There are many definitions of Corporate Social Responsibility (CSR) with most sharing common ground, the idea of CSR stems from the idea that as well as making money a business has a role in the wider society. In general terms CSR covers the legal and moral responsibility of a business towards the community and the environment in which it operates. CSR usually refers to the actions above and beyond the requirements of the law and other regulations.
CSR from a business perspective could start with being a good and ethical employer, treating employees in a fair manner, behaving responsibly, dealing with customers and suppliers fairly. Many believe that CSR actually goes beyond this and a business should take responsibility to consider and act favorably towards society, after all they may need the support of the communities which they are within.
This can include donations to charitable organisations or good causes, it could be the involvement and support of educational and social community projects, either by monetary contributions or through the donation of staff time through volunteering. Many businesses, particularly larger organisations have volunteering targets or they support and encouraging employees volunteering for their own chosen causes.
The actions of a business that would fall under the Corporate Social Responsibility umbrella will be very specific to the business and the perceived impacts on society, environment and the community as a whole. Consider a manufacturing type business, their operations may generate waste, this may cause the community concern. CSR for them may be taking responsibility to minimize impact through the waste management and pollution reduction.
A CSR program is likely to incur costs initially and will not necessarily generate a financial benefit initially. It will however mitigate harm and promote the company in a favorable light and promotes a good reputation, this works in the businesses’ favor attracting potential customers and investors.
Before undertaking activities to satisfy the CSR, just like any other investment a cost – benefit analysis should be conducted to establish the level of investment required and that can be sustained.
What CSR actually means will differ from business to business and industry to industry. However, Corporate Social Responsibility will always be considered more favorably when it is done voluntarily rather than it being imposed.
The extent to which a business embraces CSR will differ, for some businesses CSR will already feature within their fundamental values, for instance a business promoting themselves based on ethical practices and environmentally friendly products.
Others will approach CSR just like any other business decision, starting with a strategy. There will be a motive that is driving the action and a desire outcome. We think of strategy as relating to the long term so a CSR strategy will usually be to improve its position within the business environment, through favourable actions.
Some of the more common approaches to Corporate Social Responsibility focuses on:
Environmental – including recycling, waste disposal and management. Making ‘green’ choices such as choosing to use renewable energy sources, recycled materials reducing waste.
The wider community – this can include volunteering for good causes and allowing employees to volunteer. Raising money or making charitable donations and offering support to local events through sponsorship.
A business may see a number of positives resulting from a CSR Strategy.
A good CSR can help to build a positive brand image and build a loyal customer following as a result of the company values.
A CSR strategy can form part of a businesses’ risk management. Putting it simply it may encourage a business to focus on adhering to regulations which can help to reduce risk of falling foul and facing a damaged reputation or costly legal proceedings.
A business pursuing a CSR strategy can be perceived as a ‘good’ responsible business, this will create an image and help others including officials and regulators form the opinion of a business taking its obligations seriously this can potentially reduce scrutiny.
There are a number of models that have been developed in relation to CSR to illustrate the concept, one of the better known ones is that of Carroll.
The model devised by Carroll consisted of four parts which would all need to be satisfied for true CSR. Carroll suggested that CSR encompasses economic, legal, ethical and philanthropic expectations. Carroll’s theory is often illustrated in a pyramid shape, starting at the base with Economic responsibilities followed by legal, ethical and then philanthropic.
Carroll described what each part consists of:
Economic – relates to the economic requirements placed on the business, including the return for shareholders, paying employees a fair wage and providing goods and services at a fair price.
Legal – Carroll considered the law to be the minimum expectation and acts as a baseline for businesses to operate.
Ethical – relates to the actions of a business, these should be fair and just. This goes a step beyond the first to parts, which represent the basic fundamentals a business.
Philanthropic – This sections can include donations to charities and good causes, contributing to the wider community. These are considered discretionary behaviors by some.
Despite the positive that a business may derive from a CSR strategy there are still some critics who maintain that by meeting a perceived CSR it actually goes against the fundamental objectives of a business.
There are multiple variables that may be influential within this concept and it should be noted that different countries and cultures influence the extent to which a business will conduct their operations in a socially responsible manner.