Corporate social responsibility (CSR) is the idea that a business has a responsibility to the society that exists around it, according to the online course Sustainable Business Strategy. When resources are not equitably distributed, the disadvantaged look first to the government for help and support. But when the government hasn’t the resources, the will, or either, it cannot provide adequately for those in need and may engineer public policy to require businesses to be responsible. CSR may be based within the human resources, business development or public relations departments of an organisation,[59] or may be a separate unit reporting to the CEO or the board of directors. Businesses have changed when the public came to expect and require different behavior […] I predict that in the future, just as in the past, changes in public attitudes will be essential for changes in businesses’ environmental practices. The goal of the CRSD is to provide transparency that will help stakeholders better evaluate EU companies’ sustainability performance as well as the related business impacts and risks.
ISO 26000: Guidance on Social Responsibility
Even though the latter can also make a valuable contribution to poverty reduction, will directly enhance the reputation of a company and strengthen its brand, the concept of CSR clearly goes beyond that. According to the 1987 UN Brundtland report (World Commission on Environment and Development, 1987), “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” is sustainable. From this, one can extrapolate a definition of corporate environmental sustainability that incorporates a universal dimension—not just a clean environment where the corporation operates now, but a global and intergenerational one. That is, socially responsible corporations must consider the effects of current operations on the environment both now and in the future. To capture the benefits of being socially responsible, the firm must make stakeholders aware of its record. This has led to triple bottom line reporting—that is, reporting about firm performance in terms of profits, people, and the planet.
- SASB standards help businesses identify and communicate the most relevant sustainability metrics for their industry, enabling investors to assess and compare the sustainability performance of different companies.
- ISO clarifies social responsibility and helps organizations translate CSR principles into practical actions.
- Sustainability in business refers to a company’s strategy and actions to eliminate the adverse environmental and social impacts caused by business operations.
- Promoting social well-being is another core component of CSR, encompassing community engagement, diversity and inclusion, and philanthropy and volunteerism.
- Nobel Prize–winning economist Milton Friedman argued that the responsibility of business is to maximize profits for the benefit of the owners (shareholders), within ethical and legal boundaries.
Consumer perspectives
When implemented, altruistic CSR implies that firms provide a social good unrelated to the firms’ business that does not benefit the bottom line. To achieve this, CSR must be a core value of the firm and must be integrated into processes and products. When employed strategically, CSR can be an element of a differentiation strategy, leading to premium prices, enhanced brand and firm reputation, and supportive community relations.
Learn about the processes used to manage environmental performance data and the steps required to account for greenhouse gas (GHG) emissions. Companies striving to measure success beyond bottom-line financial results may adopt CSR strategies that target environmental, ethical, philanthropic, and fiscal responsibility that extend beyond the products they sell. For companies looking to outperform the market, enacting CSR strategies may improve how investors view the company’s value. The Boston Consulting Group found that companies considered leaders in environmental, social, or governance matters had an 11% valuation premium over their competitors. According to a study published in the Journal of Consumer Psychology, consumers are more likely to act favorably toward a company that has acted to benefit its customers.
Public policies
Corporate environmental responsibility often takes the form of overcompliance with regulation, improving the environment more than is required. Consumers perceive that products that are produced sustainably or have sustainable characteristics are better products and, therefore, worth more. New revenue streams can come from businesses created by recycling and reusing products that have exhausted their original purpose. Additional revenue is generated when consumers develop brand loyalty through their experience with sustainable products. Cost reductions come from using fewer inputs in all parts of the value chain (from raw materials, through production and distribution to final sales). Additionally, firms that anticipate increasing environmental regulation can innovate ahead of their competitors and reap first-mover advantages.
Implementing and measuring CSR can be challenging, as it often requires businesses to navigate complex ethical, environmental, and social issues. The Triple Bottom Line framework emphasizes the importance of balancing economic, social, and environmental performance in business decision-making. Philanthropic responsibility can include things such as funding educational programs, supporting health initiatives, donating to causes, and supporting community beautification projects. Explore Sustainable Business Strategy—one of our online courses related to business in society—and discover how you can become a purpose-driven leader. Finally, CSR initiatives inherently force business leaders to examine hiring and management practices, where and how they source products or components, and the steps they take to deliver value to customers.
A firm-focused definition holds that social responsibility includes actions that further a social goal, beyond what is required by ethics, law, and profitability. A political economy–oriented definition posits that firms have a responsibility to correct market failures such as negative externalities and government failures such as limits to jurisdiction that result in worker rights violations. The strategy utilized by Arla Foods works and has helped the company regain most of its lost market share among many countries in the Middle East.
CSR can also help attract top talent and drive employee engagement and retention, as more workers seek employers whose values align with their own. Additionally, a proactive approach to ethical and social issues has the potential to prevent legal problems, fines and reputational damage. Companies that manage their environmental impact might look to reduce their carbon footprint and limit waste.
Because the parameters what is csr of corporate social responsibility are continually evolving, there is no single standard by which CSR initiatives are measured or governed. Companies that embrace CSR are guided by local and international laws, including environmental regulations, labor rules and consumer protection standards. Small and midsize businesses also create social responsibility programs, although their initiatives are rarely as well-publicized as those of larger corporations. Benefiting society and lessening the negative impacts on the environment are among the main benefits and goals of CSR. Consumers are increasingly looking to buy goods and services from socially responsible companies and this can have a positive impact on their bottom lines. Examples of CSR initiatives include environmental sustainability, ethical labor practices, community engagement, charitable donations, and social activism.
This reflection can often lead to innovative and groundbreaking solutions that help a company act in a more socially responsible way and increase profits. For example, reconceptualizing the manufacturing process so that a company consumes less energy and produces less waste allows it to become more environmentally friendly while reducing its energy and materials costs—value that can be reclaimed and shared with both suppliers and customers. In the past few decades, however, more business leaders have recognized that they have a responsibility to do more than simply maximize profits for shareholders and executives. Rather, they have a social responsibility to do what’s best—not just for their companies, but people, the planet, and society at large.
Emerging markets vs. developed economies
Chong found that participation in corporate social responsibility programs feeds off of and reinforces corporate identity, resulting in the employee experiencing higher motivation, satisfaction, and commitment to the corporation. Environmental responsibility is one of the fastest growing areas of corporate social responsibility worldwide. Because compliance with environmental standards is a legal responsibility, being socially responsible means overcompliance. CSR practices include donating money, resources or time to positive causes and organizations, such as local and national charities, educational programs, disaster relief and more. Businesses who adopt philanthropic CSR engage with the communities where they operate, offering support through volunteer work, sponsoring local events, making contributions to local nonprofits or supporting skills training programs. The United Nations Global Compact is a voluntary initiative that encourages businesses to adopt sustainable and socially responsible policies.
Heal (2005) offers an updated perspective of corporate social responsibility that builds on Arrow, adding the risk of protests, such as Occupy Wall Street, to Arrow’s challenge of Friedman. Heal proposes that corporate social responsibility programs (such as corporate environmentalism) can reduce externalities and also ward off conflicts and demands for distributive justice, such as Black Lives Matter (Schulz, 2017). Corporate social responsibility (CSR) is a legitimate responsibility to society, based on the principle that corporations should share some of the benefit that accrues from the control of vast resources. By practicing corporate social responsibility, also called corporate citizenship, companies are aware of how they impact aspects of society, including economic, social, and environmental.
Mozes, Josman, and Yaniv (2011) studied the relationship between corporate social responsibility activity and both organizational identification (a driver of loyalty) and motivation to work. Workers in their study were classified as either active participants or non-active participants in volunteerism programs. Active participants demonstrated higher levels of organizational identification and motivation to work. To be most effective for external beneficiaries and most meaningful for the employees, corporate social responsibility must be embedded in the routines and processes of the organization (Aguinis & Glavas, 2013).
