What Is CSR?
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 are aware of how they impact aspects of society, including economic, social, and environmental. Engaging in CSR means a company operates in ways that enhance society and the environment instead of contributing negatively to them.
Key Takeaways
- Corporate social responsibility is a business model by which companies make a concerted effort to operate in ways that enhance rather than degrade society and the environment.
- CSR can help improve society and promote a positive brand image for companies.
- CSR includes four categories: environmental impacts, ethical responsibility, philanthropic endeavors, and financial responsibilities.
Understanding Corporate Social Responsibility (CSR)
Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands. A socially responsible company is accountable to itself and its shareholders. CSR is commonly a strategy employed by large corporations. The more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry.
Types of CSR
- Environmental responsibility: Corporate social responsibility is rooted in preserving the environment. A company can pursue environmental stewardship by reducing pollution and emissions in manufacturing, recycling materials, replenishing natural resources like trees, or creating product lines consistent with CSR.
- Ethical responsibility: Corporate social responsibility includes acting fairly and ethically. Instances of ethical responsibility include fair treatment of all customers regardless of age, race, culture, or sexual orientation, favorable pay and benefits for employees, vendor use across demographics, full disclosures, and transparency for investors.
- Philanthropic responsibility: CSR requires a company to contribute to society, whether a company donates profit to charities, enters into transactions only with suppliers or vendors that align with the company philanthropically, supports employee philanthropic endeavors, or sponsors fundraising events.
- Financial responsibility: A company might make plans to be more environmentally, ethically, and philanthropically focused, however, it must back these plans through financial investments in programs, donations, or product research including research and development for products that encourage sustainability, creating a diverse workforce, or implementing DEI, social awareness, or environmental initiatives.
Volunteering
Benefits of CSR
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 a company engages in CSR, it is more likely to receive favorable brand recognition. Additionally, workers are more likely to stay with a company they believe in. This reduces employee turnover, disgruntled workers, and the total cost of a new employee.
For companies looking to outperform the market, enacting CSR strategies may improve how investors view the company's value. The Boston Consulting Group found that companies considered leaders in environmental, social, or governance matters had an 11% valuation premium over their competitors.
CSR practices help companies mitigate risk by avoiding troubling situations. This includes preventing adverse activities such as discrimination against employee groups, disregard for natural resources, unethical use of company funds, and activity that leads to lawsuits, and litigation.
CSR programs can raise morale in the workplace.
Company Examples
In its 2022 Environmental and Social Impact Report, Starbucks (SBUX) highlights taking care of its workforce and the planet among its CSR priorities through stock grants and additional medical, family, and educational benefits. The company's goals include achieving 50% reductions in greenhouse gas emissions, water consumption, and waste by 2030.
Home Depot (HD) has invested more than 1 million hours per year in training to help front-line employees advance in their careers, aims to produce or procure 100% renewable energy to operate its facilities by 2030, and has plans to spend $5 billion per year with diverse suppliers by 2025.
General Motors won the Sustainability Leadership Award from the Business Intelligence Group in 2022. The automaker provided $60 million in grants to more than 400 U.S. nonprofits focusing on social issues, and it has agreements in place to use 100% renewable electricity at its U.S. sites by 2025.
Why Should a Company Implement CSR Strategies?
What Is ISO 26000?
In 2010, the International Organization for Standardization (ISO) released ISO 26000, a set of voluntary standards to help companies implement corporate social responsibility. Unlike other ISO standards, ISO 26000 provides guidance rather than requirements because the nature of CSR is more qualitative than quantitative, and its standards cannot be certified. ISO 26000 clarifies social responsibility and helps organizations translate CSR principles into practical actions.
What Are the Benefits of CSR?
What Companies Have the Best CSR?
Since 1999, Corporate Responsibility Magazine has ranked the top 100 Best Corporate Citizens each year among the 1,000 largest U.S. public companies. Rankings are based on employee relations, environmental impact, human rights, governance, and financial decisions. In 2023, the top-ranked companies include Hewlett-Packard Enterprise Company, Accenture, and Hasbro.
The Bottom Line
Companies striving to measure success beyond bottom-line financial results may adopt CSR strategies that target environmental, ethical, philanthropic, and fiscal responsibility that extend beyond the products they sell.