Corporate social responsibility is an increasingly important aspect, especially in New Zealand with the uphold of a clean and green image. Consumers are demanding more accountability of companies regarding sustainability which is displayed through many recent events in New Zealand such as a big branded supermarket, Countdown, banning single-use plastic bags by 2018 (Clayton, 2017). The question that stems from the increased corporate social reporting in New Zealand companies is whether this impacts on the profitability of these companies. This issue is targeted at the New Zealand banking industry, especially as banks hold the image of being “greedy” and money-orientated.
The method of the current study involved retrieving data from each of the competing bank’s financial statements and corporate social reports for the years 2012-2016. The data retrieved consisted of the Return on Total Average Assets (ROA) and Return on Ordinary Shareholder’s Equity (ROE) to measure the profitability figures. The profitability figures are measured against the CSR aspects of each bank including the women in leadership percentage, dollar figures of community investment and CO2e produced (tonnes).
The methods that dominate the current study orbit around Pearson’s correlation analysis which is valuable for answering the primary research question of whether there is a definite relationship between CSR reporting and profitability in New Zealand banks. Scatter plots were also of use in this stage of the method and displayed the banks’ CSR aspects over the years, as well as present trends.
The results produced some interesting findings in which made it difficult to answer the research question in its entirety. Results differed between each bank, but two of the leading banks produced relatively strong positive relationships between the women in leadership percentage and CO2e reductions against the profitability measures.
Key recommendations that would stem from the most significant results is for New Zealand banks to focus more on the equality aspect in their employment as well as the environmental issues they are creating. Reducing their carbon footprint and ensuring a gender equal workplace is suggested to be tied to increased value and profitability from the current study. Incorporating a framework to be able to measure CSR within the banks is progressive towards adding value profit wise as well as environmentally, socially and sustainably.
Recommendations for future studies would be to research over a more extended period to obtain more reliable results. Another suggestion would be to use a different profitability measure as return on equity and return on assets differed from each other. Using one profitability measure, even a figure such as net income for the year may produce more accurate results as many other factors contribute to or interfere with the values of return on assets and return on equity.