Understanding Corporate Social Responsibility (CSR)
We explore what CSR means, the 3 main principles, and how implementing a CSR strategy can benefit your employees, your business and the world around you.
If you’re thinking of starting your own business, or perhaps you’re curious about business ethics within your current company, this article will help break down the world of Corporate Social Responsibility (CSR) for you. There’s a lot more to running a business than just creating financial profit, and this article will help you to understand the importance of responsible business practices.
We’ll start off by providing you with a definition of CSR, and then discuss the three main principles. Next, we’ll delve into the purpose of CSR, why it’s important, and how it can benefit your business in more ways than one. By the end of the article, you’ll have a better understanding of modern businesses and know how to implement a successful CSR strategy.
What is Corporate Social Responsibility?
CSR, also known as corporate conscience, is essentially a form of corporate self-regulation that helps to demonstrate a company’s morals and principles. It comes from the growing idea that businesses are not isolated entities that have no effect on the external world. Rather, the actions of a business can have real and far-reaching effects on stakeholders, consumers, communities and the environment.
If you recognise that running a business comes with responsibility, the next step is to integrate CSR principles throughout business practices. This helps to ensure that the company has a positive impact on those involved with it, and doesn’t negatively contribute to the world’s issues.
The term “corporate social responsibility” started to be used regularly in the late 60s and early 70s, but it’s become even more of a hot topic lately, now that consumers are becoming more environmentally and politically conscious. For example, a study by research platform Visual GPS and YouGov found 81% of people polled expect companies to be environmentally conscious in their advertising and communications, showing that consumers care about the ethics of businesses they support.
In 1991, Archie Carrol created “The Pyramid of Corporate Social Responsibility”, which suggests that CSR can be broken down into four categories of responsibilities: philanthropic, ethical, legal and economic. This model suggests that companies must find a balance between all of their responsibilities in order to succeed in the world of CSR.
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3 principles of CSR
In the book “Corporate Social Responsibility” by David Crowther and Güler Aras, they describe the three main principles of CSR. They argue that these three basic principles help to define CSR, which can be a somewhat difficult or convoluted idea to grasp. Below, we’ll explain what each of the three principles mean.
Sustainability
We’ve written a whole blog post on what sustainability means if you want a complete overview of the topic, but we’ll break it down in simple terms for you here. Essentially, it’s all about conserving resources, trying not to harm the natural world, humanity or other living creatures, and providing a safe and liveable home for future generations.
Thinking about sustainability with regard to CSR, it’s important that businesses and corporations take a more sustainable approach. The CDP Carbon Majors Report 2017 found that just 100 companies create over 70% of greenhouse gas emissions, which demonstrates just how instrumental businesses can be in the fight against climate change.
Of course, those 100 companies are such a small proportion of global businesses. But this figure really shines light on the fact that corporations have more impact, and therefore, more responsibility than individuals on how sustainable we are as a planet.
Furthermore, if you want to adhere more to CSR in your business, you could try switching to renewable energy sources, reducing waste, and thinking about sustainable business travel policies – just to name a few ideas.
You can find out more about Leading Sustainable Communities and Organisations in our course by The Mind Lab and Tech Futures Lab. We also talk a bit about corporate sustainability in our post with 50 of the biggest sustainability FAQs.
Accountability
Accountability is all about taking responsibility for your actions, so it’s not surprising that it’s a key principle of CSR. A lot of companies don’t take responsibility for the damage they might cause, whether that’s to their employees, customers, or the environment. Instead, they use clever marketing techniques to cover their actions or act oblivious.
Being a business that holds themselves accountable means that they must acknowledge how their actions might affect the external environment, assume responsibility for any effects, and explain in detail how their actions may affect different things.
Stakeholder theory comes under the umbrella of accountability in CSR. This is because stakeholders have a legitimate interest in the company, and therefore deserve to know the full extent of the company’s actions, including the effects of their decisions.
Transparency
In a very similar vein to accountability, transparency is about being open, clear and honest about the actions and consequences of your business practices. This can also include being transparent about your company values, beliefs and principles, as this makes it easier for consumers and stakeholders to genuinely support you, knowing that both of your fundamental values are aligned.
A company can show transparency by making sure that information about their business practices is easy to find, and being honest and realistic in their marketing materials. It’s also important for businesses to keep their consumers, employees and stakeholders up to date with all the latest information about the business, including finances and projections for the future.
What is the main purpose of CSR?
There are many purposes of CSR, but the biggest one is that it makes your business better, while also ensuring that your business has a positive impact on the world around you. It improves your business’ sustainability, transparency, operational efficiency, and even profitability.
In our open step by the University of Law, they describe CSR as “one of the business world’s means of upholding human rights”, because it ensures that employees are taken care of and ethical labour standards are met. Not only is this great on a human level, but ensuring that employees are treated well can have a positive effect on productivity and therefore business performance.
In addition to this, CSR helps companies get down to the ‘why’ of their businesses. In 2009, author and leadership expert, Simon Sinek, gave a famous talk called “how great leaders inspire action”. It currently has over 55 million views, and his main point is that the most successful companies in the world focus on why they do what they do, rather than what they’re offering.
He proves that consumers are most interested in why a business exists, and this is why company purpose is so important. If then, as a company, you’re truly seeking to have a positive impact on the world and solve problems in an innovative way, consumers will see that buy into it. Therefore, adhering to CSR will help businesses tap into their true purpose and gain employees, consumers and stakeholders that really believe in their mission.
To learn more about finding a purpose, our Social Impact in Business: How to Build a Brand that Matters course by BIMA will help you to identify your brand’s authentic purpose and build a socially driven and ethical business.
What are the benefits of CSR for companies?
As we’ve already explored in some detail, there are many benefits of CSR for companies, but we’ll break this down for you even more in this section. Our open steps about the definition of CSR by Coventry University and the importance of ethics and CSR by the University of Law explain that CSR benefits companies by:
- Improving employee performance
- Managing risks more effectively
- Supporting the development of local communities
- Improving financial performance
- Lowering operating costs
- Ensuring better customer loyalty
- Achieving more workplace diversity & inclusion
- Improving product durability and functionality
- Having better product safety
- Raising employee retention
- Enhancing brand image
What are some popular CSR strategies?
In our open step by the University of Central Lancashire, experts suggest that there are two basic approaches to CSR – the traditional approach and the contemporary approach. A company that takes a more traditional approach will generate profit without too much thought about the effect on the external world, but then will distribute the money to a variety of CSR projects that stakeholders or customers might be interested in. Therefore, this approach is viewing CSR mostly as a philanthropic activity, where you use your profits to do good in the world.
Companies that take the more contemporary approach consider the entire business process when thinking about responsible behaviour. Rather than taking a profits-first attitude, they try to incorporate CSR into their entire business idea and strategy, so that they have a positive impact on society as well as make a profit.
In addition to these two approaches, there are also two types of CSR strategies. In our open step by Coventry University, we look at responsive CSR and strategic CSR, terms coined by Porter and Kramer in 2006. While responsive CSR responds to potential risks and stakeholder expectations, strategic CSR is weaved into the business strategy and proactively works to increase the positive social and environmental impact of the company.
How to implement a CSR strategy
Now you know what CSR is, why it’s important and some of the main strategies, it might be useful to understand how to implement CSR into your business strategy. Experts in our CSR open step point to the five-step model created by Jenkins in 2009, created as a response to the UN Global Compact principles. This model was designed to help businesses integrate CSR into their business practices, and it gave these steps:
- Gain an understanding of CSR and develop company principles that are in line with the UN Global Compact framework
- Identify the values and dimensions of CSR that matter the most to your business
- Evaluate all of the competitive advantages and opportunities that will be gained if you address your most important CSR values and dimensions
- Integrate your chosen CSR values into the business strategy, e.g. switch to renewable energy, raise the minimum wage, and create a new diversity policy
- Measure and report business performance to check the effectiveness of CSR and to identify any further opportunities for improvement.
Final thoughts
Hopefully, you’ve learned a lot about Corporate Social Responsibility and how to implement it into your own business strategy. Even if you’re not a business owner, it’s a good concept to be aware of, so that you’re more knowledgeable and critical of which businesses you choose to support. If you’re interested in business ethics, you can go on to join one of our fantastic courses and learn even more about this topic.
Gain a business strategy certificate with our range of online courses from top universities. Perhaps our Business Ethics: An Introduction to Ethics for Business Leaders course by DCU will inspire you to make changes in your business, or our Social Enterprise: Growing a Sustainable Business course by Middlesex University Business School might encourage you to become an entrepreneur with purpose.
