What is Corporate Social Responsibility?

 

What is Corporate Social Responsibility? 

Many people and organisations have many different definitions when it comes to corporate social responsibility (CSR). There is no definitive definition and hence I want to state a few definitions from different authors on corporate social responsibility. A journal on CSR defines it as an organisations attempts to achieve a balance between the economic, environmental and social imperatives without foregoing the expectations of stakeholders, and giving something back to the community (Popa and Salanta, 2014). Another definition of CSR according to Delbard’s is as follows:-

-          C stands for Corporate, meaning that the concept of CSR is strictly reserved for corporate forms of business (Delbard, 2020). However, according to Lee’s journal on valuations and decisions of investing in CSR, he states that it is not only corporates that look at CSR but also government agencies and the public (Lee, 2018). This suggests to me that CSR is more than just for corporates but any organisation that wants to be socially and economically responsible.

-          S stands for Social, this covers a wide range of issues related to people and the planet which covers ethical issues such as corruption (Delbard, 2020).

-          R which stands for Responsibility, where he suggests that CSR is something that is voluntary rather than just a legal requirement (Delbard, 2020).

The use of CSR is increasing and today it is vital for organisations to be seen and known for being socially conscious (Schooley, 2020). A research study that was done by Cone Communications shows the importance of corporate social responsibility. The study showed that 60% of Americans hoped that companies would drive social and environmental change and further 90% of consumers surveyed said that they would purchase a product because the company supported an issue they cared about (Schooley, 2020). This suggests to me that being an organisation that has a strong CSR image or program will benefit the company as it will enable them to attract more consumers and build a strong brand image through CSR and hence I believe according to this research CSR is about adding value through your organisation to impact the needs of society in a positive manner that would lead towards a better future.

Figure 1: Elkington Triple Bottom Line (Source: tutor2U)

The 3 P’s or the triple bottom line (TBL) is closely related to the missions of CSR and what it stands for. According to Dr. Loewenberger’s panopto video this concept of 3 P’s is about guiding businesses not to solely focus on profits alone, but to have a balance of aiming on profits, people and the planet when doing business. Many organisations today are adding TBL into their business plans to gauge their total performance and how they are benefiting society. E.g. the General Electric Foundation gave USD 88 million to community and educational programs in 2016 (Stax, 2019).

When it comes to understanding what CSR is it is important to first understand the categories of CSR and then the benefits that CSR can bring into an organisation. I would like to list down 4 categories of CSR as per the Corporate Finance Institute (CFI) which are:-

                        Figure 2: Four Levels of CSR – Carroll’s Pyramid (Source: the CSR Journal, 2019)

1.      Environmental Responsibility – this aim to reduce greenhouse gasses, pollutions and anything that is detrimental to society.

2.      Human Rights Responsibility (Ethical) – this involves ensuring companies adhere to fair trade and fair labour practices.

3.      Philanthropic & Legal Responsibility – this is where the company ensures it follows the law at all times. When it comes to philanthropic activities this can include funding special programs, such as educational, health programs and donating to various charities. 

4.      Economic Responsibility – this is about refining the company’s business operation whilst ensuring sustainable practices. (CFI, 2020).

Today many companies across various sectors implement CSR. There are many research studies that have been undertaken that show the positive benefits of CSR. (Križanová and Gajanová, 2016)

As I work in the education sector I want to look at how CSR can play an important role for education institutes and hence why they should comply with the four categories mentioned above when laying out their CSR practises. When Institutes in the education sector engage in CSR there are certain benefits it would bring the organisation which I have outlined below:-

1.      Improves brand value

The Faculty of Economics and Administration at the Masaryk University did a research study of 251 companies in the construction and manufacturing sector and most of these companies mentioned that the reason they adopted CSR was for the visibility and image of the company (Križanová and Gajanová, 2016). According to this research I believe adopting CSR will improve the brand value and image of the institute as it shows your commitment to look after the environment, economy and people.

2.      Builds customer loyalty

According to research done, 55% of consumers are prepared and willing to pay a higher price for products from companies that are socially responsible (Dutta, 2020). Further, if we compare another industry such as the airline sector, it is found that appropriate CSR initiatives is very important for increasing Customer loyalty (Kim, Seojin and Roh, 2020). This suggests to me that CSR is an important initiative that will enable organisations to retain customers. In the education sector retaining students is very important as we as an education institute want our students to undertake their entire education cycle from undergraduate to post-graduate with us, and therefore one way to do that is to be an education institute that is socially responsible.

3.      Engages Millennial's

According to an article by Shreya Dutta on corporate social responsibility, she mentions that 7 out of 10 millennial's see themselves as social activists. Further, she said that 78% of millennial's said that CSR directly influences their decision whether to join an organisation or not (Dutta, 2020). As per this article that is a big percentage of millennial's that are influenced by a company’s CSR and hence companies in the education sector and all sectors as a matter of fact should take this on seriously, as it would give them more opportunities when looking to hire the right talent.

4.      Helps attract and retain employees

As an organisation if you are CSR conscious you will retain and attract more employees or students. According to an article by CFI employees stay longer in companies that practice CSR (CFI, 2020).  Some companies even give their employees opportunities to volunteer in CSR work of their choice (Dutta, 2020). As an education institute it would be advisable to encourage students and employees to take part in CSR related activities which I believe would help them further their career as it would give them more exposure and valuable experience.

I think it is apt to take a look at some global companies that have a very good CSR reputation. This will help us better understand what CSR.

IKEA – Is a Swedish multinational organisation that designs all kinds of furniture and household items. They are known for creating safe places for children in areas of conflict. Some of their initiatives include –

§  Let’s play for change to enable children to “play and develop, even in the most difficult circumstance.” (Dutta, 2020)

§  Brighter lives for refugees for which they have donated almost “30.8 million Euros to help the UNHCR bring light and renewable energy to refugee camps across Africa, Asia and the Middle East.” (Dutta, 2020).

By reading the above it is clear to say that Ikea have positioned themselves in a way through their CSR to show and prove to their employees, stakeholders and customers that they are a company who care about the people, the environment and the world that we live in.

COCA COLA – Coke has implemented many CSR schemes from the 5by20 where they empower women to become entrepreneurs and give them the right training and access to mentors. They have already helped approximately 4.6 million women across 96 countries. They have also helped the lives of 10.6 million people by providing them clean water to drink. Further, Coca Cola are very environment conscious as they focus a lot on using recycled material. (Coca cola, 2020).

In conclusion I believe CSR is a game changer for companies, it adds value to them and gives them a better image as they focus not only on profits but people and places as well. In a world that is ever changing it is also important that CSR initiatives adapt as well to ensure companies stay ahead at all times.

When it comes to CSR what do you believe?