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What Is Corporate Social Responsibility?

Updated Sep 05, 2023

Nadia Reckmann
Contributing Writer at businessnewsdaily.com

Corporate social responsibility (CSR) is a management concept that describes how a

company contributes to the well-being of communities and society through
environmental and social measures. CSR plays a crucial role in how brands are
perceived by customers and their target audience. It may also help attract employees
and investors who prioritize the CSR goals a company has identified.

Learn about the importance of CSR and how it can impact the success of your business
below.

What is corporate social responsibility?

Corporate social responsibility is a type of business self-regulation with the aim of

social accountability and making a positive impact on society. Some ways that a
company can embrace CSR include being environmentally friendly and eco-conscious;
promoting equality, diversity, and inclusion in the workplace; treating employees with
respect; giving back to the community; and ensuring business decisions are ethical.
CSR evolved from the voluntary choices of individual companies to mandatory
regulations at regional, national and international levels. However, many companies
choose to go beyond the legal requirements and embed the idea of “doing good” into
their business models.

There is no one way a company can embrace CSR, but one thing is certain – to be
perceived as genuine, the company’s practices need to be integrated into its culture
and business operations. In today’s socially conscious environment, employees and
customers place a premium on working for and spending their money on businesses
that prioritize CSR. They can detect corporate hypocrisy.

To ensure CSR authenticity, a company should look at its values, business mission and
core issues and determine which initiatives best align with the business’s goals and
culture. The business can do this internally or hire a third party to conduct an
assessment.

Reviewing the United Nations 17 Sustainable Development Goals is a good place to

start. While goals like Good Health and Well-Being or Gender Equality can apply to
most businesses, specific goals like Life Below Water or Affordable and Clean Energy
may be relevant to select industries like water technology or energy providers.

Why CSR is important

There are many reasons for a company to embrace CSR practices.

1. It improves customers’ perception of your brand.

It’s increasingly important for companies to have a socially conscious image.

Consumers, employees, and stakeholders prioritize CSR when choosing a brand or
company, and they hold corporations accountable for effecting social change with
their beliefs, practices, and profits.

“What the public thinks of your company is critical to its success,” said Katie Schmidt,
founder and lead designer of Passion Lilie. “By building a positive image that you
believe in, you can make a name for your company as being socially conscious.”
To stand out among the competition, your company needs to prove to the public that it
is a force for good. Advocating and raising awareness for socially important causes is
an excellent way for your business to stay top-of-mind and increase brand value.

The Kantar Purpose 2020 study demonstrated a direct correlation between perceived
positive impact and brand value growth. Companies that the public considers highly
impactful demonstrated a brand value growth of 175% over 12 years, while businesses
with a low positive impact showed only 70% growth.

Schmidt also said that sustainable development could help a business financially. For
example, using less packaging and less energy can reduce production costs.

2. It attracts and retains employees.

Consumers aren’t the only ones drawn to businesses that give back. Susan Cooney,
head of global diversity and inclusion at Symantec, said that sustainability strategy is a
big factor in where today’s top talent chooses to work.

“The next generation of employees is seeking out employers that are focused on the
triple bottom line: people, planet and revenue,” she said. “Coming out of the recession,
corporate revenue has been getting stronger. Companies are encouraged to put that
increased profit into programs that give back.”

According to Deloitte’s 2021 Millennial and Gen Z Survey, the modern workforce
prioritizes culture, diversity, and high impact over financial benefits. An estimated 44%
of millennials and 49% of Gen Zers rely on their personal ethics in determining the type
of work and companies they’d join. The respondents of the Porter Novelli Purpose
Tracker 2021 report go even further, with 70% saying they wouldn’t work for a company
without a strong purpose.

What’s more, employees that share the company’s values and can relate to its CSR
initiatives are much more likely to stay. Deloitte’s 2020 Global Marketing Trends Report
shows that purpose-driven companies retain talent up to 40% more than their
competitors. Considering that the estimated cost of losing an employee averages 40%
of their annual salary, according to a report by the Washington Center for Equitable
Growth, offering your team a sense of purpose and meaning in their work is worth the
effort.

3. It increases your appeal to investors.

By demonstrating a developed CSR program and initiatives, your company is bound to

become more appealing to both current and future investors. CECP’s influential 2021
Giving in Numbers report shows that investors play a growing role as key stakeholders
in corporate social responsibility. Almost 80% of surveyed businesses were open to
providing them with data and considering their perspectives on sustainability. Just like
customers, investors are holding businesses accountable when it comes to social
responsibility.

At the same time, a company that takes CSR seriously signals to both investors and
partners that it’s interested in long-term as well as short-term gain. CSR goes hand in
hand with environmental, social, and governance (ESG) metrics that help external
analysts quantify the company’s social efforts, and becomes a key factor for investors’
consideration and continued interest.
4 types of corporate responsibility your business can practice

In recognition of how important socially responsible efforts are to their customers,

employees and stakeholders, many companies focus on four broad CSR categories.

1. Environmental efforts: One primary focus of CSR is the environment. Businesses

have large carbon footprints, regardless of size. Any steps a company can take to
reduce its footprint is considered good for both the company and society.
2. Philanthropy: Businesses can practice social responsibility by donating money,
products or services to social causes and nonprofits. Larger companies tend to
have plentiful resources that can benefit charities and local community programs;
however, even as a small business, your efforts can make a difference. If you have
a specific charity or program in mind, reach out to the organization. Ask them
about their specific needs and whether a donation of money, time or your
company’s products would best help them.
3. Ethical labor practices: Companies can demonstrate CSR by treating employees
fairly and ethically. This is especially true of businesses that operate in
international locations with labor laws that differ from those in the U. S.
4. Volunteering: Participating in local causes or volunteering your time (and your
staff’s time) to community events says a lot about your company’s sincerity. When
your company does good deeds without expecting anything in return, you express
concern (and support) for specific issues and social causes.

Building a socially responsible business

While startups and small companies don’t have the deep financial pockets that
enterprises have, their efforts can have a significant impact, especially in their local
communities.

“Even 5%, though it might not sound like a lot, can add up to make a difference,”
Schmidt said. “When thinking of ways to donate and give back, start local, and then
move from there.”

When identifying and launching a CSR initiative, involve your employees in the
decision-making process. Create an internal team to spearhead the efforts and identify
organizations or causes related to your business or that employees feel strongly about.
You’ll increase engagement and success when you contribute to something that
matters to your employees. Involving your employees in the decision-making process
can also bring clarity and assurance to your team.

“If decisions [about CSR] are made behind closed doors, people will wonder if there are
strings attached and if the donations are really going where they say,” Cooney said.
“Engage your employees [and consumers] in giving back. Let them feel like they have a
voice.”

Whichever strategies you use for sustainable development, be vocal. Let your
consumers know what you are doing to be socially conscious. [Related read: PayPal’s
Mission for Corporate Social Responsibility]

“Consumers deserve to share in the good feelings associated with doing the right thing,
and many surveys have found that consumers are inclined to purchase a sustainable
product over a conventional alternative,” Cooney said. “Announcing these benefits is a
win-win from both a commercial and sustainability perspective.”

What to avoid when creating a socially responsible business

model

Becoming a socially responsible business can be simple, but there are a few caveats.

1. Don’t choose unrelated initiatives.

Avoid participating in charitable efforts that are not related to your core business focus
or that violate your company’s ethical standards in any way. Instead of blindly sending
money to a completely unrelated organization, find a nonprofit that your company
believes in or invest in a project in your community.

2. Don’t use CSR as a marketing scheme.

Don’t use CSR opportunities solely for marketing purposes. Schmidt said running a
corporate responsibility campaign as a quick marketing scheme can backfire if your
business doesn’t follow through. Instead of trying a one-time stunt, adopt socially
responsible business practices over time. Schmidt said employees and consumers react
positively to companies that embrace long-term social responsibility.

3. Don’t wait for the industry to catch up.

If you are considering sustainable activities that aren’t legally required yet, don’t wait.
By adopting socially responsible norms early on, you set the bar for your industry and
refine your process. [Related read: 14 Examples of Socially Responsible Businesses]

Undertaking CSR initiatives is a win for everyone involved. The impact of your actions
will not only appeal to socially conscious consumers and employees, but can also make
a real difference in the world.

CSR certifications

While many companies self-assess their CSR efforts, often the most practical and
trusted way to prove your company’s social accountability to the public is to undergo a
third-party social impact assessment.

These three corporate social responsibility certifications can help you achieve public
recognition for your sustainability and CSR efforts.

B-corp certification

Certified B corporations, or B-corps, are companies verified by B Lab to meet high

standards of social and environmental performance, accountability, and transparency.
To become a B-corp, a company must undergo a rigorous and holistic verification
process every three years, integrate B-corp commitments to all stakeholders (rather
than only shareholders) into its governing documents, and pay a sales-based annual
fee.

While B-corp status is mainly associated with multinationals like Patagonia or Ben &
Jerry’s, small businesses and startups that strive for social and environmental
excellence can also receive this CSR certification. The first step is to complete the free
and confidential B Impact Assessment on the B Lab website and receive a minimum
score of 80. If you meet the baseline, you can submit the impact assessment for review
and start the verification process.

ISEAL code compliance

ISEAL Alliance is a global membership organization for credible sustainability

standards whose members include Fairtrade International, Gold Standard, Alliance for
Water Stewardship and more. An assessment from ISEAL is carried out by an
independent third-party verification provider that determines whether a business
meets Codes of Good Practice and can be deemed ISEAL Code Compliant. This
assessment offers a reputable seal of approval for companies that emphasize
sustainability.

In some circumstances, verifications from ISEAL members can directly impact business
continuity. For example, the absence of a certification from the Roundtable for
Sustainable Palm Oil can effectively close down a supply chain for some consumer
brands.
SASB standards

The Sustainability Accounting Standards Board is one of the most established

environmental, social, and governance (ESG) guidance frameworks, providing
standards for disclosing the financial impact of a company’s sustainability efforts. In
other words, it allows businesses to communicate the financial outcomes of their CSR
and ESG measures to investors and other stakeholders.

SASB Standards are evidence-based, cost-effective, market-informed, and industry-

specific, covering 77 industries. These standards help produce structured, comparable,
and standardized data that is perfect for both internal and external communications of
CSR and ESG impacts.

Examples of CSR companies

If you’re looking for CSR inspiration for your business, here are six companies practicing
corporate social responsibility on a large scale.

LEGO: The toy company has invested millions of dollars into addressing climate
change and reducing waste. LEGO’s environmentally conscious efforts include
reduced packaging, sustainable materials, and investments in alternative energy.
TOMS: TOMS donates one-third of its net profits to charities that support physical
and mental health as well as educational opportunities. During the pandemic, the
brand directed all charitable donations to the TOMS COVID-19 Global Giving
Fund.
Johnson & Johnson: The brand Johnson & Johnson focuses on reducing its
environmental impact by investing in alternative energy sources. Globally, Johnson
& Johnson also works to provide clean, safe water to communities.
Starbucks: The global coffee chain has implemented a socially responsible hiring
process to diversify its workforce. Its efforts are focused on hiring more veterans,
young people looking to start their careers, and refugees.
Google: Google has demonstrated its commitment to the environment by
investing in renewable energy sources and sustainable offices. CEO Sundar Pichai
is also known to take stands on certain social issues.
 Pfizer: The pharmaceutical company’s focus on corporate citizenship is reflected in
its healthcare initiatives, which include spreading awareness about non-infectious
diseases and providing accessible health services to women and children in need.

Corporate social responsibility FAQs

Corporate social responsibility is a modern approach to running a business. Here are

some of the most frequently asked questions about it.

What is corporate social responsibility (CSR)?

Corporate social responsibility is a way of describing how companies measure and

control their impact on society. This includes a company’s contributions – both positive
and negative – to the economy, environment and greater community.

Who is CSR for?

Businesses of all sizes can choose to introduce a comprehensive CSR program or

selected initiatives and reap the associated benefits. No matter the size or maturity of
your business, an investment in ethical behavior and sustainable practices can improve
your brand value, build customer trust, grow your company, and improve the bottom
line.

What are the benefits of CSR for companies?

CSR can be beneficial to a company in several ways. The first is by improving its brand
image. When customers or clients see evidence that a business is socially responsible,
they tend to respond positively.

The second benefit is improving employee morale. Morale tends to be higher at

companies that invest effort and resources into ethical and socially responsible
behavior.

The third involves appealing to new talent. Modern employees often choose purpose-
driven and environmentally conscious companies over financial benefits.

Lastly, CSR-active companies attract investors and partners. A company that is willing
to invest in long-term policies and improvements offers security to potential investors.

What are examples of CSR initiatives?

Some examples of CSR components are reducing carbon footprint and energy
consumption, engaging in wildlife conservation initiatives, encouraging charity and
volunteer work, supporting local communities, improving labor policies, ensuring
diversity and equality in the workplace, investing in nonprofit organizations, and
guaranteeing ethically sourced materials.

Whichever practices you employ, make sure they are authentic and match your
corporate values. Otherwise, your business might be accused of greenwashing.

How do you monitor CSR?

There are a few key ways to measure CSR. The first is to break CSR goals into
categories, such as philanthropy, labor practices, and environmental efforts.

To track the success of these investments, look for measurable key performance
indicators. How much has your company’s carbon footprint changed? How many
people did you reach with a charitable effort? Monitor new developments and keep a
pulse on general public perception of issues associated with your company’s social
causes.

Skye Schooley, Nicole Fallon and Sammi Caramela contributed to the writing and
reporting in this article. Source interviews were conducted for a previous version of this
article.
Nadia Reckmann
Contributing Writer at businessnewsdaily.com

During her years as a professional business writer, Nadia Reckmann has written hundreds of articles with a focus
on SMB strategy, operations, technology, and tools that are essential for business success. In addition to that,
she creates content that helps small businesses and entrepreneurs improve their marketing techniques, sales
performance, and communication strategy. She also writes about CRM and other essential business software,
team and project management, and productivity.

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