Unit 24 Corporate social responsibility

1. Corporate social responsibility

- 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.
- Engaging 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.
2. 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.
(1) 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.
(2) 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.
3. Benefits of Corporate Social Responsibility
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.
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.
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.
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.