- SR is the corporate belief that a company needs to be responsible for its actions socially, ethically, and environmentally.
- In other words, CSR is a way of doing business that aims to embed a company’s social impact as a corporate mandate alongside meeting its business objectives such as growth and revenue goals.
- Satisfying each of these stakeholder groups allows companies to maximize their commitment to another important stakeholder group—the investors, who benefit most when the needs of these other stakeholder groups are being met.
- While CSR programs would often start as a reactionary measure due to stakeholder scrutiny, research showed that once it’s in place, these programs often receive broad support within the organization.
Once seen as a purely philanthropic activity with no positive bottom-line impact, Corporate Social Responsibility is gaining popularity and moving to the forefront of leading global organizations.
As a manager, you may have heard of this term before and, at first, wondered if it’s just another passing fad.
What is Corporate Social Responsibility (CSR)?
CSR is the corporate belief that a company needs to be responsible for its actions socially, ethically, and environmentally.
Also known as ‘community relations’ it is demonstrated when a company fosters an open relationship that is sensitive to the local community. Companies recognize the need to play a proactive, cooperative, and collaborative role to make society a better place to live and conduct business. This influences their brand image, credibility, and overall consumer trust.
However, when using the terms ‘community relations’, be aware that it’s more than just sponsoring a beach walk for a charity or a once-a-year event where employees can volunteer for a cause.
Many business leaders today believe CSR should be embedded in the essence, the mission, and the brand of an organization, influencing even day-to-day decisions to satisfy all the stakeholders involved.
In other words, CSR is a way of doing business that aims to embed a company’s social impact as a corporate mandate alongside meeting its business objectives such as growth and revenue goals.
It is an important business strategy because customers prefer to buy products from companies they trust; suppliers want to form business partnerships with companies that are reliable; and most employees seek to work for companies they respect.
Satisfying each of these stakeholder groups allows companies to maximize their commitment to another important stakeholder group—the investors, who benefit most when the needs of these other stakeholder groups are being met.
While CSR programs would often start as a reactionary measure due to stakeholder scrutiny, research showed that once it’s in place, these programs often receive broad support within the organization.
A Babson College report which reviewed hundreds of CSR programs found that it had a strong impact on the company’s market value and lowered risk. CSR programs were proven to have the potential to:
- Increase market value by up to 6%
- Reduce systemic risk by up to 4%
- Reduce the cost of debt by 40% or more
- Raise price premium by up to 20%
- Reduce staff turnover rate by up to 50%
Reasons Why CSR is Important to Businesses
REASON 1: Keep employees engaged
The way an organization treats the community would also suggest that it also treats and respects its employees. Research shows that employees that work for companies that prioritize CSR are happier and more fulfilled. Around 80% of these employees noted that they felt a sense of purpose when they believed that their work made a difference in the world. This sense of purpose is essential to foster employee engagement, making them more likely to stay with the company.
Related: Keeping Employee Morale Up Virtually
REASON 2: Encourage customer loyalty
Customers today are more conscious about the products and services they buy. A Nielson survey showed that 66% of participants said that they would pay more for products and services from socially responsible companies. Customers are more likely to be loyal to a company that aligns with their own values.
REASON 3: Promote positive public attention
Active CSR programs position the organization as a leader in the community. This helps them become a positive role model that encourages other businesses to follow suit. It can help them gain influence to raise awareness on various social issues and help them play a vital role in societal progress.
What is the role of a manager in CSR?
With the power to communicate and implement ideas, policies, and cultural and behavioral change in organizations, managers play an integral part in fulfilling an organization’s CSR objectives once they are defined.
Beyond organizing the occasional community service activity, managers can use their organization’s CSR philosophy during partner selection, when developing brand ideas, and in HR practices.
Even at the recruitment stage, CSR impacts job seeker decisions. Twenty years ago, issues such as human rights records, environmental policies, and levels of community involvement wouldn’t have affected job seeker decisions as they do today. CSR is proving to be good not only for branding, publicity, and the bottom line, but it can also be a valuable recruiting tool, as these statistics demonstrate:
In a survey conducted by the Conference Board of Canada in 2000, 71% of employees want to work for companies that commit to social and community concerns. Furthermore, GlobeScan conducted an international survey in 2002 which showed that eight in ten people who worked for a large company felt greater motivation and loyalty towards their jobs and companies the more socially responsible their employers were.
Overall Benefits of CSR Programs
Organizations are coming to realize the bottom-line benefits of integrating CSR into their businesses. CSR initiatives can boost good image, publicity, and media value for firms. They also promote sensitivity to social issues and serve as opportunities to address misconceptions and help gauge the level of brand awareness. As awareness increases, so do standards of quality and sustainability.
Does your business have a CSR strategy? How does it affect you as a manager?
Corporate Social Responsibility (CSR). (2022). Retrieved 9 September 2022, from https://www.thebalancemoney.com/corporate-social-responsibility-csr-4772443#citation-13Foundation, T. (2019). Three Reasons Why CSR is Important for Your Business. Retrieved 9 September 2022, from https://www.uschamberfoundation.org/blog/post/three-reasons-why-csr-important-your-business