What Is Corporate Social Responsibility in Business?
Corporate social responsibility (CSR) refers to a business’s obligation to make sure its operations and practices address social and environmental concerns. The concept of CSR exhorts businesses not to focus on economic objectives to the exclusion of all else. Rather, businesses should also manage their operations with an understanding of their impact on key societal and environmental components.
- The environment
- Their employees
- Society
- Consumers
- The economy
Socially responsible companies work to reduce and eliminate their negative impact, as well as positively contribute to society while remaining economically viable. CSR makes up part of the governing framework of a company. As such, it can touch on all aspects of an organization, from its manufacturing processes to its human resources department.
While the government mandates some CSR activities, such as the protection of private health information by health care organizations, many businesses voluntarily engage in CSR.
Traditionally, corporations have defined their stakeholders as investors, customers, employees, and suppliers. With CSR, many have expanded that notion of a stakeholder, recognizing communities, governments, and trade associations as additional parties to whom they owe accountability.
Establishing CSR Standards
Organizations establish CSR standards according to the expectations of stakeholders and the public. So, what are those expectations? Clearly, stakeholders expect corporations to make a profit. More frequently, however, consumers, investors, and employees also expect socially responsible behavior from businesses.
For example, according to research from business experts James Rubin and Barie Carmichael, 68% of people say knowing how a company operates is more important than knowing what it sells. Additionally, 75% of people say they act on their opinions about a company. Such attitudes inevitably influence the types of CSR standards many organizations adopt.
How can organizations implement CSR standards and practices? They can start by following a definable path of actions.
Creating Socially Responsible Company Policies
These policies should reflect a company’s core values and commitment to ethical behavior across all levels of its operations.
Having an Awareness of the Environment
Businesses need to assess the impact they have on the environment to determine how they can reduce or eliminate their carbon footprint.
Supporting Local Communities
Businesses can find ways to give back to the communities in which they operate. This can involve supporting local charities, organizing volunteering, or giving employees paid time off for local volunteer work.
Creating Equitable Work Environments
Creating an equitable work environment involves inclusion and support. This could involve establishing family-friendly work policies or cultivating a culture of fairness that rewards hard work and promotes workers based on merit.
Encouraging Diversity in the Workplace
Encouraging diversity includes hiring policies that seek out talent from people of all backgrounds. It can also include identifying the needs of underrepresented groups and making sure to provide them with support and resources.
Environmental Corporate Social Responsibility
One type of corporate social responsibility involves environmental stewardship. The responsibility for protecting the environment either through conservation, regeneration, or restoration rests with everyone. However, businesses whose operations tend to demand a lot from the environment must be especially mindful of ways to mitigate any damage they might do.
Many businesses require large amounts of natural resources. For example, organizations often use a great deal of electricity or water. Some corporations create environmental hazards, such as toxic emissions from production, while others extract resources that damage soil and water systems or destroy animal habitats.
Sometimes, businesses cannot avoid these environmental tolls altogether. Nonetheless, they can often find alternative ways to operate and manage their impact. Corporations can embrace environmental CSR responsibility in several ways.
Responsible Sourcing
Responsible sourcing means basing supply and purchasing decisions on more than the traditional factors of quality, cost, and delivery time. Responsible sourcing calls on companies to consider other aspects of their supply chain, such issues related to their effects on labor, society, and the environment.
Businesses, like customers, vote with their wallets. Organizations can choose to support suppliers that engage in sound sourcing practices that reduce negative impacts and contribute to a healthier environment.
For example, corporations can avoid purchasing supplies that come from mineral or fossil resources. Instead, they can commit to purchasing supplies that come from renewable materials. This can significantly reduce the environmental impact in many ways.
- Lowering emissions
- Protecting biodiversity
- Promoting the sustainable use of land
In addition to buying supplies that use renewable materials, companies can choose to purchase from suppliers that work to actively replenish the materials they use. This helps avoid resource scarcity issues that can also bring about climate change.
Environmental Management
Environmental management encompasses the policies and procedures that organizations undertake to comply with environmental laws. This usually involves monitoring the release of chemicals or byproducts into the air and water. Failure to adhere to regulations that aim to limit harm to the environment and public health can result in large fines and loss of business reputation.
Additionally, environmental management examines how businesses use resources and whether that use is sustainable. Effective environmental management ensures that resources and the profits that come from them can be sustained.
Corporations can do much more than merely comply with environmental laws. Robust environmental management systems can actively address sustainability issues relevant to a business’s viability and the well-being of the general population. Organizations can strive to exceed minimum requirements when it comes to emissions, as well as engage in restoration projects that help regain the health of compromised ecosystems.
By using an effective environmental management system, environmental resources such as water and the profits that these resources bring can be maintained into the future, and not taken advantage of for fast, unsustainable profits.
Eco-Efficiency
Eco-efficiency focuses on keeping environmental harm to a minimum while maximizing operational efficiency. It generally addresses a business’s production processes to ensure they use less energy and materials while recycling more. However, it also applies to areas such as purchasing, distribution, and marketing, aiming to reduce a company’s ecological impact at every turn.
Eco-efficient organizations use fewer virgin resources and create less pollution and waste. They also tend to use recycled materials in their products and services. For example, eco-efficient corporations may employ the latest technologies and modify their systems to capture and reuse production emissions. This could potentially improve wastewater emission quality and lower purchasing expenses at the same time.
Business leaders and administrators can make decisions that help reduce the carbon footprint of their organizations. By adopting policies that help benefit the environment, they can minimize their impact on climate change.
Ethical Corporate Social Responsibility?
Another element of CSR relates to ethical decisions. Business ethics involve treating people with fairness and honesty. This frequently means companies need to consider what’s right, not just what’s legal or expedient.
For example, organizations may only be required to pay minimum wage, but what if a business operates where the minimum wage is not a living wage? In such cases, a business concerned with ethical and socially responsible decisions may choose to pay more.
Business leaders can engage in several practices that embrace ethical business models.
Fair Trade
Fair trade practices seek to prevent the exploitation of workers, farmers, and other producers in developing countries. It involves following certain standards that support sustainable development that addresses present needs, without preventing future generations from meeting their needs. Fair trade also aims to protect workers’ rights and ensure individuals receive fairer trade terms. Ultimately, fair trade helps give producers more equitable control over the trading process. It also provides them with money to invest in projects that improve their economies and environments.
Establishing Safer Work Conditions
Work conditions can refer to physical environments, but can also extend beyond that. For physical safety and health, the government imposes many regulations on organizations to protect workers. Safer working conditions can also refer to comfort and ease. Businesses can find ways to promote both the physical and emotional well-being of their employees. This might involve creating well-equipped break rooms, exercise facilities, or cafeterias that offer healthy food choices.
Creating Equitable Labor Policies
Policies that govern how companies pay, protect, and support employees play a significant role in CSR. The U.S. Department of Labor outlines many laws regarding hours and wages, workplace safety, workers’ compensation, and retirement benefits. However, socially responsible organizations may choose to do more to ensure equitable labor policies.
For example, they can offer profit sharing opportunities to their employees, vacation packages, paid family leave, pensions, and more comprehensive health insurance benefits, among other things.
Ethical CSR means making investments and decisions that are socially aware and responsible. Businesses should be transparent with their workers, stakeholders, and communities. Indeed, companies and organizations should be responsible for making ethical decisions, following regulations, and upholding human rights policies.
Diversity and Corporate Social Responsibility
Diversity makes up an important part of corporate social responsibility, providing balance and equity to an organization’s talent. What does diversity mean in business? It refers to creating a workplace that invites, nurtures, and invests in people from various backgrounds and experiences. Organizations with a diverse workforce hire individuals of varying genders, races, cultures, ages, sexual orientations, and abilities.
A diverse workforce offers inclusion to all people. By hiring diverse individuals, organizations broaden their perspective, enabling them to see problems and solutions from different points of view. People from different backgrounds offer unique ways of viewing the world. With more ideas flowing, companies improve their ability to address challenges and develop ideas.
A company with a diverse workforce may more easily identify issues that need attention. For example, a team that is managing an ad campaign might not recognize content that could offend a particular group. However, with a diverse workforce, someone is likely to catch the mistake.
Honoring Diversity in the Workplace
A diverse workforce will have diverse needs. Socially responsible businesses understand and respect those needs. This understanding and respect play a key role in CSR.
What does that understanding and respect look like? It can manifest in several ways. For example, organizations can offer alternative work schedules or arrangements, such as remote working, to employees who care for elderly family members or children. Businesses can be mindful of various religious holidays and honor requests made by employees who wish to observe them.
Business administrators should also ensure they adhere to equitable hiring policies and avoid discrimination against potential employees based on gender, race, ethnicity, disability, military status, and other factors. This involves developing a nuanced understanding of federal, state, and local anti-discriminatory laws. It also means making sure human resources and hiring staff receive the necessary training to avoid inadvertent discriminatory behavior.
Organizations can turn to the U.S. Equal Employment Opportunity Commission (EEOC) for current information, training, and online tools. Additionally, organizations and companies themselves can provide training to all employees to help ensure compliance with anti-discriminatory procedures and policies.
Diversity and corporate social responsibility also involve actively cultivating relationships with employees. Business leaders who build relationships with their employees directly improve the work environment. These relationships demonstrate a respect for diverse voices and opinions, and serve to strengthen a sense of inclusion.
What are Some Examples of Corporate Social Responsibility?
Prospective business managers and leaders can examine several examples of corporate social responsibility and consider ways to apply them to their own organizations.
Examples of CSR That Help the Environment
Organizations can adopt environmentally aware practices and policies that reduce their carbon footprint.
- Provide recycling bins around their facilities
- Switch to eco-friendly technology
- Conserve energy through LED light bulbs
- Promote paperless options
- Encourage employees to bike or carpool to work
Method, a cleaning product company, packages its dish and hand soaps in plastic that is recovered from the ocean. It also powers its production plants with wind power and takes measures to make its soaps as biodegradable as possible.
The Coca-Cola Company has also taken significant measures to reduce its environmental impact. In 2014, it invested in trucks powered by alternative fuel to address the 3.7 million metric tons of greenhouse gases emitted yearly by its delivery fleet. The company aims to reduce its carbon footprint by 25%.
Examples of CSR That Promote Ethical Decisions
Organizations can engage in practices that promote ethical decisions. Many of these decisions relate to quality control and anti-corruption measures.
Quality Control
Clear links exist between environmental protection and a company’s quality control efforts. Quality control aims to address the shortcomings of processes and cut waste to achieve quality and efficiency. CSR practices, such as zero waste, which aims to eliminate waste through efficiency, align with many quality control measures. Businesses that focus on high quality control can also help avoid accidents such as oil spills that cause untold environmental damage.
Additionally, products that are produced as a result of poor quality control usually don’t last as long and need to be replaced more often. This results in overflowing landfills and the unnecessary use of resources to create the same products again. Socially responsible businesses can purchase higher-quality materials and invest money in more thorough procedures to reduce this waste.
Anti-Corruption Standards
Anti-corruption also serves a strategic role in CSR. Corruption can have serious social and environmental consequences. For example, it can lead to the theft of state assets by politicians, human rights abuses, and labor rights abuses, among other problems. Transparency and anti-corruption measures make it possible to address social and environmental concerns. Some of the greatest challenges to sustainability, for example, come from corruption.
Applying anti-corruption standards as a CSR tool requires more than adopting policies. It also involves taking a close look at an organization’s corporate culture. For example, if a business implements policies to forbid bribes but also pushes sales teams to take great risks to meet nearly unreachable sales targets, their culture does not effectively support anti-corruption.
Anti-corruption standards demand a holistic approach that ensures an organization’s business model supports its policies.
Examples of CSR That Promote Diversity
Many organizations demonstrate their commitment to diversity and inclusion by finding ways to open opportunities to more people. They accomplish this in different ways. One method is through targeted hiring goals and practices which strive to reach more diverse communities. Another strategy involves developing training programs that broaden opportunities. Consider the following examples.
Starbucks has committed to hiring 25,000 veterans by 2025. The company has also committed to hiring 10,000 refugees by 2022.
Salesforce and Deloitte joined forces to create the Pathfinders Training Program. The program develops the technical and business skills of people from diverse backgrounds, aiming to reach almost 6 million unemployed young people and 22% of veterans who are looking for jobs. Program participants train for Salesforce positions during a four-month program.
Why Is Corporate Social Responsibility Important?
CSR does not simply serve as a gimmick to build a brand. Different types of corporate social responsibility serve an essential purpose and contribute to the success of businesses.
Businesses typically possess the resources to make a meaningful difference. The differences companies can make may not only support the health of the environment and society, but a sustainable future for the business itself.
CSR Strengthens a Company’s Reputation
Consumers want companies to act in socially responsible ways. A 2017 Cone Communications study found that 70% of Americans believe companies are obligated to take actions that improve issues outside of their normal business operations.
The same study found 92% of Americans have a more favorable view of businesses that work to address social and environmental issues. With this positive image, businesses can build market share and conversely, recover more quickly from setbacks to their reputation.
CSR Attracts Talent and Improves Employee Relations
A good company reputation also attracts talent. By 2025, millennials will make up 75% of the global workforce. A Deloitte study shows millennials deeply value how their companies respond to the environment and social issues such as income inequality. By aligning organizational values to those of the workforce, companies can both attract and retain top employees.
CSR activities create opportunities for organizations to forge stronger relationships with their communities and employees. When people participate in actions that give back and make a positive impact, they feel a greater sense of community, which can boost pride and motivation.
With heightened morale, employee engagement improves, which increases productivity. According to Gallup, highly engaged employees can bring in 21% more profitability.
CSR Offers Financial Benefits
With increasing demand for CSR, businesses stand to gain financially from adopting such practices as sustainability. Increasingly, consumers don’t mind paying more to support socially responsible values.
For example, a 2019 Nielson survey showed 66% of respondents expressed a willingness to pay extra for eco-friendly services and products. By meeting the demand for CSR, organizations can often increase their profitability.
In response to climate change, the government has created incentive programs that reward businesses for sustainable practices. These include tax write-offs, financial grants, and expedited regulatory permitting.
In addition, sustainable practices can offer organizations other financial benefits. For example, energy conservation and the use of sustainable energy sources such as solar power can deliver handsome financial rewards in the long run.
Pursue a Career in Business Administration
Today’s business leaders have a lot to gain from heeding the growing calls for CSR. By considering the many types of corporate social responsibility and how to implement them, business administrators can bring real value to their organizations.
Learn more about how Ohio University’s Online Master of Business Administration program can build the skills to create and foster socially responsible businesses.
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