There are several ways to define what exactly corporate social responsibility is and what it means to an individual business. Businesses may use terms such as corporate philanthropy or corporate citizenship to explain the ideas behind their business strategies when incorporating CSR into their objectives. The primary objective of CSR, or whatever you may call it, is to promote the welfare of customers, community, shareholders, stakeholders, employees, and the environment while at the same time promoting the raison d’etre of the corporation — maximizing shareholder value.
COMPONENTS OF CSR
Despite the varying definitions of corporate social responsibility and how it should be applied to business, five components of CSR programs constantly remain the same: philanthropy, the environment, social engagement, ethics, and diversity and inclusion. These key areas of focus build the foundation for an impactful CSR business strategy.
Philanthropy: Volunteerism & Workplace Giving
The philanthropic aspect of CSR programs consists of charitable contributions of time and money. Many corporations have a charitable foundation, which contributes allocated money to deserving non-profits. Some businesses will also donate their facilities for non-profits to gather and fundraise. Corporations also engage their employees around philanthropy in a variety of ways, such as raising cash donations, matching gifts, volunteer grants and time volunteered by the company’s employees.
Environmental: Reducing Water Usage, Waste, & Carbon Reduction
Environmental sustainability can be incorporated via operations and product development. Within the operations of a company, CSR leaders can work to reduce energy usage and greenhouse gas emissions. Products can be designed with less packaging and with an environmentally sustainable impact. These actions are generally also very good for the bottom line, as reduction in usage of raw materials bring material savings. Furthermore, companies can tie environmental initiatives with employee engagement by rewarding employees for their efforts to reduce their carbon footprint. Examples include using reusable water bottles, carpooling to work, and encouraging eating lunches brought from home in order to reduce waste.
Social: Engaging in Shared Value Initiatives
Social initiatives work to closely tie business objectives with social goals. These programs are designed to solve a societal issue through product development, human resource allocation, or market expansion, which would benefit not only the business but also society at large. For more information, read our blog post about creating economic prosperity through shared value.
Ethics: Human Right Standards
Working with suppliers and internal departments to create human rights standards helps to ensure fair working conditions abroad and at home. Corporations have an ethical duty to every person and place involved in the production of their products, and it is their job to promote the highest standards while doing so.
Diversity & Inclusion
It is important that a company strives to hire individuals with unique backgrounds (race, age, geographic, etc.) in order to promote corporate diversity. Today’s most troubling societal ills: clean water crisis, systemic poverty, and hunger, will only be resolved when individuals with diverse ways of thinking unite. Tackling difficult issues with individuals who think similarly will result in stagnant results, so utilizing diversity and inclusion to evaluate social initiatives will provide for broad-reaching solutions to challenging problems. For more information, read our blog post about diversity and inclusion.
INTERNATIONAL DEFINITIONS OF CSR
Internationally, CSR’s meaning and philosophy is anything but homogenized. Each country has its own set of priorities, issues, and values that will shape how companies approach the adaptation of social responsibility.
Traditionally in the United States, CSR has been defined in terms of a philanthropic model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. They donate a certain share of the profits to charitable causes to boost their image even though it is commonly seen as an act void of any kind of legitimate increased profit for the company.
The European model is focused on operating the core of a business in a socially responsible way, complemented by investment in communities for solid business reasons. Social responsibility becomes an important part of the wealth creation process, which enhances the competitiveness of business and maximizes profit.
India has recently passed a law that requires corporate groups to donate 2% of their profits to social causes. Could governmentally enforced philanthropy be the best approach to get business to adopt CSR? Of course there are a plethora of new issues that come with the implementation of required philanthropy such as dishonest data records, how to monitor each business, and how effectively the donated money will be used. But it is an interesting approach to consider and a much more proactive one than has ever been used before.
No matter what the definition is, no matter which country you’re in, CSR is ultimately a business strategy to create social and environmental impact upon the world. Properly implemented CSR tactics can bring competitive advantages for a business while simultaneously creating a positive social impact. Effective CSR strategies have increased sales and profits, cut operating costs, improved productivity and merchandise quality, enhanced customer loyalty and of course improved brand image and reputation!