Gone are the days when the only focus for businesses was their profit margin. Now, a business’s social responsibility to their stakeholders holds as much weight as the profits they bring in. Croner consultant, Carol Smith, explains corporate social responsibility.
What is corporate responsibility?
Corporate social responsibility (CSR) is an organisation’s commitment to promoting ethical and transparent behaviours and accounting for the impacts of its decisions on society and the environment beyond immediate legal obligations.
It should take into account a business's impact, not only financially, but also socially and environmentally within its wider community.
Various activities fall under this umbrella. They can range from partnering with the local community to plant trees, through to deciding on socially responsible investments. This approach contributes to the sustainable development of a society by delivering social, economic, and environmental benefits to stakeholders.
CSR can be viewed as the efforts of an organisation to improve its local (or more widespread) social environment. Another way of looking at it is a way of encouraging corporations to conduct business in an ethical manner.
Is corporate social responsibility mandatory?
At the moment, organisations approach CSR in a corporate self-regulation capacity. But the British Government may introduce laws that make CSR mandatory for businesses in the future.
Some business insiders argue that voluntary social responsibility allows companies to demonstrate best practices within their industry. It also allows them to determine their criteria for the best practices.
Why should corporations be socially responsible?
Governments, employees, and customers recognise the importance of contributing to the social development of the communities they occupy.
For some employers, CSR is also an essential means of increasing competitive advantage. It's also considered an effective tool in raising brand awareness among customers and employees.
Having a CSR policy in place not only shows your customer base you care about their community, but that you’re also taking steps to improve it. And in the modern business world, all SMEs are facing increased demand to be more open about their business activities from customers. They’re also facing pressure to maintain acceptable business practices in order to build trust.
How does corporate social responsibility affect businesses?
You can feel the effects of CSR efforts at various levels of your business.
Organisations that practice CSR have happier and more satisfied employees. This is due to the fact employees have more of a sense of purpose when working for a company that's socially and environmentally conscious.
CSR can also impact the ability to attract new talent. Millennials and Generation Z are now joining the workforce — they have a major focus on protecting the planet.
The rise in popularity of social media has also created an environment where feedback is key. Employees and customers can give public feedback on their experience of dealing with your business. This can negatively affect your public image unless you put in the steps to ensure you make a positive contribution to the world around you.
Types of corporate social responsibilities
There are four main pillars that form the foundation of CSR.
Business owners can choose between the different pillars to create a programme that suits their brand.
The four types are as follows.
Philanthropic efforts: These initiatives include donating time, money, and other resources to the likes of charities. You can donate to various organisations and causes on a local, national, or international level. Possibilities include human rights projects, natural disaster relief aid, and education programmes.
Environmental protection and sustainability: Aligning yourself with efforts to reduce carbon footprint can have positive results for your public image. It requires you to take a social stance on disaster relief and environmental conversations. You can assist in your local communities by contributing resources to food drives, etc.
Company diversity: This encourages businesses to acknowledge and address the need for a diverse workforce that makes all members feel welcome. You should have policies in place that are in line with equality and diversity as well as a process to implement said policies.
Volunteering commitments: This is probably the most popular type of CSR. Businesses recognise that to improve the profile of their brand they should work together with their local community. Providing employees with opportunities (time or resources) goes a long way to improving the public perception of your company.
What are the benefits of CSR?
The actions you put in can lead to many positive outcomes. These apply to businesses within any sector and of any size. You can expect:
improved brand recognition
positive brand reputation
an increase in customer loyalty
improved employee retention rates.
You also save on costs by reducing the use of resources, managing waste and monitoring carbon footprints.
Focusing on your corporate social responsibilities can also contribute to winning new business deals, enhancing relationships, and gaining access to new funding opportunities.
See your Corporate Social Responsibility topic.
Want expert advice? Croner Consulting can offer advice on creating and implementing your CSR policy. Call for more information on 0844 561 8149.