Csr what is it

What is CSR?

Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (“Triple-Bottom-Line- Approach”), while at the same time addressing the expectations of shareholders and stakeholders. In this sense it is important to draw a distinction between CSR, which can be a strategic business management concept, and charity, sponsorships or philanthropy. 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.

Promoting the uptake of CSR amongst SMEs requires approaches that fit the respective needs and capacities of these businesses, and do not adversely affect their economic viability. UNIDO based its CSR programme on the Triple Bottom Line (TBL) Approach, which has proven to be a successful tool for SMEs in the developing countries to assist them in meeting social and environmental standards without compromising their competitiveness. The TBL approach is used as a framework for measuring and reporting corporate performance against economic, social and environmental performance. It is an attempt to align private enterprises to the goal of sustainable global development by providing them with a more comprehensive set of working objectives than just profit alone. The perspective taken is that for an organization to be sustainable, it must be financially secure, minimize (or ideally eliminate) its negative environmental impacts and act in conformity with societal expectations.

Key CSR issues: environmental management, eco-efficiency, responsible sourcing, stakeholder engagement, labour standards and working conditions, employee and community relations, social equity, gender balance, human rights, good governance, and anti-corruption measures.

A properly implemented CSR concept can bring along a variety of competitive advantages, such as enhanced access to capital and markets, increased sales and profits, operational cost savings, improved productivity and quality, efficient human resource base, improved brand image and reputation, enhanced customer loyalty, better decision making and risk management processes.

What Is Corporate Social Responsibility (CSR)?

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Brian Edmondson is a banking and online business specialist with two decades of experience working in the financial industry as an employee and an entrepreneur. Brian is the founder of the Bankruptcy Recovery Foundation, a regular contributor to Entrepreneur, and was a financial analyst and advisor at Merrill Lynch.

Corporate social responsibility (CSR) is the business practice of joining environmental and social policies with a business’ economic goals and operations. It is based on the idea that businesses can reduce their adverse social and environmental impact on the world.

How Corporate Social Responsibility Works

Corporate social responsibility is a way of doing business that aims to increase a company’s social impact while meeting business objectives such as growth and revenue goals. It can also refer to any effort to improve a company’s eco-friendliness or carbon footprint. Companies can deploy CSR efforts as a standalone program or as part of a broader campaign.

Companies may create CSR programs that involve every part of their business and often have dedicated staff members and resources for CSR.

Types of Corporate Social Responsibility

In 1991, researcher Archie B. Carroll, came up with a ‘pyramid of corporate social responsibility.’ His pyramid included the four components of CSR – economic responsibility (make profits), legal responsibility (follow laws), ethical responsibility (be fair) and philanthropic responsibility (be charitable).

These components have evolved over time into the following types of CSR:

Examples of Corporate Social Responsibility

CSR programs vary in scope, but a few examples might include:

For example, outdoor and sport apparel-maker Patagonia has a number of programs as a part of its CSR efforts. These include a living wage program, a migrant worker program, a fair trade program as well as a fair labor program among others.

Another example of a company’s corporate social responsibility is Starbucks’ commitment to global human rights. This commitment is spelled out in official corporate policy and includes compliance requirements across the firm’s business units. From hiring to supply chain to the way the company works with its business partners, adhering to this social mission affects all levels of Starbucks’ operations.

Benefits of Corporate Social Responsibility

Though CSR programs are often the result of pressure from within the community, research shows that, once instilled, these programs often receive broad support from within the company, too.

One report found that 92% of S&P 500 and Russell 1000 companies published reports charting their efforts related to CSR and sustainability in 2020. In 2011, that figure was less than 20%.

There’s little doubt that CSR programs should exist in every business. Companies with robust CSR programs can benefit from better public relations and have happier customers. Improved company profits usually result, in turn satisfying stakeholders.

In some cases, the positive financial impact of CSR is clear. For example, a shift toward renewable energy sources, like solar panels at corporate campuses, might result in lower electricity costs over time.

A report by Babson College reviewed hundreds of CSR program studies. The reviewers found that the programs can have a strong impact on a company’s market value and brand and lower risk. The report’s findings found that CSR programs have the potential to do the following:

A lot of companies publish CSR reports and provide success metrics, however, it is very difficult to measure the actual impact of CSR activities beyond the numbers provided by the companies.

Corporate Social Responsibility vs. Environmental, Social, and Corporate Governance

CSR is similar to environmental, social, and corporate governance (ESG) principles. The leading difference is that CSR is an internal function, while ESG is an external one.

With CSR programs, it’s up to those inside the company to measure the success of their actions. They decide which programs to continue, and rework those that aren’t performing as well.

ESG, on the other hand, is a metric that outside analysts can use to compare the effect of different corporate efforts to address environmental and social issues.

Many investment groups gauge companies based on their pledge to integrate ESG criteria. Institutional investors and mutual fund companies may outline how ESG guidelines are incorporated into their philosophies in their annual reports.

The framework for ESG reporting stems from the Global Reporting Initiative (GRI), which is a private standards body that seeks to standardize corporate sustainability reporting. It has been working toward this goal since the late 1990s.

In 2006, the United Nations launched the Principles for Responsible Investment (PRI), a program that institutional investors can use to merge ESG values into their decision-making process. More than 3,000 investors and groups have signed on to the PRI, pledging to stand by ESG six principles.

Individual investors may want their investments to reflect their values. They can buy into mutual funds and exchange traded funds (ETFs), grouped by their commitment to CSR. Examples of this include the iShares MSCI KLD 400 Social ETF (DSI) and the SPDR SSGA Gender Diversity Index Fund (SHE).

Key Takeaways

Frequently Asked Questions (FAQs)

Why is corporate social responsibility important?

Big businesses committing to social and environmental causes can make a big a difference. However, CSR is important for businesses not just because it is good for their brand. Research suggests that CSR can potentially help companies increase their market value, reduce systemic risks and even retain employees. A 2019 survey suggested that 77% of consumers were motivated to give their business to companies committed to making the world a better place.

What is mainly driving the move toward more corporate social responsibility?

Companies moving towards practices aligned with environment, social and governance (ESG) criteria one of the driving forces behind CSR in recent years. While ESG has its roots in CSR, ESG is more focused on driving environmental impact, sustainability, and positive changes towards social justice.

Corporate Social Responsibility (CSR)

Investopedia / Zoe Hansen

What Is Corporate Social Responsibility (CSR)?

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.

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.

Key Takeaways

Click Play to Learn What CSR Is

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.

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.

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.

Example of Corporate Social Responsibility

Starbucks has long been known for its keen sense of corporate social responsibility and commitment to sustainability and community welfare. According to the company, Starbucks has achieved many of its CSR milestones since it opened its doors. According to its 2020 Global Social Impact Report, these milestones include reaching 100% of ethically sourced coffee, creating a global network of farmers and providing them with 100 million trees by 2025, pioneering green building throughout its stores, contributing millions of hours of community service, and creating a groundbreaking college program for its employees.

Starbucks’ goals for 2021 and beyond include hiring 5,000 veterans and 10,000 refugees, reducing the environmental impact of its cups, and engaging its employees in environmental leadership.

The 2020 report also mentioned how Starbucks planned to help the world navigate the coronavirus pandemic. The company’s response to the pandemic focuses on three essential elements:

Today, there are many socially responsible companies whose brands are known for their CSR programs, such as Ben & Jerry’s.

Special Considerations

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.

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.

What Is Corporate Social Responsibility (CSR)?

The term corporate social responsibility (CSR) refers to practices and policies undertaken by corporations intended to have a positive influence on the world. The key idea behind CSR is for corporations to pursue other pro-social objectives, in addition to maximizing profits. Examples of common CSR objectives include minimizing environmental externalities, promoting volunteerism among company employees, and donating to charity.

Why Should a Company Implement CSR?

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.

What Is the Impact of CSR?

The movement toward CSR has had an impact in several domains. For example, many companies have taken steps to improve the environmental sustainability of their operations, through measures such as installing renewable energy sources or purchasing carbon offsets. In managing supply chains, efforts have also been taken to eliminate reliance on unethical labor practices, such as child labor and slavery.

Although CSR programs have generally been most common among large corporations, small businesses also participate in CSR through smaller-scale programs, such as donating to local charities and sponsoring local events.

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Getting into the detail

Take the following illustration:

Other definitions

The World Business Council for Sustainable Development in its publication Making Good Business Sense by Lord Holme and Richard Watts, used the following definition:

Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large

The same report gave some evidence of the different perceptions of what this should mean from a number of different societies across the world. Definitions as different as CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government from Ghana, through to CSR is about business giving back to society from the Phillipines.

Traditionally in the United States, CSR has been defined much more in terms of a philanphropic model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as tainting the act for the company to receive any benefit from the giving.

The European model is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons. Personally, I believe this model is more sustainable because:

But as with any process based on the collective activities of communities of human beings (as companies are) there is no ‘one size fits all’. In different countries, there will be different priorities, and values that will shape how business act. And even the observations above are changing over time. The US has growing numbers of people looking towards core business issues.

For instance, the CSR definition used by Business for Social Responsibility is:

Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business.

On the other hand, the European Commission hedges its bets with two definitions wrapped into one:

A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.

When you review each of these, they broadly agree that the definition now focuses on the impact of how you manage your core business. Some go further than others in prescribing how far companies go beyond managing their own impact into the terrain of acting specifically outside of that focus to make a contribution to the achievement of broader societal goals. It is a key difference, when many business leaders feel that their companies are ill equipped to pursue broaders societal goals, and activists argue that companies have no democratic legitimacy to take such roles. That particular debate will continue.

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CSR 101: What is Corporate Social Responsibility in 2022?

Join 100s of companies powering their CSR programs to offer volunteering & giving opportunities to their employees, track and report on their efforts.

Corporate Social Responsibility (CSR) is a business initiative that can result in positive outcomes for employees, employers, and many good causes across the globe. Done well, CSR can drastically improve how your business is perceived, engaged with, and help your company’s broader mission and vision.

In this post, we’ll explore the ins and outs of CSR. We’ll dive into CSR history, share an overview of the different types of CSR, and we’ll explore the benefits of Corporate Social Responsibility initiatives— some of which may surprise you. We’ll wrap up the article with some FAQs.

Our first in our back-to-basics series, this article is to help guide you towards defining a CSR strategy that fits with your business and equipping your efforts with the tools and knowledge to win support from internal stakeholders.

What is Corporate Social Responsibility?

CSR covers companies’ practices to be responsible corporate citizens for their shareholders, employees, customers, communities, and society at large. Corporate social responsibility is about acting for profit, people, and the planet—the so-called triple bottom line.

With corporate social responsibility initiatives, companies consider not just shareholders, but all of their stakeholders in the way they operate – including economic, social, and environmental aspects of their business.

The history of CSR

Over the years, a number of organizations have defined CSR, from the United Nations, the European Union, to the International Organization for Standardization (ISO).

As the importance of sustainability and sustainable development have grown and these terms are sometimes used interchangeably with corporate social responsibility. The emergence of shared value creation or ESG (environmental, social & governance) also overlap with CSR, but speaks to different audiences like academics, governments, or investors.

Movements like the UN Sustainable Development Goals, B Corporations, and the UN Global Compact are driving the CSR agenda forward, moving CSR to the forefront of a company’s strategy.

While there are differences, they all embody the same principles and aim to CSR companies and socially responsible business practices.

Socially responsible organizations can be traced back to the mid-to-late 1800s and came hand-in-hand with philanthropy efforts and worker wellbeing in factories throughout the industrial revolution.

However, corporate responsibility really settled into its own in the early 1950s with the American economist, Howard Bowen. Bowen published Social Responsibilities of the Businessman, and businesses began to take note of how they need to look after staff, their communities, and their philanthropic responsibility.

After this, the American Committee for Economic Development formed a ‘social contract’ for emerging businesses in the 1970s— a big step towards popularising the initiative and CSR programs.

Jumping forward a few decades more, authors and professors from Harvard business school and other reputable places began to write more heavily on corporate responsibility, dictating the way for businesses to be more conscious of their people and environments.

Today, corporate social responsibility sits as a must-have strategy for every business and cuts across the entire business, from its supply chain to the employee experience to end consumers and their social or environmental benefits. Despite it originating to lead businesses ethically, it now provides many more benefits that depend on various CSR strategies implemented.

Any business can implement a CSR strategy; it’s not something that only corporate giants can handle. The truth is, managed well, even the smallest of companies can create a positive impact.

What’s the difference between Corporate Social Responsibility (CSR) and Environment, Social, Governance (ESG)?

Corporate Social Responsibility (CSR) is the qualitative implementation of positive impact initiatives. It encompasses the company’s mission when it comes to social responsibility and reports on how that affects things like employee sentiment or brand reputation with customers. CSR strategies keep employees, stakeholders, shareholders, and customers in the loop on the business’s do-good efforts.

ESG, on the other hand, reports on the quantitative metrics that determine if a company’s CSR initiatives are on track and successful. For example, an Environment, Social, Governance (ESG) metric is often numerical and measurable.

To pin it down, a company’s CSR initiative may be to reduce single-use plastics in the workplace. ESG criteria on this initiative could be the company has cut down single-use plastics by 50% in one year, and 80% of the workforce are now plastic-free.

Why is CSR important?

To some extent, we were all responsible—and still are—for positively affecting the world and the social or environmental challenges it presents. Although today, consumers feel the heat more than ever. The recently coined “eco-anxiety” is flooding social media feeds thanks to influencing characters like Greta Thunberg and Lauren Singer encouraging socially responsible behavior.

Eco-anxiety has encouraged younger generations to live more aware of their environmental impact and social responsibility to better the world, and now they’re looking to their employers to help them get there.

Yet, it doesn’t stop there. CSR is not only crucial for our planet and its people’s environmental sustainability, but it’s essential for our economy as well.

An efficient corporate responsibility initiative has the power to increase employee engagement. Companies with higher levels of engagement are 22% more productive and can create a 50% higher revenue per employee. There’s no wonder all businesses are looking to tie corporate social responsibility into their business model and business strategies.

Employees today want to do more than work for a company; they want to work with a company and for a larger purpose.

Different types of Corporate Social Responsibility initiatives

There are many different areas of corporate social responsibility that are formalized by business CSR programs. A few examples of areas these programs help to address are:

Of course, these are just a select few impacts a business corporate social responsibility program can have. Let’s explore what some of these programs actually look like.

Employee volunteering programs

Volunteering programs include on and offline activities. Team members can volunteer themselves for manual labor to nonprofit organizations in the local community, or volunteer their skill sets to help less fortunate people thrive.

This type of program promotes corporate citizenship, corporate governance, and can help a nonprofit on operational cost savings.

Corporate giving programs

Also known as corporate philanthropy. Corporate giving programs include charitable donations of cash, services, or goods. They can also include setting up corporate foundations, and often perform best if the charity is close to the business mission or a particular team member.

This type of financial assistance for an NGO can be exactly what they need to survive through tougher times.

Sustainability initiatives

This type of CSR includes the practice of a business running as environmentally conscious as possible. This can consist of finding a plastic-free goods supply chain, meat-free lunches, recycling, and sustainable development; there are many options.

Employee wellbeing, diversity & inclusion

CSR is about looking after many different communities, and employees are a community themselves, sitting directly under a company’s roof. This CSR area can drastically improve an employee’s experience, which in turn affects a customer’s perspective on the company, talent retention, and even bottom-line ROI. Although employee wellbeing has discovered a recent tie with CSR, it was long overdue.

74% of Gen Z workers believe work should contribute more to their lives than a paycheck, and they’re looking at CSR when considering their next employer.

Employee wellbeing has several key areas:

1. Physical — Yoga, gym classes, pedal bikes for office commutes, “a healthy body is a healthy mind” mentality.

2. Social & community — Activities like buddy systems, staff retreats, culturally inspired meet-ups, fostering genuine connections among team members. Highlighting exemplary team members, remote work options, book clubs, acts of building community through goodness. This builds a sense of belonging in a workforce, and focuses on including diverse groups of people under one mission.

3. Mental — Mental health awareness, access to psychologists and health care, counseling, meditation.

4. Financial — Study-support, financial planning advice, and home-office stipends also fall under CSR activities.

Source

Benefits of CSR initiatives

Customer & employee loyalty

Loyalty is hard to build today but can be highly rewarding. CSR initiatives allow people to witness your business’s kindness and consistency; two factors helping build trust and loyalty.

Bottom line financials

It’s not just staff engagement and retention that adds to a more financially valuable company by using CSR. A study from 191 sample firms listed on the Korea exchange showed a positive correlation between a firm’s financials and business value alongside Corporate Social Responsibility efforts.

Research also shows a standard deviation increase in a customer-facing CSR score leads to “an increase in the economic value of innovation by about 10% of its sample mean.”

Local and global impact

We touched on it earlier, but the global impact your business can make on the world will always be welcomed, little or large.

Mission & vision alignment

Strategically considered CSR initiatives can radically help your business align with its mission and vision. It doesn’t always have to come from your product; a good CSR initiative can be the solution to bringing purpose to the workplace, creating a shared initiative in line with the employer’s and employee’s values.

Partnership, external relations & press opportunities

If you’re in a saturated market and are often struggling to get press traction with your product, consider ways to get positive attention via your operations. CSR is a way to promote who you are and what you do with acts of goodness.

Unique selling points

Whether it gives your employer branding a USP or your product a USP, a strong CSR strategy can help your business stand out from the competition.

Corporate Social Responsibilility FAQs

Corporate social responsibility (CSR) can be measured the following ways:
Benchmark your results against competition or top performers
Set calendar goals and KPIs
Measure the qualitative effect of a CSR campaign with an employee feedback loop
Use digital tools and platforms to evaluate the success of your campaign
Analyze other business variables: staff retention, audience size, and sentiment
Bottom-line financials and company value, etc.

Ever CSR business model needs to incorporate the following KPIs:
Higher employee engagement rates
Higher employee retention rates
Increased online brand sentiment
Lower customer churn rate
Increase in brand organic searches
Increase in employee satisfaction

Many companies have a specific CSR department, whereas others rely on Human Resources teams or location-specific Office Managers. It can also be a responsibility of marketing or communications departments, depending on what the business hopes to achieve with its CSR initiatives.
A CSR program certainly needs a manager to head up the business model. No matter whether you choose to use a digital platform like Alaya to handle your initiatives or not, the project itself is best managed by someone that has a good overview of all teams and people.

Every CSR program will have different key performance indicators. What’s important is that you establish what they are from the start.
Perhaps you’re looking to retain talent, keep employees engaged, receive more positive brand sentiment, or want an increase in brand name searches; the list is long. Establish what goals you’re after and make sure you hit them.

Increased bottom-line is mainly because of lower financing costs due to better innovation, competitive differentiation leading to more customers, greater employee engagement and productivity, and reduced recruitment costs due to staff retention and employee referrals.

Wrapping it all up

Old-school Corporate Social Responsibility can be time-consuming, but it can be so much more efficient if you’re willing to adopt the right technology to help your team work. Plus, it’s something that all employees are looking for in their employers and something that business owners need to seriously consider if they hope to win genuine loyalty and respect from future talent.

CSR has proven to increase employee engagement, performance, and even bottom-line revenue per team member for many companies. Numbers aside, it’s also proving to better our world. If you have the time and talent to incorporate CSR in your business growth, then there’s no time like the present to dive right in and help start making the world a better place, one act at a time.

Impact the world,
one act at a time

Alaya helps companies make an impact in their communities and engage employees to do good