Understanding the Role and Purpose of Corporate Social Responsibility
Companies could simply donate a few hundred dollars here and some old computers there and call it good, right? So what is the purpose of corporate social responsibility?
In the past, companies didn’t worry much about how they could give back. Sure, plenty of businesses gave money to their favorite charities and sponsored the local Little League team. While charitable donations of any type are commendable, corporate social responsibility (CSR) is something more. It is about holistic business practices that support a healthy economy and a strong global community for long-term sustainability, not just for the corporation, but for the world.
In the ‘80s, there were a handful of corporations that built their legacies on giving back some part of their proceeds to support communities and provide for the underserved, like Newman’s Own and Ben & Jerry’s. But it wasn’t until the last couple of decades that consumers began to expect more.
With the growing popularity of the internet and easy access to global news, corporate dealings became more transparent. Consumers couldn’t help noticing the media spotlight on the existential issues that we face today — climate change, contamination and the depletion of our natural resources, as well as the exploitation of our world communities.
Increasingly, customers want to deal with companies that are responsible and ethical. At the same time, more business leaders understand that they have a vital role to play in actively participating in global solutions. International powerhouses such as Coca-Cola, Pfizer and Walt Disney made CSR an essential part of their business processes.
Both large and small businesses are bolstering their CSR initiatives. In the process, they are attracting the best talent, engendering customer loyalty, and improving the communities that they serve.
What Is Corporate Social Responsibility?
Corporate social responsibility is the integration of societal and environmental concerns into the strategy and operations of a business. It consists of initiatives that are founded on the principle that companies should play a positive role in the community and be accountable for the impacts they have on society as a whole.
The term was coined in the 1950s by economist Howard Bowen, but elements of it have existed since the 1800s. Although there is no specific law that mandates social responsibility per se, most company leaders have long recognized that when they act in the best interest of society, benefits accrue to them.
Benefit of CSR
In many corporations, CSR matches existing cultural values and aligns with the ethics and morality of the leaders. That’s reason enough to have a CSR program and, in any case, answers the question: “What is the purpose of corporate social responsibility?” However, even though businesses may not expect that there will be a strategic advantage or even many benefits to the CSR program, the rewards are plentiful.
CSR programs consistently return results. For example, they:
- Increase brand recognition.
- Create positive perceptions and enhance the brand reputation.
- Differentiate the company from its competitors.
- Provide greater protection against reputational damage.
- Generate increased customer loyalty.
These benefits are backed by research. Further, customers are four to six times more likely to buy from and trust a company with a strong sense of purpose. And 87% of those surveyed report that they would purchase products and services from companies that advocate for the causes they believe in.
The CSR pyramid
The CSR pyramid is a framework that represents the role of business in society and how businesses can take social responsibility. It was created by Archie Carroll, professor emeritus at the Terry College of Business, University of Georgia, in 1991.
The hierarchy of the pyramid appears to place economic consideration before all else. In actual practice, if a business cannot be profitable while following the legal and ethical norms of a society, it should not exist. Like all frameworks, it has its limitations. Yet, despite criticisms that it may misrepresent the relative business priorities and place too strong an emphasis on profit-first, it still provides a useful way to think about how social responsibility works.
In any corporation, there will always be tension between what is right and what is profitable. At the end of the day, a viable business must make money. Savvy leaders understand that they must be both ethical and legal. The others become Enron.
Let’s consider each of the levels:
The responsibility to be a good corporate citizen, to serve mankind and to look out for the poor and the underprivileged.
The responsibility to do what is right and fair, do no harm, follow fair labor practices, uphold nondiscriminatory actions and provide equal pay.
The responsibility to obey the law, society’s codification of right and wrong.
The responsibility to make a profit and to meet its core responsibility to shareholders.
Each of these components works together to create a sustainable operating model.
How Does CSR Work?
There’s no one right way to do CSR. Programs can take many forms. Following are some of the most popular:
- General donations: Corporations give money to their favorite nonprofits with no expectations in return.
- In-kind giving: Rather than money, corporations donate products, services, equipment or use of their facilities, for example.
- Scholarship and grants: Companies provide need-based or merit-based money for education, often targeting specific fields where they have an interest.
- Sponsorships: Companies pay money or donate products, services and even their employees, to be associated with an event, a team, a project or just the nonprofit itself.
- Disaster relief donations: When disaster strikes, relief efforts provide we assistance to communities and individuals who need food, shelter, clothing and other essentials.
- Employee volunteer programs: These workplace-based initiatives support and encourage employees to participate in managed community volunteer efforts.
- Matching gifts: Corporations set up an employee benefit that provides a matching donation to nonprofit organizations.
- Volunteer grants: Also known as a dollars for doers programs, corporations provide grant money to nonprofits based on the number of hours employees spend volunteering there.
- Pro bono work: Companies provide free services, typically professional work, to those in need.
Best Practices for a CSR Program
CSR is self-regulating. As such, there are no rules of compliance that you must follow. But there are certain things a company can do to ensure that the program gets a good start and that it exercises the discipline required to meet its business objectives.
- Put together a vision of where you want to be based on Carroll’s pyramid. What is the right balance between profitability and service to the community?
- Audit current activities. What are you doing now that could be considered part of your CSR program?
- Develop a business code of ethics. Establish guiding principles that provide direction in terms of daily operations and how you treat employees, customers, the environment and competitors.
- Adopt a workplace health and safety program. Ensure that you are following government regulations that are aimed at providing a safe work environment, avoiding the transmission of disease and preventing accidents.
- Pledge to protect the environment. Start by implementing the three Rs of waste management in your workplace: reduce, reuse and recycle. Consider ways to minimize your carbon footprint, e.g., smart lighting and eliminating unnecessary travel.
- Get strategic about nonprofits. Donate to causes that make sense given your business model and your values.
- Mandate supply chain CSR. Communicate your values and expectations to your suppliers. Treat your suppliers equitably.
CSR Made Easy
One way to ensure that your CSR program runs smoothly is to find the right partners. Technology can help you effortlessly monitor, manage and measure the results of your program.
Groundswell is the best option when you are looking to make charitable giving an employee benefit. It allows you to create a personal foundation for each employee and put the control in their capable hands. If you’d like more information about Groundswell, contact us.