What Is Corporate Social Responsibility (CSR)?

Corporate Social Responsibility (CSR) is when a company operates in an ethical and sustainable way and deals with its environmental and social impacts. This means a careful consideration of human rights, the community, environment, and society in which it operates.

To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment instead of contributing negatively to them.

For a company to be socially responsible, it first needs to be accountable to itself and its shareholders. Companies that adopt CSR programs have often grown their business to the point where they can give back to society. Thus, CSR is typically a strategy that’s implemented by large corporations. After all, the more visible and successful a corporation is, the more responsibility it has to set standards of ethical behaviour for its peers, competition, and industry.

In general, there are four main types of corporate social responsibility. A company may choose to engage in any of these separately, and lack of involvement in one area does not necessarily exclude a company from being socially responsible.

  • Economic responsibility: According to Carroll, maximizing profits consistently was the firm’s responsibility. Of course, that definition has evolved to include business practices that not only help maximize profits but help make an impact.
  • Environmental responsibility: Efforts made by companies to adopt business practices keeping in mind their environmental impact. This could include companies committed to shirking their carbon footprint or working in other ways to mitigate adverse impacts of global warming and climate change.
  • Ethical responsibility: Efforts made by companies to adopt fair and ethical business practices. That could mean anything from offering equal to or better than minimum wages to employees, to using ethically sourced raw material.
  • Philanthropic responsibility: Some companies may opt to give away a portion of their earnings or executive time to charities or towards charitable causes. For example, in 1946, Target made a commitment to give away 5% of the company’s profits back to the community.

CSR initiatives can range from philanthropy to operational changes and even transforming your entire business strategy or model.

  1. Donations and sponsorships

You can donate time and/or money to causes that are meaningful for your business, employees, and community.

  1. Operational initiatives

Operational CSR initiatives are often oriented around improving business efficiency or performance in ways that also have positive social or environmental impacts in the wider community. Initiatives can fall into several categories, here are a few examples.

  • Environmental:
    • Reduce your carbon footprint
    • Improve energy efficiency
    • reduce waste, water use and emissions
  • Social:
    • deal with diverse, local and socially responsible suppliers and partners
    • consult community stakeholders about business decisions
    • support community initiatives
  • Workplace:
    • Improve workplace diversity, equity and inclusion
    • enhance workplace health and safety
    • develop a code of ethics for your business and eliminate workplace harassment and discrimination
  1. Strategic transformation

Some CSR initiatives can involve a wholesale transformation in a company’s business strategy or model to integrate social or environmental goals as a key priority.

Many businesses imbed impact or purpose into their business model. You may hear this referred to as social enterprises, purpose enterprises, and coops. They place social or environmental goals at the heart of their mission and business strategy. These companies are still businesses that seek a profit, but they also formally pledge to focus on a “double bottom line” or even a “triple bottom line”—tracking profits along with social and/or environmental impacts.

  • Better recruitment:Your business may be able to attract a higher calibre of staff due to its BSR activities. Businesses such as Google, LinkedIn and Facebook are renowned for their CSR policies, which help them attract a higher calibre of staff.
  • Clarity in long-term strategy:BSR promotes a culture of risk management in business, as prior to implementing a BSR policy you should examine your organisation in detail, which helps you with long-term strategic planning.
  • Enhanced learning opportunities for staff:BSR initiatives often require staff to learn or develop new skills – for example, organising events, etc.
  • ‘Feel good’ factor:People who work in a business can get a good feeling about what they do if they feel that they are helping the community and the world at large, while customers also feel that purchasing from your organisation helps the community and the world at large.
  • Improved business culture:Staff are likely to be more motivated and have a stronger commitment to the organisation if good BSR initiatives are in place. Helping external stakeholders usually improves the internal work environment also.
  • Improved marketing and public relations:A BSR initiative highlights your business’s good side and the publicity gained from arranging events and providing assistance to charities through your BSR initiative is an effectively free marketing.
  • Increase in customers:Having an effective BSR initiative differentiates your organisation from your competitors and thus may attract more customers.
  • Increase in reputation:If your organisation can help local communities and / or the world at large, it creates an impression that it must be financially viable because otherwise it would not be in a position to give back.
  • Productivity:Giving back through working hours enables staff to feel better about their work environment and happier staff leads to increased productivity.
  • Greenwashing:Some critics believe that CSR is simply a ploy to improve an organisation’s brand image. (Greenwashing is the practice of making an unsubstantiated or misleading claims about the environmental benefits of a product, service, technology, or company practice.) Thus, it is important to carefully consider the nature and impact of your BSR initiative to ensure its effectiveness.
  • Reduced profits:Critics argue that a company’s management has a fiduciary duty to its shareholders to obtain the maximum profits possible, which CSR initiatives directly reduce. But often BSR leads to increased sales – and thus increased profits.
  • Resources must be used for non-commercial activities:This is particularly likely to affect SMEs, which do not have the same resources as larger organisations. However, with proper planning and implementation of a BSR initiative that fits your business model, this disadvantage can be overcome. For example, you don’t have to implement a BSR initiative rapidly – a slower approach may be more suited to your resources. Make sure to tell the story of how you determined and developed the BSR initiative for your organisation, as it will provide a personal touch to your initiative and a good background to your business model to external stakeholders as well’.