As some of you might know, Amazon came up with a new charitable project called ‘Smile’. How this works is, when customers purchase a product from Amazon, they have the option of deciding whether they want to donate a percentage of the profit Amazon makes to a trustworthy charitable organization such as Red Cross.

Now let’s not kid ourselves, we all know that except for a very select few, CSR is merely a method necessary to ultimately increase profit for for-profit businesses.

So the question everyone asks is, “How does one get ahead of competitors when the majority of companies out there are implementing CSR in a way or the other?”

Although this question may seem complex on the surface, it’s actually a very simple question to answer. All you have to do is to look at CSR as a marketing tool. If you think about it, all companies promote their ethical behaviours in some way or the other. And just like any other marketing moves, you have to look at CSR in that light. Therefore, the answer to the question asked above is that for a company to get ahead of competitors, they have to see how much their potential ‘socially responsible’ move is going to be perceived by the public, compared to the actual costs of implementing it.

For Amazon, the charity is going to decrease their EBIT, thereby essentially allowing Amazon to pay less tax for each product purchased with SMILE. When the end of a quarter comes, they can advertise the sum of SMILE’s charitable monetary contribution and customers would simply think that the figure represents how much Amazon gave away when technically, it isn’t. Needless to say, there would be more repeat customers as they feel good about their purchases lead to greater ‘world benefit’.

But still, the article says Amazon’s income statements aren’t showing any net profit. This is a sign that Amazon is doing it right. In a dynamic industry like theirs, they understand that they need to constantly adapt to keep their current customers and appeal to more and they are doing just that.

Reference:

http://www.businessweek.com/articles/2013-10-30/now-amazon-is-just-giving-money-away#r=nav-r-story

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