CORPORATE SOCIAL RESPONSIBILITY

What is Corporate Social responsibility?

Corporate social responsibility (CSR) refers to the efforts made by a company to improve society
and contribute towards sustainable development. Also known as corporate conscience or corporate
citizenship, CSR describes initiatives run by a business to evaluate and take responsibility for their
impact on a number of issues ranging from human rights to the environment.

Corporate social responsibility is a type of self-regulatory business plan, with initiatives focusing
on achieving economic, social and environmental benefits for all stakeholders involved
(employees, consumers, investors and other groups).

The purpose of CSR is to encourage businesses to conduct their companies in an ethical manner
and work towards having a more positive impact on society through ensuring sustainable growth.

Sustainability is often mentioned with CSR and is usually associated with environmental
sustainability. However, sustainability can also apply to many other aspects of a business including
procurement, economic, hiring and training for example.

Corporate social responsibility typically refers to lengths taken by businesses that go beyond what
is deemed compulsory by law and ethical standards as stated by regulators and environmental
associations.

CSR can often result in short-term costs that do not lead to immediate economic gain for the
company, however instead support and prioritise social and environmental progress.

Understanding Corporate Social Responsibility (CSR)

Corporate social responsibility is a broad concept that can take many forms depending on the
company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses
can benefit society while boosting their brands.

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 behavior for its peers, competition, and industry.

Small and midsize businesses also create social responsibility programs, although their initiatives
are rarely as well-publicized as those of larger corporations.

Types of Corporate Social Responsibility

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.

Environmental Responsibility

Environmental responsibility is the pillar of corporate social responsibility rooted in preserving

mother nature. Through optimal operations and support of related causes, a company can ensure
that it leaves natural resources better than before its operations. A company can pursue
environmental stewardship through:

 Reducing pollution, waste, natural resource consumption, and emissions through its
manufacturing process.
 Recycling goods and materials throughout its processes, including promoting re-use
practices with its customers.
 Offsetting negative impacts by replenishing natural resources or supporting causes that
can help neutralize the company's impact. For example, a manufacturer that deforests
trees may commit to planting the same amount or more.
 Distributing goods consciously by choosing methods that have the least impact on
emissions and pollution.
 Creating product lines that enhance these values. For example, a company that offers a
gas lawnmower may design an electric lawnmower.

Ethical Responsibility

Ethical responsibility is the pillar of corporate social responsibility rooted in acting in a fair,
ethical manner. Companies often set their own standards, although external forces or demands by
clients may shape ethical goals. Instances of ethical responsibility include:

 Fair treatment across all types of customers regardless of age, race, culture, or sexual
orientation.
 Positive treatment of all employees including favorable pay and benefits in excess of
mandated minimums. This includes fair employment consideration for all individuals
regardless of personal differences.
 Expansion of vendor use to utilize different suppliers of different races, genders, veteran
statuses, or economic statuses.
 Honest disclosure of operating concerns to investors in a timely and respectful manner.
Though not always mandated, a company may choose to manage its relationship with
external stakeholders beyond what is legally required.

Philanthropic Responsibility

Philanthropic responsibility is the pillar of corporate social responsibility that challenges how a
company acts and how it contributes to society. In its simplest form, philanthropic responsibility
refers to how a company spends its resources to make the world a better place. This includes:
  Whether a company donates profit to charities or causes it believes in.
 Whether a company enters into transactions only with suppliers or vendors that align with
the company philanthropically.
 Whether a company supports employee philanthropic endeavors through time off or
matching contributions.
 Whether a company sponsors fundraising events or has a presence in the community.

Financial Responsibility

Financial responsibility is the pillar of corporate social responsibility that ties together the three
areas above. A company might make plans to be more environmentally, ethically, and
philanthropically focused; however, it must back these plans through financial investments of
programs, donations, or product research. This includes spending on:

 Research and development for new products that encourage sustainability.

 Recruiting different types of talent to ensure a diverse workforce.
 Initiatives that train employees on DEI, social awareness, or environmental concerns.
 Processes that might be more expensive but yield greater CSR results.
 Ensuring transparent and timely financial reporting including external audits.

Some corporate social responsibility models replace financial responsibility with a sense of
volunteerism. Otherwise, most models still include environmental, ethical, and philanthropic as
types of CSR.

Benefits of Corporate Social Responsibility

What are the benefits of CSR?

 Increased employee engagement.

 Better bottom-line financials.
 More support for local and global communities.
 Increased investment opportunities.
 Press opportunities and brand awareness.
 Increased customer retention and loyalty.
 A stronger employer brand.

As important as CSR is for the community, it is equally valuable for a company. CSR activities
can help forge a stronger bond between employees and corporations, boost morale, and aid both
employees and employers in feeling more connected to the world around them. Aside from the
positive impacts to the planet, here are some additional reasons businesses pursue corporate social
responsibility.

Brand Recognition
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 as opposed to
companies that have demonstrated an ability to delivery quality products.3 Customers are
increasingly becoming more aware of the impacts companies can have on their community, and
many now base purchasing decisions on the CSR aspect of a business. As a company engages
more in CSR, it is more likely to receive favorable brand recognition.

Investor Relations

In a study by Boston Consulting Group, companies that are considered leaders in environmental,
social, or governance matters had an 11% valuation premium over their competitors.4 For
companies looking to get an edge and outperform the market, enacting CSR strategies tends to
improve how investors feel about an organization and how they view the worth of the company.

Employee Engagement

Another study by professionals from Texas A&M, Temple, and the University of Minnesota
found that CSR-related aligning firms and employees serve as non-financial job benefits that
strengthen employee retention.5 Workers are more likely to stick around a company that they
believe in. This in turn reduces employee turnover, disgruntled workers, and the total cost of a
new employee.

Risk Mitigation

By adhering to CSR practices, companies can mitigate risk by avoiding troubling situations. This
includes preventing adverse activities such as discrimination against employee groups, disregard
for natural resources, or unethical use of company funds. This type of activity is likely to lead to
lawsuits, litigation, or legal proceedings that may harm the company financially or expose it to
negative news headlines.

CSR strategies may be difficult to assess strategically because not all benefits may be financially
translatable back to the company. For example, it might be very difficult to assess the positive
impact to a company's brand image that planting 1 million trees may have.

ISO 26000

In 2010, the International Organization for Standardization (ISO) released ISO 26000, a set of
voluntary standards meant to help companies implement corporate social responsibility. Unlike
other ISO standards, ISO 26000 provides guidance rather than requirements because the nature
of CSR is more qualitative than quantitative, and its standards cannot be certified.6

ISO 26000 clarifies what social responsibility is and helps organizations translate CSR principles
into practical actions. The standard is aimed at all types of organizations, regardless of their
activity, size, or location. And because many key stakeholders from around the world contributed
to developing ISO 26000, this standard represents an international consensus.6
Examples of Corporate Social Responsibility

Starbucks

Starbucks (SBUX) has long been known for its keen sense of corporate social responsibility and
commitment to sustainability and community welfare. In its 2022 Environmental and Social
Impact Report, the coffee giant highlights taking care of its workforce and the planet among its
CSR priorities. Starbucks points to its investments in its employees through stock grants and
providing additional medical, family, and educational benefits. In terms of environmental
sustainability, the company's goals include achieving 50% reductions in greenhouse gas emission,
water consumption, and waste by 2030.7

Home Depot

As part of its annual reporting on ESG, Home Depot (HD) highlighted its achievements in
focusing on its employees, operating sustainably, and strengthening its communities. The
company has invested more than 1 million hours per year in training to help front-line employees
advance in their careers, aims to produce or procure 100% renewable energy to operate its
facilities by 2030, and has plans to spend $5 billion per year with diverse suppliers by 2025.8

General Motors

General Motors won the Sustainability Leadership Award from Business Intelligence Group in
2022 and was among Diversity Inc.'s top 50 companies for diversity for a seventh consecutive
year in 2021. According to its latest Sustainability Report, the automaker provided $60 million in
grants to more than 400 U.S. nonprofits focusing on social issues, and it has agreements in place
to use 100% renewable electricity at its U.S. sites by 2025.9

Why Should a Company Implement CSR Strategies?

Many companies view CSR as an integral part of their brand image, believing that customers will
be more likely to do business with brands that they perceive to be more ethical. In this sense, CSR
activities can be an important component of corporate public relations. At the same time, some
company founders are also motivated to engage in CSR due to their convictions.