Kraft Foods Group Inc (KRFT), Panera Bread Co (PNRA), Whole Foods Market, Inc. (WFM): Does Social Responsibility Increase Financial Performance?

Kraft Foods Group Inc (NASDAQ:KRFT)’s charitable giving undoubtedly has an impact on the causes it promotes, but the shareholder value created is unlikely to exceed that of other CSR companies. The company’s broad-based approach offers it the same exposure as sponsoring a sporting event; it is essentially a way to create a weak link between Kraft and causes that consumers believe are beneficial to society.

Panera Cares has an impact on consumer behavior in the communities it serves. Customers are more likely to view Panera Bread Co (NASDAQ:PNRA) in a positive light, and those with the means to make a donation to Panera Cares are more likely to visit a for-profit Panera Bread location when the only alternatives are other for-profit, fast-casual restaurants. But the program is limited in scope — there are only five Panera Cares locations — so the effect on consumer attitudes toward the company is small.

Whole Foods’ success in both creating shareholder value and furthering social ideals is due to its integration of the two goals into one operating model. Panera Bread Co (NASDAQ:PNRA) and Kraft Foods Group Inc (NASDAQ:KRFT) have been unable to integrate the two. Instead, they have created offshoots of their normal operations to serve as the social arm. This makes it difficult to pursue both goals at once, and is the reason that Whole Foods derives much more value from its social responsibility efforts than Panera Bread Co (NASDAQ:PNRA) and Kraft Foods Group Inc (NASDAQ:KRFT).

Takeaway

If you are trying to decide between two seemingly equal investment opportunities, the data shows that you should choose the more socially responsible company. The more integrated social responsibility in the company’s everyday operations, the better. So the next time a company makes a donation to a social cause — rather than ruthlessly pursuing profit — think about how much long-term value that donation is likely to create for shareholders, rather than the smaller dividend that comes next quarter.

The article Does Social Responsibility Increase Financial Performance? originally appeared on Fool.com and is written by Ted Cooper.

Ted Cooper has no position in any stocks mentioned. The Motley Fool recommends Panera Bread and Whole Foods Market. The Motley Fool owns shares of Panera Bread and Whole Foods Market. 

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