What is corporate social responsibility?

by Dan Byrne on Aug 12, 2022


Corporate social responsibility (CSR) is a model of doing business that combines profits with other goals intended to better society.

Every company has a business model that keeps it self-sustaining from one year to the next. All activities, from sales to expenses, feed into a machine that keeps the company healthy. Corporate social responsibility is a way of running this machine. It is popular now, and it will be in future.

The basics of corporate social responsibility

It’s crucial to remember that corporate social responsibility is not a side project. It is fully integrated into an organisation’s business practices so that every business goal (social or not) can exist alongside each other and produce an overall benefit. 

Implementing a CSR model demonstrates to all stakeholders that a business cares about more than simply making money. 

There are many different types of CSR models available to choose from – each bringing different benefits and likely suited to different organisations. But a common thread running through all of them is that they affect how a brand is perceived in public. 

What does CSR focus on?

It can vary, depending on the business, how big it is, what market it’s in, and what it’s capable of supporting. Generally, however, we can break it down into four categories:

  • A model that supports green policies
  • A model that supports charitable causes
  • A model that supports ethical workplace practices
  • A model that supports volunteering

Why is CSR important?

It’s important because CSR is what stakeholders care about.

  • It makes brands stand out in public. A good CSR model means the public will see the company as a more conscious, caring corporate – a shining example among its competitors.
  • It’s what employees care about. Increasingly, surveys are showing that workers are more likely to gravitate toward companies with good CSR models because these companies align more with their personal views. This makes CSR a critical factor in retaining talent in the industry. 
  • Investors like it. If the principles of CSR models don’t entice investors, their promise in the industry will. Businesses with a CSR model look better in the marketplace. They attract more sales and top talent and therefore increase their long-term viability. This is what investors want to hear, so this is where they’ll spend their money.

The dos and don’ts of basic CSR

  • DO invest in talent and expertise. Building a good CSR model is not easy. It has to combine financial and social success, so ensure you have the right people on board to deliver results. 
  • DO listen to stakeholders about CSR priorities. These people keep the wheels of a business turning, so their advice is vital in building a good CSR model.
  • DO ensure that you are measuring progress on anything CSR-related. Tangible results make much more of a case to stakeholders than plans. 
  • DO make it clear to investors and customers how they contribute to the CSR effort. Feeling involved will make far more of an impact on stakeholders than simply watching a company act.
  • DON’T box-tick. CSR is a business decision. When a company’s management sits down to make that decision, they should do so after carefully analysing principles and goals. Companies shouldn’t pick a direction at random.
  • DON’T be arrogant. CSR is not an opportunity for companies to praise themselves, and it shouldn’t be approached as such. These tactics can backfire because stakeholders will often see through them and claim the entire effort isn’t genuine.
  • DON’T sit and wait. Some companies pursue a CSR model only when stakeholders demand it, or lawmakers require it. Good CSR models have formed ahead of time. Boards and management have deliberately sat down together, looked to the future, decided what will be necessary, and acted on it. 

What’s the difference between CSR and ESG?

It’s understandable to read the above definitions and think there’s a great deal of overlap between CSR and environmental, social and corporate governance (ESG).

Are the two the same thing? No. Are they related? Absolutely. 

Think of CSR as a plan and ESG as a scorecard. CSR means a company adopts a business structure designed to succeed in several areas critical to society today. ESG, meanwhile, is a measure of how successful those efforts are. 

Boards and management will find themselves more interested in CSR in their day-to-day work because it shows how a company intends to conduct business. 

By contrast, investors, customers and other stakeholders will be more interested in ESG because it shows how a company performs in those areas and where it can improve. 

Notable CSR examples

Starbucks has been flying the CSR flag for many years. The global coffee chain has made it a key goal to invest in the communities it works in. 

Last year, the company pledged to hire 25,000 US military veterans and their spouses by 2025. It is a bid to support one of US society’s most heavily praised groups. 

Meanwhile, Starbucks has consistently tried to source its entire stock of coffee beans from sustainable and ethical sources.

Lego has announced a $400 million project to make its products more sustainable. It is one of the leading toy brands worldwide – so popular that many continue to buy its products into adulthood – but its packaging has become a source of contention. 

As a result, the company is investing in paper packaging for all its products, in conjunction with sustainable forestry companies. It is also aiming to reduce the amount of waste its products generate. 

Pfizer – famously one of the first to develop and launch a COVID vaccine – the company’s CSR strategy is about healthcare for people who need it most. 

The company has committed itself to grants for medicinal research and vaccines for vulnerable areas (for example, any region which has suffered a major natural disaster).

In summary

If a company’s stakeholders aren’t looking for a CSR-style business model, they may be soon. The trend is impossible to ignore. 

The good news is that the concept is relatively easy to grasp at the top level, and plenty of education and training is available to help management and boards understand it better.

ESG for Directors

Become the ESG expert in your organisation. Rapidly acquire the new and updated thinking you need to navigate the impact of ESG.

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ESG for Directors

Become the ESG expert in your organisation. Rapidly acquire the new and updated thinking you need to navigate the impact of ESG.

Learn more
Corporate Social Responsibility

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