It has a nice ring, but is there more to it? “Corporate social responsibility” or CSR for short suggests ethics and business working together. It might be the latest invention of a marketing department.
On the other hand, it could turn out instead to be the backbone of any enterprise that wants to succeed, bridging the gap between yesterday’s public relations statements and today’s need for businesses to show how they help to enhance the planet instead of eroding it.
But just what is corporate social responsibility?
One starting point is its definition as the “voluntary activities undertaken by a company to operate in an economic, social and environmentally sustainable manner”. That point of view comes from the Government of Canada. Other nations and their consumers offer different flavours of CSR. In China, corporate social responsibility is a matter of making safe products of high quality. By comparison, secure employment is the cornerstone of CSR in Germany, while in South Africa a socially responsible company makes a positive contribution to health, education and other social needs.
Not Just One Bottom Line to Live Up to, but Three
An easy way of remembering what CSR represents overall, as the Australian Human Rights Commission notes, is the “triple bottom line” that businesses need to achieve, also known as “people, planet and profit”. From this, we can start to see why CSR is destined to be more than just handy PR:
Enterprises must treat their employees fairly and with respect. The same is true for customers, investors and anyone else affected by the operations of the enterprise. Without this fairness and respect, an enterprise cannot reasonably expect any of these groups of people to stay with it.
Green business operations are the way to go. Otherwise, the planet’s resources will peter out without being renewed. Firms that have not moved to an ecologically friendly mode of business will fail and jobs will be lost, not to mention the possible damage already done to the environment.
Businesses also need to be profitable in order to operate safely and invest for the future. While the way profit is made is also subject to a number of conditions, the absence of profit means loss, which can only be a temporary situation or else the business collapses.
Other names to describe similar initiatives include “corporate accountability”, “corporate citizenship” and “sustainability”. CSR or corporate social responsibility has an advantage however as a name for what needs to be done. It is not only a reminder that corporate success and social welfare are interlinked, but also a pointer to the onus put on enterprises to be driving forces in making the improvements. Even though businesses themselves are subject to what their markets and stakeholders want, while being constrained by government regulations, businesses are also directly responsible for making the people-planet-profit approach work.
Opportunities to Put CSR to Work
Initiatives taken by enterprises in CSR can vary. Companies should specialise in the way they give back or contribute to community and planetary wellbeing. Too wide a spread of activities can make it difficult to measure the real, positive impact, dilute effectiveness, and leave observers puzzled or doubtful. A clear focus on a worthwhile programme in particular often makes more sense.
• Giving products or services at zero cost to deserving recipients according to sales made
• Contributing a portion of a company’s profit to a charitable organisation
• Providing other useful resources (time, facilities, knowhow) at no charge to non-profit organisations
• Significantly reducing the company’s carbon footprint
• Defining and adhering to ethical labour policies nationally and internationally
• Operating supply chains with sustainable procurement of raw materials or products to be distributed or resold.
However, not every enterprise will automatically arrive at the conclusion that CSR needs to be part of their daily activities. If this is the case, there are two key forces acting on businesses that will push them towards a more enlightened attitude – governments and stakeholders.
“Helping Hands” towards Corporate Social Responsibility
While the meaning of CSR in different contexts may vary, for instance according to local culture or environmental conditions, government regulation has been created in many countries to make certain corporate social responsibilities into legal obligations as well. Conversely, government scrutiny of corporations may be tempered by evidence offered by such corporations that they are taking their CSR seriously. While this may seem like a backwards way of getting enterprises to comply with directives, it is clear that numerous companies would rather make the effort to exercise their corporate social responsibility correctly, when faced with the implicit menace of inspections otherwise.
Stakeholders on the other hand exert different pressures on businesses. Customers who do not agree with a company’s stance (or lack of it) on CSR may choose to boycott that company and buy their products or services from competitors. In recent years, fuelled by factors such as the Internet that allows immediate information gathering and comparison shopping, customer power has grown considerably. So has their knowledge about business practices of which they disapprove, and their determination to see positive changes brought about.
Investors also want to know more about an enterprise’s record and policy in matters like worker minimum ages and wages, especially when the enterprise is using low-cost suppliers in other countries. Failure to satisfy customers and investors on these points often leads to both of these groups “voting with their feet” and taking their patronage and their investment funds elsewhere.
Employees look for an employer with which they are happy to be associated. Like customers and investors, employees increasingly think that corporations can no longer do business in a vacuum, divorced from social and ecological issues. Competitiveness, survival and profitability are still part of the scenery, but the way they are being pursued is undergoing profound transformation.
Businesses Turning CSR into a Pleasure instead of a Chore
Yet it would be unfair to suggest that companies only grudgingly accept their CSR, under duress of national laws or because of the prospect of losing their customers to their competitors. Business owners may be motivated by a desire to do good or assist communities, independently of other people’s opinions.
Some businesses start with that aim in the first place, making CSR an integral part of the business plan from the start. In 1824, the Cadbury family started its business of selling tea, coffee and drinking chocolate in Birmingham in the UK. A generation later, the family business developed the Bournville estate, a village with the express goal of improving living conditions for employees of the company. Since then, Cadbury has become the second largest confectionery brand in the world.
Today, a number of companies build CSR into their operations for similar reasons. Many business owners, directors and senior managers think that corporate social responsibility is a natural part of business. Moreover, they embrace CSR because it is an opportunity to do something they like doing and feel good about doing. Giving often procures more pleasure than receiving. That already makes CSR a win-win proposition for the companies that abide by it and the communities that benefit from it.
There are additional potential advantages to businesses too. Positive results from successful CSR policies can include:
• Better financial performance and lower operational costs
• Improved brand image with the customers the company wants to attract
• Additional sales and brand loyalty from customers
• Increases in productivity and quality
• Enhanced capability to attract the right employee talent
• Improvement in product and service safety and quality
• Wider access to investment capital
• Replacement of non-renewable resources by renewable ones
• Increased recycling, ‘leaning and greening’, and better return on investment
How Much CSR? The Need to Measure
Measuring the impact of a corporate social responsibility programme can still be a challenge. For one thing, the values of CSR initiatives change according to where they are being exercised. For another, there is to date no standard procedure for auditing CSR. Nonetheless, benchmarking is used by companies to evaluate their CSR initiatives, either against those of competitors or else in terms of the impact of the CSR actions on society and on the environment.
The notion of comparing how much good is being done might be considered incongruous. After all, shouldn’t companies get on with doing the right thing for their CSR, rather than seeking comparison with others? There is however at least one good reason for trying to measure a company’s CSR results. In a supply chain, it becomes important for enterprises to vet their suppliers in terms of corporate social responsibility. The foreign labour scandals that have tarnished the reputations of a number of multinational corporations are examples. In the worst cases, supplier neglect of even the most basic safety precautions for workers led to catastrophes like the Savar building collapse in 2013 and the deaths of workers making garments inside it.
Once again though, although negative consequences of poor or non-existent CSR programmes can push companies to take their corporate social responsibilities seriously, the positive outcomes to be gained by a better attitude to CSR should be brought to the fore as well. The Harvard Business Review linked CSR with competitive advantage in its article “Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility”.
Elsewhere, results from game theory, the part of mathematics that helps predict outcomes in many areas of business and life, show that overall people will do better by being nice to each other. In other words, if a corporation is “nice” about being socially responsible, then customers will be “nice” back by buying the corporation’s products and services, and investors will be “nice” by providing the capital to help develop the corporation.
Marketing Again – But the Real One This Time
How should corporations address their social responsibilities? We started this article with a reference to marketing with the aim of showing that CSR goes further than a marketing action or a label pasted on products as lip service to customer opinion. Yet, marketing – real marketing, that is – is an important part of getting CSR right too. Real marketing is about finding out what customers want and then specifying the deliverable from the enterprise that will satisfy that desire. This applies to CSR programmes. Listening to and acting in accordance with customer opinion about how to contribute as a business is important. Employee and investor voices count as well. Transparency and honesty are essential in the decision process to convince stakeholders at all times that CSR programmes are being run for the good of all concerned, and not as the brainchild of a company spin doctor.
Conclusion: a Short Case Study in CSR
Logistics Bureau with offices in Australia and Southeast Asia aims to follow these different points. The company’s goal is to have a CSR programme that meets with customer approval about what the company is doing, while taking into account staff interest too. For Rob O’Byrne, Owner and Group Managing Director, the focus from the start was on projects involving people, with fresh water supplies, food, healthcare and education all priorities. Logistics Bureau initially considered starting its own charity, before finding that the B1G1 (Buy One Give One) organisation met the company’s needs as vehicle for giving.
Informal marketing is the way that Logistics Bureau then integrates customer and employee opinion into its CSR. The Logistics Bureau team chooses a worthy cause every month. In addition, for client projects, worthy causes are chosen according to the way they “resonate” with the client concerned. When a client assignment that has sparked the selection of a cause finishes, the client receives a certificate from Logistics Bureau to highlight the gift made on the client’s behalf, although at the expense of Logistics Bureau. Recent examples of gifts made include giving 10,000 people access to clean water for a day in Ethiopia, and 1,000 children education support for a day in Cambodia. As Rob also confirms, “It’s a tremendous feeling of joy, knowing that we’re really making a difference in so many people’s lives.”
You can track how Logistics Bureau ‘giving’ milestones are rolling past right here: Thanks a Million