Corporate social responsibility is positively blooming in today’s economic and social environment. Companies that take steps to commit to more sustainable or otherwise ethical policies quickly create quite a buzz in the press.
The famous and globally popular toy company Lego saved over 7,000 tons of cardboard, which would otherwise likely have ended up in landfill sites around the planet, just by reducing the size of product packaging — and by 2025, it’s planning to stop using single-use plastic altogether, as well.
TOMs shoes are well-known for donating a pair of shoes to a person in need for every pair sold, with plans to ensure that all the cotton the company uses comes from sustainable and primarily recycled sources in the near future.
Starbucks has committed itself to sustainable packaging, something easily seen in all its branches.
Still, the company has also been working very hard to ensure that all its source materials are produced ethically.
That means the reduction of waste, the preservation of water, and equitable working conditions for farmers.
Ice cream manufacturer Ben & Jerry’s recently announced that it would take steps to withdraw its products from Israeli settlements in occupied Palestinian territories, angering many in the process, leading to significant tension between Ben and Jerry’s and its parent company, Unilever.
In some cases, steps companies take in embracing ethical and sustainable practices are clearly a win-win; the company saves money, gains a reputation boost, and does something good for the planet, all at the same time.
We’d be surprised if you don’t recognize at least one of the industry giants in these examples as companies committed to more than profits.
Suppose that didn’t make you consider purchasing one of their products just a little bit more readily.
On the other hand, Ben & Jerry’s latest decision shows that a commitment to corporate social responsibility can lead to far more complex situations, too.
What does corporate social responsibility entail, what is driving corporate social responsibility, and why is corporate social responsibility important?
What Is Corporate Social Responsibility?
Corporate social responsibility — CSR for short, and also often referred to as corporate citizenship — is, at its very core, precisely what it sounds like. Corporate social responsibility is a philosophy, business model, or mission to ensure that a commercial venture positively impacts the world within which it operates.
How a company implements policies related to corporate social responsibility can differ enormously depending on the business’ size, scope, nature, and the goals it has adopted.
However, the one common characteristic is that corporate social responsibility is not meant to hinder profits.
Rather, practicing corporate social responsibility means attaining growth and profits in a way that benefits all stakeholders — from directors and shareholders to employees, suppliers, contractors, customers, the environment, and the world at large.
The core idea can be summed up by looking at the three Ps of the “triple bottom line”:
- Profit. This part goes without saying — to stay in business, and a venture has to initially work toward breaking even and then hopefully make increasingly large profits that enable it to grow and expand. Embracing corporate social responsibility does not in any way mean that a company is willing to sacrifice this “original bottom line.” This concept has been broadened to include two further points, however.
- People. For “people,” the second P highlights a company’s commitment to those impacted by the business far beyond shareholders alone. Customers, employees, suppliers, and even entire communities all fall under this heading for businesses that have embraced the principles of corporate citizenship.
- Planet. The third P is becoming ever more pressing as we are all waking up to the impact of climate change and the role which governments, consumers, and commercial ventures have all played in causing it. Companies committed to increased environmental sustainability may work on implementing policies that reduce pollution, energy usage, and waste and embrace more environmentally friendly practices that ultimately lead to a smaller carbon footprint.
When operating within parameters that make it possible to profit while also taking responsibility for sustainability and implementing progressive social policies, you have a company that takes corporate citizenship extremely seriously.
How each company practices corporate social responsibility can, however, look radically different.
To a sports team, corporate social responsibility may primarily mean creating opportunities for young athletes of diverse backgrounds, for instance.
At the same time, a beverage company will inevitably emphasize water preservation and recycling more heavily.
For ventures that emerged within the fossil fuel industry, it may mean working on negative carbon solutions.
See Related: Best ESG Stocks to Invest In Today
How Has the Concept of Corporate Social Responsibility Changed Over Time?
Philanthropy — charitable giving, often on an amazing scale — has been around since the late industrial revolution, with Andrew Carnegie being a famous pioneer in this area.
Famous philanthropists have made large contributions to society in science, the arts, charitable giving, and education and continue to do so to this day because they have the means and the will to do so.
Philanthropy is, as such, arguably the first form that corporate social responsibility took.
Over time, however, the two concepts have evolved separately.
While philanthropy would mean, if you like, taking a nice chunk of profits to donate to causes that create social or scientific change, corporate social responsibility allows this culture of positive change to soak into the very fabric of the company, at all its respective levels.
CSR, then, means working to make a profit so that it would also have a positive social and environmental impact from the very outset.
That is, of course, easier said than done and requires total commitment and boundless ambition.
For this reason, large companies now often have entire corporate social responsibility teams, which has created exciting job opportunities for those interested in helping businesses ensure that they leave a measurably positive impact on the community.
Three common guiding principles that companies and other stakeholders (including potential investors and consumers) use to assess how committed a venture is to corporate social responsibility are “ESG.”
These three letters stand for environmental, social, and governance criteria.
The environmental and social aspects align very nicely with the three Ps of the triple bottom line. The G stands for governance — steps companies take to increase transparency, such as published audits and shareholder voting.
Why is corporate social responsibility important, and what is the purpose of corporate social responsibility?
While it is nearly impossible not to have some intuitive responses to these questions, CSR has more dimensions than you might have considered. Let’s investigate that in more detail, then!
- Businesses — and Especially Large Companies — Can Make a Huge Difference
When you consider the importance of corporate social responsibility to society, it is crucial to remember that many businesses can leverage power like few individuals ever could on their own. Some of the largest US-based companies have hundreds of thousands of global employees, while a few even employ more than a million people.
Even if their notions of corporate social responsibility were to focus solely on their own workforce — by, for instance, implementing training programs, focusing on equitable hiring policies, and building a deeply diverse employee pool — these companies can improve the lives of a whole lot of people.
Large companies are further in a position to significantly impact the economy, use their voices to influence public opinion, and even make a noteworthy dent in the carbon footprint of an entire nation, or even on the international level. When it comes to climate change, this is especially important.
After all, for your business to survive and continue to be profitable, the planet has to continue to be hospitable, and you need to minimize the risk of disrupted supply lines. In that sense, what’s good for everyone else is good for a company too.
When a large business is truly committed to a goal, it can make a huge difference. Corporate social responsibility is important for that reason alone.
See Related: Best Impact Investing Books
- Corporate Social Responsibility Has a Knock-On Effect
Both large corporations and much smaller local businesses are in an excellent position to attract press attention.
Even if journalists only cover your latest and greatest effort to make the world a more equitable and sustainable place, and even if bored commuters only click on the headline because they have nothing better to do, companies have a real chance of getting through to people.
Do you want to encourage private citizens — including perhaps your customers — to take steps to stop using disposable plastics, do you want to encourage others to take important public health steps such as adhering to social distancing measures, or do you want to encourage your competitors to go green?
Implementing groundbreaking policies yourself and then sharing your commitment with the world will encourage others to move in the same direction.
See Related: What are Social Returns on Investment?
- Corporate Social Responsibility Can Build Deep Customer Loyalty
“Yes, but what’s in it for us?” companies must inevitably ask themselves when they consider reasons for corporate social responsibility.
The truth that modern consumers don’t want to buy services and products from faceless companies that they cannot relate to is plain to anyone who uses the internet.
The fact that consumers are quite willing to boycott companies who have retained unethical practices is equally clear — and those same ethnically conscious citizens who choose to boycott a business will then put pressure on a company to mend its ways while vocally discouraging others from working with such companies.
In the 21st century, consumers want more than the cheapest deal, the highest quality, or the best service. They want to do business with companies that support the important values, and they want to feel good about their choice once they have checked out and made their payment.
When a company shares its personal values and takes practical steps that show they are quite willing to put their money where their mouth is, customers will be willing to pay more to get your product or service.
They’ll spread the word that your business is an ethical one and recommend you to their friends and their networks on social media. In this day and age, corporate social responsibility pays.
See Related: How to Invest in Electric Car Charging Stations
- Corporate Social Responsibility Will Attract Like-Minded Investors
On a related note, this same principle applies to investors as well. Modern socially and environmentally conscious investors are still looking to make a handsome profit — but they want to do it in a way that advances their goals, and that’s another reason why corporate social responsibility is important.
By adopting the principles of corporate social responsibility, especially as a smaller and growing business, you have an excellent chance of attracting like-minded investors who aren’t just excited about your business but also about the social and environmental programs and practices you are committed to.
See Related: Examples of Collective Income Model
- Your Corporate Citizenship Will Cause Talented Workers to Flock to Your Business
Corporate social responsibility can also encompass policies and programs that benefit employees.
A business may be known for offering generous maternity and paternity leave packages, for instance, offering educational opportunities and embracing marginalized groups such as sexual minorities or autistic employees.
When you do that, some of the greatest minds will flock to your company — applying to work for your business not just because they need a job but because they greatly admire your commitment to important causes.
The same employees you are so committed to will be equally committed to your company’s mission — something that will show in your staff turnover rates, productivity, and sheer creativity as well.
Loyal employees will work tirelessly and give their very best 100 percent of the time, and this is why you should consider corporate social responsibility to be a win-win.
What is the purpose of corporate social responsibility?
Ultimately, it is quite simple; you can help create the world you would like to see, even as you increase your profits, increase your productivity levels, and move forward with groundbreaking ideas.
Related Resources
🌎 Invest and Make a Difference
 | ESG investing made easy and free | Rating 🌱 🌱 🌱 🌱 🌱 | Fees $0 $125 for M1 Plus | Minimum $100 | |
 | Wealth management and SRI investing | Rating 🌱 🌱 🌱 🌱 🌱 | Fees Average 0.08% | Minimum $100,000 | |
 | Attractive investment options, fees and automated | Rating 🌱 🌱 🌱 🌱 | Fees Average 0.25% | Minimum $0 | |
 | Excellent ESG and SRI options, automated | Rating 🌱 🌱 🌱 🌱 | Fees Average 0.50% | Minimum $100,000 |