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.
Corporate governance strategies employed by firms that are ethical, societally friendly, and beneficial to its community
What is Corporate Social Responsibility (CSR)?
Corporate social responsibility (CSR) refers to strategies that companies put into action as part of corporate governance that are designed to ensure the company’s operations are ethical and beneficial for society.
Categories of CSR
Although corporate social responsibility is a very broad concept that is understood and implemented differently by each firm, the underlying idea of CSR is to operate in an economically, socially, and environmentally sustainable manner.
Generally, corporate social responsibility initiatives are categorized as follows:
1. Environmental responsibility
Environmental responsibility initiatives aim to reduce pollution and greenhouse gas emissions and the sustainable use of natural resources.
2. Human rights responsibility
Human rights responsibility initiatives involve providing fair labor practices (e.g., equal pay for equal work) and fair trade practices, and disavowing child labor.
3. Philanthropic responsibility
Philanthropic responsibility can include things such as funding educational programs, supporting health initiatives, donating to causes, and supporting community beautification projects.
4. Economic responsibility
Economic responsibility initiatives involve improving the firm’s business operation while participating in sustainable practices – for example, using a new manufacturing process to minimize wastage.
Business Benefits of CSR
In a way, corporate social responsibility can be seen as a public relations effort. However, it goes beyond that, as corporate social responsibility can also boost a firm’s competitiveness. The business benefits of corporate social responsibility include the following:
1. Stronger brand image, recognition, and reputation
CSR adds value to firms by establishing and maintaining a good corporate reputation and/or brand equity.
2. Increased customer loyalty and sales
Customers of a firm that practices CSR feel that they are helping the firm support good causes.
3. Operational cost savings
Investing in operational efficiencies results in operational cost savings as well as reduced environmental impact.
4. Retaining key and talented employees
Employees often stay longer and are more committed to their firm knowing that they are working for a business that practices CSR.
5. Easier access to funding
Many investors are more willing to support a business that practices CSR.
6. Reduced regulatory burden
Strong relationships with regulatory bodies can help to reduce a firm’s regulatory burden.
Example of CSR in Canada
In Canada, mining companies often engage with Aboriginal communities and groups. Converting land sites into mines can cause a significant environmental impact on the Aboriginal communities living near the sites. Several Canadian mining companies engage in corporate social responsibility with local communities to ensure that the adverse effects are minimized.
For example:
- Cameco Corporation oversees education programs directed toward northern and Aboriginal peoples through their northern Saskatchewan five-pillar strategy.
- Goldcorp Inc. strives to make a positive impact on its communities by supporting education and health initiatives and sponsorship of special events.
- Softrock Minerals Ltd. contributes money for festivals, schools, and projects.
CSR of Starbucks
Starbucks is a well-known firm that practices corporate social responsibility. As indicated by the company: “Starbucks’ social corporate responsibility and sustainability is about being responsible and doing things that are good for the planet and each other.”
Starbucks’ CSR initiatives include:
- Starbucks Youth Action Grants: Awarding grants to inspire and support youth action
- Ethos Water Fund: Raising clean water awareness and providing children with access to clean water
- Ethical Sourcing: Commitment to buying and serving ethically traded coffee
- Green Building: Using the U.S. Green Building Council’s LEED certification program to create energy and water-efficient store designs
Related Readings
This has been CFI’s guide to return on Corporate Social Responsibility. To keep learning and advancing your career, the following CFI resources will be helpful:
- Free Introduction to ESG Course
- Corporate Development
- Employee Morale
- A Sense of Purpose at Work
- Soft Skills at Work