What is Corporate Social Responsibility?

Corporate Social Responsibility (CSR) is about the impact that an organisation makes on society, the environment and the economy. The concept of organisations acting responsibly is not a new one, but the term “Corporate Social Responsibility” has taken on a more significant meaning in recent years.

Research shows that:

• 72% of consumers believe companies should have a legal responsibility to people and the planet.
• 91% of the global population wants to see businesses do more than just make a profit.
• 92% want to buy a product that supports a cause.
• More than 90% of shoppers worldwide are likely to switch to brands supporting a good cause.
• 90% of the shoppers surveyed would boycott companies if they found the firms engaged in irresponsible business practices, with 55% of the respondents having already done so in the past year.
• 76% of consumers say they wouldn’t do business with a company that holds views or supports issues that are in conflict with their own.
• 55% of consumers are willing to pay extra for products and services that contribute to positive change.
• 85% of consumers have a more positive image of a product or company when it supports a cause they care about.
• 88% of people want to know about a company’s CSR efforts, and 84% would “tell friends and family” about a company’s CSR efforts.
• 61% of investors consider CSR a sign of ethical corporate behaviour, which reduces their investment risk.
• 67% of respondents prefer to work for socially-inclined companies.
• Engaging in socially valuable projects can reduce employee turnover by approximately 50%.

(Source Views for Change)

What is Corporate Social Responsibility?

Corporate Social Responsibility (CSR) is the long-term, sustainable improvements for society that can be gained from organisations promoting positive social, economic and environmental impact. CSR starts with recognising that an organisation’s activities have an impact on society, the environment and the economy, as well as on their own workforce. It is about the values and ethics that drive an organisation’s activities and how it operates.

The UK Government defines CSR as “the responsibility of an organisation for the impacts of its decisions on society and the environment above and beyond its legal obligations, through transparent and ethical behaviour.”

CSR is about more than just an organisation’s environmental responsibility or having a recycling policy. CSR is about considering the whole picture, from all internal processes through to external contacts and contracts, taking in every step that a business takes during its day-to-day operations.

Organisational CSR strategies usually cover some, or all, of the four main categories or models:

• Society – How can the organisation contribute positively to society and support local businesses and the communities in which we operate?
• Environment – How can the environmental impact be mitigated, minimised or improved? How can waste, emissions and consumption of natural resources be actively managed?
• People – What is the best way to look after employees and other workers in the value chain? What is the best approach to create a workplace that encourages diversity, inclusivity and equal opportunities for all?
• Economy – What impact does the organisation’s products or services have? Do they comply with all fair trading, corporate taxes and anti-bribery requirements? Do others in the value chain subscribe to and exhibit the same CSR values?

Many organisations will have a CSR policy, which defines their areas of interest and concern and the initiatives they are adopting to improve relations with the people and environments affected by their business operations.

These will vary in scope and some generic examples may include:

• Giving to charities and not for profit groups, such as local food banks.
• Supplying volunteers from their workforce.
• Monetary donations to charities and community groups.
• Offering job training for those in need.
• Promising to ensure diversity in the workforce.
• Focusing on minimising the company’s carbon footprint through improved supply chain efficiency.
• Investigating supply chains to ensure there are no negative working practices such as modern slavery.

Companies House, the United Kingdom’s registrar of companies, issued its own statement of commitment to CSR, stating, “As a government organisation and a large employer, corporate social responsibility (CSR) is important to us. We’re committed to ethical and sustainable business practices.

This means we take account of our social, economic and environmental impact. CSR is good for the planet, our employees, customers and communities.” They update news of their CSR activities via Twitter, #CompaniesHouseCSR.

What is the purpose of Corporate Social Responsibility?

The most challenging global problems cannot be solved by governments and non-profit organisations alone. All organisations irrespective of their size or nature need to commit to positively impact all stakeholders – that is, workers, communities, customers, the planet – through CSR.

The aim of CSR is to promote ethical and sustainable activity, as well as to generate goodwill and a positive reputation. The overarching purpose of corporate social responsibility is to give back to the community, to take part in philanthropic causes, and to provide positive social value.

Endorsing a CSR strategy can compel organisations to measure their social and environmental impact, along with their profits, as a business not only has a responsibility to its owners or shareholders but also to the society that exists around it. Some organisations even carry designations or seals, such as B Corporations (B Corps), to highlight their CSR credentials.

In order to achieve certification, a company must:

• Demonstrate high social and environmental performance by achieving a B Impact Assessment score of 80 or above and passing a risk review. Multinational corporations must also meet baseline requirement standards.
• Make a legal commitment by changing their corporate governance structure to be accountable to all stakeholders, not just shareholders, and achieve benefit corporation status if available in their jurisdiction.
• Exhibit transparency by allowing information about their performance measured against B Lab’s standards to be publicly available on their B Corp profile on B Lab’s website.

Why is Corporate Social Responsibility important?

Climate change and the development of social justice movements have altered how many people view the world and these people are expecting organisations in all sectors to understand and address these issues in the way that they operate and do business.

The United Nations Global Compact calls upon organisations to “align their strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals”.

Increasingly, CSR is seen as part of best practice by both the City of London and the UK Government. The Association of British Insurers, whose members own more than 20 per cent of the companies on the London Stock Exchange, publishes guidance on CSR-related issues for both companies and investors.

Who is Corporate Social Responsibility for?

Corporate social responsibility is not just for large corporations – anyone in business or service including the public sector, sole traders and small and medium size enterprises (SMEs) can adopt CSR initiatives.

For example, but not limited to:

• Donating a small percentage of profits to a local charity.
• Food outlets donating end of day, unsold items to local foodbanks or charities.
• Sourcing raw materials or stock items locally.
• Offering job and training opportunities to the local community.
• Implementing environmental policies and practices.
• Reviewing the CSR impact of HR policies and procedures.
• Providing time off for employees to volunteer.
• Organising team building events based on cleaning up a local park area.
• Investing in and using renewable energy sources.
• Encouraging walk or ride your bike to work days.
• Promoting recycling and composting at the workplace.

Consumers and customers can also play their part in promoting CSR by checking the CSR credentials of any organisation that they either purchase from or use the services of. People are more and more seeing their buying decisions as a way to support the issues they care about. Consumers hold the power of choice over businesses and can use their money as a tool to affect change and influence how businesses operate.

Although affordability has always fuelled people’s buying decisions, price is not always the most important factor people consider when choosing a company or its products. Whilst no one wants to pay more than they have to for a product or service, more people rank a company’s commitment to the environment, social responsibility and giving back to the local community as the most important attributes of a business when considering purchasing.

Why should a company implement Corporate Social Responsibility?

Whilst there is no explicit legislation that legally compels organisations to observe corporate social responsibilities, the supporting principles of the UK Corporate Governance Code states, “The board should set the company’s values and standards and ensure that its obligations to its shareholders and others are understood and met” and that risk assessment should cover not only narrow financial risks but also those related to “health, safety and environmental, reputation, and business probity issues”.

Linking the CSR strategy to the organisation’s purpose and values is vital. Aligning CSR with other business goals such as improving employee engagement, increasing investor appeal, and enhancing the brand reputation, CSR can indirectly and positively affect a number of Return on Investment (ROI) centred goals. CSR can actively help a business work toward a larger profit margin while doing things that positively benefit the wider community.

CSR is also important when it comes to branding. To have a successful brand and retain customers, businesses must create trust with their target audience. Having a CSR strategy can help build a good reputation and, in turn, earn trust and loyalty among clients, service users and employees. This corporate and employer branding can help an organisation become instantly recognisable and this helps to reduce marketing, advertising and recruitment costs.

Last but certainly not least, CSR is the right thing for an organisation to do.

What are the benefits of Corporate Social Responsibility?

Organisations are sometimes accused of driving their CSR efforts in the hope of having a positive public relations (PR) effect and increasing profits, and not for moral motives. However, this is quite a cynical viewpoint, as many organisations are made up of ethically and socially responsible people at all levels who believe that CSR is the just and right thing to do.

However, it would be foolish to say that all organisations’ motives for implementing CSR are totally altruistic. As the majority of organisations can only exist in business if they generate profits, having positive CSR credentials does bring benefits to an organisation, so these benefits can act as an incentive for organisations to look at their CSRs and put in place initiatives that will also have benefits for the wider community.

Organisations with strong CSR programmes can and do benefit from enhanced public relations (PR), increased business and more satisfied customers and employees. Improved company profits that usually result from CSR implementation, in turn will result in satisfying shareholders and other stakeholders. Other benefits of CSR include:

CSR can help a business better engage with its customers. Many forms of CSR involve businesses interacting directly with members of society, who may also be customers or potential customers. An organisation can get direct feedback on what it is doing well and what the organisation needs to improve on.

Word of mouth is still an effective form of advertising, and customers who have been part of the social responsibility created by an organisation are able to tell other potential customers about the business.

• For communities – CSR can have any number of benefits, for example creating short-term employment opportunities by supporting various community projects such as the construction or maintenance of local parks and sporting facilities etc. The insistence of fair working practices within the supply chain will improve the working conditions and pay for wider society.
• For the environment – Organisations that are, for example, measuring and mitigating their carbon footprints, using sustainable resources and recycling materials and waste products will help to improve the impact their business might be having on the environment.
• For employees – CSR credentials are a way to attract and retain top talent to ensure an organisation continues to grow and thrive. More than half (58%) of employees say they hold their employer to a higher standard than other companies when it comes to addressing social justice issues. 43% say they are reconsidering their current job because their company is not doing enough to address social justice issues (Source Views for Change). A Glassdoor survey found that 75% of employees between the ages of 18 and 34 expect their employers to take a stand on important social issues.

Organisations also benefit from CSR in areas such as business sustainability, competitive advantage and easier compliance with regulatory requirements.

What to avoid when creating a Corporate Social Responsibility business model

Increasingly, organisations are being asked by their customers, service users and employees to engage in CSR that is both authentic and aligned; they want the CSR initiatives to portray a genuine concern for communities served and to be associated with the organisation’s core products and services. So choosing the right area(s) of corporate social responsibility to implement is important.

This means that it is important to take into consideration which areas of ethics, responsibility and sustainability fit with the image of the organisation, as well as the image the organisation would like to portray.

When choosing and creating a CSR strategy, organisations need to review their internal environment to ensure that it reflects the areas of CSR it wishes to support and be recognised for.

For example:

• If the organisation is donating to charity, how are those donations raised? If they are linked to the sale of goods and are intended to promote higher sales figures, for example, by promising to donate part of the profit per product sold to a good cause, or if the organisation takes the credit for donations raised from customers and or employees rather than a donation from the organisation’s corporate accounts, then this might be considered dubious practice as far as CSR is concerned.
• Organisations that call for and promote equality and fair working practices amongst their supply chains but are not implementing equality and fair working practices amongst their own workforce, are also culpable of dubious CSR credentials.
• Conversely, an organisation that prides itself upon its own ethical CSR values but who does business with less than scrupulous businesses in its supply chain will have its own wider CSR values called into question.
• Organisations that promote their CSR credentials as a PR marketing strategy of good citizenship yet use strategies to avoid paying taxes that are used for society’s benefit, have dubious CSR values.
• Large organisations who publicise the use of local suppliers but who operate accounting systems that pay local, often small suppliers on a 90-day or more accounting system, financially disadvantage the local community supply chain to suit their own business processes.

Organisations who are implementing CSR initiatives need to take into consideration the impact of their plans on all stakeholders and whether the CSR values that they are promoting to the general public are reflected in their own working practices.

Any organisation that promotes and implements dubious CSR initiatives risks reputational damage. The most respected brands don’t rely on virtue signalling or Greenwashing, they live and breathe their CSR values. A brand that is consistent in its actions is more likely to gain loyal followers and cultivate long-term corporate sustainability.

In 2017, Danish organisation Lego was named the world’s most responsible company. The public believes the company behaves ethically, conducts business fairly, operates transparently, protects the environment, and supports worthy causes.

How to monitor Corporate Social Responsibility

An organisation’s CSR policy will often dictate a system for monitoring responsible performance.

Organisations can use:

• Benchmarking – By looking at ethical business practices that are working well for similar organisations and understanding their successful CSR initiatives, an organisation can benchmark its own corporate strategy against them.
• Issues – This identifies and prioritises the most pressing concerns as seen by all stakeholders and allows the organisation to address them in order of perceived importance.
• Setting goals and Key Performance Indicators (KPIs) – These help to showcase that the CSR strategy is positively impacting the business and community, and that the CSR project is on track.
• Feedback – This can come from employees, customers and/or service users, stakeholders, investors or recipients of the CSR initiatives.
• An impact assessment – This identifies the areas in which the organisation is creating a negative or positive social or environmental impact. During this step, it’s also key to identify indicators to measure progress.

According to KPMG, around 80% of companies publish an annual CSR report with the aim of sharing their corporate responsibility efforts and results, their commitment to being socially responsible and promoting transparency amongst stakeholders when it comes to setting and hitting CSR goals.

Here are some examples of organisations’ CSR initiatives and links to their CSR reports:

• Network Rail – Their Volunteer Leave Policy enables colleagues to spend up to 5 days per annum supporting any registered charity of their choice.
• NatWest Group – Their CSR report states that “Across all our fundraising and volunteering programmes, our colleagues have given £3,543,533 and 43,003 worktime volunteering hours.”
• Whitbread – Their CSR report states that £19 million was raised for Great Ormond Street Hospital children’s charity and 500,000 meals were donated to charity partners.
• IKEA – Their CSR initiative includes Let’s Play for Change which enables children to play and develop, even in the most difficult circumstances, and Brighter Lives for Refugees, for which they have donated 30.8 million Euros to help the UNHCR bring light and renewable energy to refugee camps across Asia, Africa and the Middle East.
• KPMG – In November 2020, KPMG in the Isle of Man became a UNESCO Biosphere partner.
• Marks and Spencer has key charity partnerships with:
  – Breast Cancer Now.
  – Macmillan Cancer Support.
  – The Royal British Legion.
  – NHS Charities Together.
  – Great Ormond Street Hospital Charity.
  – Shelter.
  – Together for Short Lives.

Final thoughts

Organisations can no longer operate with the sole aim of making profits at the expense of the environment, society, the economy, their consumers and their employees.

Organisations need to consider how they can give back to society, and as a benefit of giving back and taking Corporate Social Responsibility it can help organisations to attract customers and retain their top talent. After all, customer and employee satisfaction and retention are the keys to any successful organisation.