What
Is Corporate Social Responsibility (CSR)?
Corporate
social responsibility (CSR) is a self-regulatory business model that helps
companies be socially accountable to themselves, their stakeholders, and the
general public. Companies that practice corporate social responsibility, also
known as corporate citizenship, are aware of their impact on all aspects of
society, including economic, social, and environmental factors.
CSR
implies that a company conducts business in ways that benefit society and the
environment rather than harming them.
Benefits
of Corporate Social Responsibility
CSR
is not only beneficial to the community, but it is also beneficial to
businesses. Employees and corporations can form stronger bonds through CSR
activities, which can boost morale and make both employees and employers feel
more connected to the world around them. Aside from the environmental
advantages, here are some additional reasons why businesses pursue corporate
social responsibility.
- Brand Recognition: Consumers are more likely to favor a company that has demonstrated the ability to deliver quality products, according to a study published in the Journal of Consumer Psychology. Customers are becoming more conscious of the impact that businesses can have on their communities, and many are now basing their purchasing decisions on a company's CSR. A company is more likely to gain favorable brand recognition as it becomes more involved in CSR.
- Investor Relations: Companies that are thought to be leaders in environmental, social, or governance issues have an 11% valuation premium over their competitors, according to a Boston Consulting Group study. For companies looking to gain an advantage and outperform the market, implementing CSR strategies has a positive impact on how investors feel about an organization and how they view the company's worth.
- Employee Engagement: Another study found that CSR-related values that align firms and employees serve as non-financial job benefits that improve employee retention.Employees are more likely to stay with a company in which they have faith. Employee turnover, disgruntled employees, and the total cost of hiring a new employee are all reduced as a result.
- Risk Mitigation: Consider negative behaviors like employee group discrimination, disregard for natural resources, or unethical use of company funds. This type of behavior is more likely to result in lawsuits, litigation, or legal proceedings, in which the company may incur financial losses and be featured in the media. Companies that adhere to CSR practices can reduce risk by avoiding troublesome situations and participating in beneficial activities.
Types
of Corporate Social Responsibility
Archie
B. Carroll, a researcher, proposed a "pyramid of corporate social
responsibility" in 1991. His CSR pyramid included four components:
economic responsibility (profitability), legal responsibility (law observance),
ethical responsibility (fairness), and philanthropic responsibility (being
charitable).
These
components have evolved into the following types of CSR over time:
Economic
accountability: Carroll stated that it was the firm's responsibility to
consistently maximize profits. Of course, that definition has evolved to
include business practices that help not only maximize profits but also make a
difference.
Environmental
responsibility refers to companies' efforts to adopt business practices that
minimize their environmental impact. This could include businesses that are
committed to reducing their carbon footprint or working in other ways to
mitigate the negative effects of global warming and climate change.
Ethical
responsibility refers to a company's efforts to adopt fair and ethical business
practices. This could include anything from paying employees at or above the
minimum wage to sourcing raw materials ethically.
Philanthropic
responsibility: Some businesses may choose to donate a portion of their profits
or executive time to charities or charitable causes. Target, for example, committed
in 1946 to return 5% of its profits to the community.
Examples
of Corporate Social Responsibility
Patagonia,
for example, is an outdoor and sports apparel company that has several CSR
programs. Among these are a living wage program, a migrant worker program, a
fair trade program, and a fair labor program.
Starbucks'
commitment to global human rights is another example of a company's corporate
social responsibility. This commitment is stated in official corporate policy
and includes compliance requirements for all business units within the firm.
Following this social mission affects all levels of Starbucks' operations, from
hiring to supply chain to how the company works with its business partners.
Conclusion
According
to research, a commitment to CSR can benefit a company's finances as well as
employee morale. CSR is similar to ESG, a process in which investors base their
decisions on CSR programs and the environmental impact of a company.
Written by Jay Kumar Gupta
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