What Is Corporate Social Responsibility (CSR)?

As we’ve slowly but surely gotten used to more globalised ideas of being more civic-minded, businesses have also had to step it up, especially since the dawn of the age of social media. But due to the powers that be it’s easier for an individual than it is for a corporation to “do the right thing.

Socially-responsible activity doesn’t normally carry much risk at a personal level. A corporation that “does the right thing, however, may risk loss of revenue, loss of profits, and loss of jobs. And one of the jobs most at risk belongs to the corporate executive who decides to “do the right thing.” This is maybe why a certain president it so keen to steer clear of any kind of socially responsible policy. More and more companies are adopting a policy of corporate social responsibility at an organizational level. Formalizing the goal of “doing good” doesn’t leave any executive or employee twisting in the wind for their decision to try and make a difference. Instead, a CSR embeds the concept in a company’s DNA, and has long-term benefits which far outweigh any temporary financial outlays.

Defining Corporate Social Responsibility

There’s no single, accepted definition of CSR. A simplistic view is that corporate social responsibility is nothing more than self-regulation. Businesses not only comply with all laws or regulations which govern them, but go beyond them. A more sophisticated approach to CSR defines it as performing actions contributing to the overall social good. In some nations or industries that means delivering goods or services without harming the environment. In others, the definition is expanded to include positive actions which benefit employees and communities, or which encourage ethical societal behavior as a whole.

Some companies practice social responsibility by using only ethically-sourced products in manufacturing, and some implement corporate social responsibility mandates by funding medical institutions, schools or advocacy campaigns in their home communities. Many dedicate corporate resources to research or development projects which may bring about societal improvements but won’t directly increase profitability, while some simply codify an underlying CSR philosophy with a phrase like Google’s “Don’t Be Evil,” and implement it on a case-by-case basis.

Corporate social responsibility isn’t one-size-fits-all. But a number of management experts describe four specific types of CSR initiatives:

  • Socially-Responsible Sourcing, Operation and Business Practices
  • Funding Volunteer and Pro-Bono Work by Employees
  • Issue Advocacy and Behavioral Change Campaigns
  • Philanthropy and Charitable Donations

Most effective CSR programs include some or all of those elements.

Why CSR Is Necessary

Ethical readers may wonder why specific corporate social responsibility policies are necessary. The answer can be condensed to five words: companies often do bad thingsThere are innumerable examples of businesses and corporations ignoring the greater good in pursuit of profit. The most egregious ones include air, land and water contamination by industrial plants, the theft of natural resources by multinational corporations, and the use of child labour in third-world manufacturing facilities. Less serious but still harmful examples include overcharging customers or defrauding Medicaid.

And even if companies aren’t making deliberate decisions to cut corners or overtly cause harm to improve the bottom line, their operations may still be causing societal problems. A firm utilizing industrial diamonds could be sourcing them from countries where stones are mined and sold to finance revolution or oppression. “Legal” emissions of pollutants may still be enough to harm the environment. Without a guiding star, hikers can easily get lost at night; without a guiding principle, corporations can lose their way just as easily. That’s why corporate social responsibility matters, and why so many shareholders, customers and employees demand that companies implement and follow a CSR program.

Driving Forces for Corporate Social Responsibility

There are unquestionably many companies whose executives have a deep social conscience. They’re likely to embrace CSR policies on their own, and rigorously conduct business according to them. Other firms, however, only do it in response to pressure.

And that pressure has grown in recent years. For example, recent research by Cone Communications discovered that nearly nine out of ten respondents would prefer to buy products from companies which support a cause or issue they’re passionate about. Three-quarters would not buy from a business if they learn that it opposes one of their favored causes or issues. And other studies have shown that customers who use CSR as a buying criterion are more accepting of higher prices.

Consumer support of corporate social responsibility is evident in the decisions corporations are making in the 21st century, and is the major driving force behind the increased production of ethically-sourced products. For instance, Purdue Farms has completely changed its methods of breeding and processing chickens, in cooperation with the Humane Society, to satisfy growing demands that meat be “cruelty-free.” Brand awareness and trust also benefit from corporate social responsibility policies such as Purdue’s

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CSR has become important in the retention and recruitment of employees as well, particularly among millennials. Cone surveyed a large sample group in their teens and mid-twenties, and four-fifths said that they wanted their employer to care about making a contribution to society. Even more telling, over 50% indicated that they wouldn’t consider working for a corporation that isn’t socially responsibility. Those findings are supported by a similar study done by Nielsen.

Shareholders in many companies regularly propose various societal and environmental policies, placing added pressure on management to implement corporate social responsibility programs to satisfy ownership. These are often controversial, since many stakeholders believe that CSR efforts will have a negative impact on profitability. However, research done at the Ivey Business School was the first rigorous look at the issue, and it found that companies adopting CSR shareholder proposals actually showed an increase of nearly 1% in shareholder value. A business philosophy known as “People, Planet, Profit,” embracing both profitability and corporate social responsibility, has been increasingly popular during the 2010s as a result of the growing focus on a blend of traditional business models and CSR.

Economic and Marketing Benefits of Corporate Social Responsibility

We’ve touched on some of the reasons companies adopt corporate social responsibility, not the least of which is that it embraces the concept of “doing good.”But it can also “do good” for a company, too. Some of the major benefits include:

Lowering costs: Conventional wisdom is that CSR is expensive, but it can also produce cost savings. For example, energy conservation is socially-responsible and can also lower energy bills dramatically, particularly for companies which are major consumers of power.

Marketing opportunities: Increased public interest in sustainability, environmentalism, conservation and social causes provides an enormous opportunity for companies to present themselves on the “right” side of issues. This is a particularly fruitful area for content marketing to important demographic groups such as high-income consumers and millennials. Customer loyalty and engagement with brands also increases dramatically with a marketing focus on CSR.

Branding: Many firms have found that highlighting their commitment to corporate social responsibility has allowed them to effectively differentiate their brand from competitors. For instance, PetSmart doesn’t sell household pets; it gives away floor space to local pet adoption centers. That benefits the nonprofit agencies, it distinguishes the PetSmart brand as one which doesn’t profit from pet adoptions, and it creates new generations of customers as a very important side benefit.

Workforce engagement: Giving employees an opportunity to make contributions to their community, on “company time,” increases workplace satisfaction and employee loyal – more than a new espresso machine or a free lunch ever could.

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