Businesses that practice corporate social responsibility aim to improve their communities, the economy or the environment.
- Corporate social responsibility, or CSR, is a form of self-regulation that reflects a business’s accountability and commitment to contributing to the well-being of communities and society through various environmental and social measures.
- CSR plays a crucial role in a company’s brand perception; attractiveness to customers, employees, and investors; talent retention; and overall business success.
- A company can implement four types of CSR efforts: environmental initiatives, charity work, ethical labor practices and volunteer projects.
- This article is for business owners who are looking to implement or improve CSR initiatives and want to learn more about the benefits, best practices, and potential pitfalls.
The definition of business success goes beyond profitability, growth rate and brand recognition. In today’s world, customers, employees and other stakeholders judge a company by how its activity impacts the community, economy, environment and society at large. In other words, by whether it cares about the greater good and not only greater profit. Corporate social responsibility practices are a way to demonstrate your business’s stance on the matter.
What is corporate social responsibility?
Corporate social responsibility is a type of business self-regulation with the aim of social accountability and making a positive impact on society. Some ways that a company can embrace CSR include being environmentally friendly and eco-conscious; promoting equality, diversity, and inclusion in the workplace; treating employees with respect; giving back to the community; and ensuring business decisions are ethical.
CSR evolved from the voluntary choices of individual companies to mandatory regulations at regional, national and international levels. However, many companies choose to go beyond the legal requirements and embed the idea of “doing good” into their business models.
There is no one way a company can embrace CSR, but one thing is certain – to be perceived as genuine, the company’s practices need to be integrated into its culture and business operations. In today’s socially conscious environment, employees and customers place a premium on working for and spending their money on businesses that prioritize CSR. They can detect corporate hypocrisy.
To ensure CSR authenticity, a company should look at its values, business mission and core issues and determine which initiatives best align with the business’s goals and culture. The business can do this internally or hire a third party to conduct an assessment.
Reviewing the United Nations 17 Sustainable Development Goals is a good place to start. While goals like Good Health and Well-Being or Gender Equality can apply to most businesses, specific goals like Life Below Water or Affordable and Clean Energy may be relevant to select industries like water technology or energy providers.
Why CSR is important
There are many reasons for a company to embrace CSR practices.
1. It improves customers’ perception of your brand.
It’s increasingly important for companies to have a socially conscious image. Consumers, employees, and stakeholders prioritize CSR when choosing a brand or company, and they hold corporations accountable for effecting social change with their beliefs, practices, and profits.
“What the public thinks of your company is critical to its success,” said Katie Schmidt, founder and lead designer of Passion Lilie. “By building a positive image that you believe in, you can make a name for your company as being socially conscious.”
To stand out among the competition, your company needs to prove to the public that it is a force for good. Advocating and raising awareness for socially important causes is an excellent way for your business to stay top-of-mind and increase brand value.
The Kantar Purpose 2020 study demonstrated a direct correlation between perceived positive impact and brand value growth. Companies that the public considers highly impactful demonstrated a brand value growth of 175% over 12 years, while businesses with a low positive impact showed only 70% growth.
Schmidt also said that sustainable development could help a business financially. For example, using less packaging and less energy can reduce production costs.
2. It attracts and retains employees.
Consumers aren’t the only ones drawn to businesses that give back. Susan Cooney, head of global diversity and inclusion at Symantec, said that sustainability strategy is a big factor in where today’s top talent chooses to work.
“The next generation of employees is seeking out employers that are focused on the triple bottom line: people, planet and revenue,” she said. “Coming out of the recession, corporate revenue has been getting stronger. Companies are encouraged to put that increased profit into programs that give back.”
According to Deloitte’s 2021 Millennial and Gen Z Survey, the modern workforce prioritizes culture, diversity, and high impact over financial benefits. An estimated 44% of millennials and 49% of Gen Zers rely on their personal ethics in determining the type of work and companies they’d join. The respondents of the Porter Novelli Purpose Tracker 2021 report go even further, with 70% saying they wouldn’t work for a company without a strong purpose.
What’s more, employees that share the company’s values and can relate to its CSR initiatives are much more likely to stay. Deloitte’s 2020 Global Marketing Trends Report shows that purpose-driven companies retain talent up to 40% more than their competitors. Considering that the estimated cost of losing an employee averages 40% of their annual salary, according to a report by the Washington Center for Equitable Growth, offering your team a sense of purpose and meaning in their work is worth the effort.
3. It increases your appeal to investors.
By demonstrating a developed CSR program and initiatives, your company is bound to become more appealing to both current and future investors. CECP’s influential 2021 Giving in Numbers report shows that investors play a growing role as key stakeholders in corporate social responsibility. Almost 80% of surveyed businesses were open to providing them with data and considering their perspectives on sustainability. Just like customers, investors are holding businesses accountable when it comes to social responsibility.
At the same time, a company that takes CSR seriously signals to both investors and partners that it’s interested in long-term as well as short-term gain. CSR goes hand in hand with environmental, social, and governance (ESG) metrics that help external analysts quantify the company’s social efforts, and becomes a key factor for investors’ consideration and continued interest.
4 types of corporate responsibility your business can practice
In recognition of how important socially responsible efforts are to their customers, employees and stakeholders, many companies focus on four broad CSR categories.
- Environmental efforts: One primary focus of CSR is the environment. Businesses have large carbon footprints, regardless of size. Any steps a company can take to reduce its footprint is considered good for both the company and society.
- Philanthropy: Businesses can practice social responsibility by donating money, products or services to social causes and nonprofits. Larger companies tend to have plentiful resources that can benefit charities and local community programs; however, even as a small business, your efforts can make a difference. If you have a specific charity or program in mind, reach out to the organization. Ask them about their specific needs and whether a donation of money, time or your company’s products would best help them.
- Ethical labor practices: Companies can demonstrate CSR by treating employees fairly and ethically. This is especially true of businesses that operate in international locations with labor laws that differ from those in the U. S.
- Volunteering: Participating in local causes or volunteering your time (and your staff’s time) to community events says a lot about your company’s sincerity. When your company does good deeds without expecting anything in return, you express concern (and support) for specific issues and social causes.
Building a socially responsible business
While startups and small companies don’t have the deep financial pockets that enterprises have, their efforts can have a significant impact, especially in their local communities.
“Even 5%, though it might not sound like a lot, can add up to make a difference,” Schmidt said. “When thinking of ways to donate and give back, start local, and then move from there.”
When identifying and launching a CSR initiative, involve your employees in the decision-making process. Create an internal team to spearhead the efforts and identify organizations or causes related to your business or that employees feel strongly about. You’ll increase engagement and success when you contribute to something that matters to your employees. Involving your employees in the decision-making process can also bring clarity and assurance to your team.
“If decisions [about CSR] are made behind closed doors, people will wonder if there are strings attached and if the donations are really going where they say,” Cooney said. “Engage your employees [and consumers] in giving back. Let them feel like they have a voice.”
Whichever strategies you use for sustainable development, be vocal. Let your consumers know what you are doing to be socially conscious. [Related read: PayPal’s Mission for Corporate Social Responsibility]
“Consumers deserve to share in the good feelings associated with doing the right thing, and many surveys have found that consumers are inclined to purchase a sustainable product over a conventional alternative,” Cooney said. “Announcing these benefits is a win-win from both a commercial and sustainability perspective.”
What Is Corporate Social Responsibility? [Biznewsdaily]
