing but leading to a shorter product lifespan.

Norbert Bol

Literature

Fosfuri, A., Giarratana, M. S., & Roca, E. (2015). Walking a slippery line: Investments in social values and product longevity. Strategic Management Journal., 36: 1750–1760. doi: 10.1002/smj.2311

Photo credit: robjewitt / Foter / CC BY-NC-SA

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