What is Corporate Social Responsibility?

What is Corporate Social Responsibility?

“Business as Usual” is no longer achievable in a changing environment that generates new and unforeseeable types of risks. Taking responsibility beyond job and wealth creation has become mandatory for the survival and well-being of any company.

Businesses rely on communities within which they operate and cannot exist or prosper in isolation. They need the infrastructure that society provides, its workforce, not to mention its customer base. Corporate Social Responsibility (CSR) is the recognition of that inter-dependence and means of delivering on that obligation for the mutual benefit of businesses and the societies where they operate. This article is the first in a series of four that provides a simple definition of what CSR is, while shaping a basic road map towards establishing the strategic approach.   

The simplest rational behind CSR is the way companies manage their business processes to produce an overall positive impact on society. However, with different priorities emerging in different countries, CSR does not obviously have one size that fits all. Accordingly, various definitions have been used by leading global organizations and agencies to help corporations adopt responsible practices each pertaining to their local context.

Notably, The “World Business Council for Sustainable Development” defined CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.” For instance, “Business for Social Responsibility” refers to CSR as business operating in a manner that “meets or exceeds the ethical, legal, commercial and public expectations that society has of business.” Recently,  the Europen Commission  has put forward a new policy and simpler definition of CSR as “the responsibility of enterprises for their impacts on society”.

There is no doubt that the concept of CSR is still evolving and there is still some debate over how it should be defined. CSR LEBANON defines CSR as a “strategic framework of any company to ethically manage the economic, social, and environmental impacts it has on its workplace, business partners, and the community within which it operates.”

While voluntary in nature, a typical CSR framework allows corporations to widen the scope of their commitment towards society by engaging their surroundings into their everyday business operations, understanding their communities’ needs, and assisting in offering long-term solutions to tackle these needs effectively and in profitable ways.

 THE TERM

Even though the origins of CSR can be traced back to the beginning of commerce itself, the nature and scope of corporate responsibility has changed over time, and it wasn’t until the 1960s that the term ‘Corporate Social Responsibility’ has been widely used. 

In the corporate and academic world, alternative terms are used to designate business responsibilities towards society, among which Sustainability, Corporate Responsibility, Corporate Citizenship, Responsible Business, Tripple Bottom Line or People, Planet, Profit (PPP), Spiritual Capitalism,  and Environment, Social, and Governance (ESG) to name a few. Moreover, the terms of the CSR debate have been given an impetus by a new one by professors Michael Porter and Mark Kremer who called in an article in Harvard Business Review last year for the adoption of the concept of “Shared Value” which focuses on the connections between societal and economic progress.

 THE BUSINESS CASE

Perhaps one of the biggest challenges that CSR advocates had to face, especially in the early stages of the CSR movement and sometimes still today, is building the business case for integrating CSR into a company strategy. This challenge is not so much in managing risks or showing qualitative benefits such as enhanced brand image and reputation, employee well-being, sustainable environment, and better relations with communities, among others, as in showing the economic benefits that directly or indirectly affect the bottom line of the company.

 Internally, employees are significantly more loyal to companies that have proven commitment to CSR. An April 2010 study by Hewitt & Associates looked at 230 workplaces with more than 100,000 employees and found that the more a company actively pursues worthy environmental and social efforts, the more engaged its employees are. Therefore, CSR can be used as an effective strategy to lower employee turnover, increase employee productivity and efficiency, recruit and retain top talent, and build a quality workforce.

CSR can also help a company reduce its costs. Managing resource use, waste, and greenhouse gas emissions is not only good for the environment but can also save large amounts of money. Other strategic benefits can be reaped in the form of intangible assets such as the company’s corporate reputation, the value of its brand identity, the relationships it has built on trust, and its business partnerships.

 THE FOUR AREAS

There are four areas of CSR, as a model accepted and implemented by global CSR institutions and experts that can provide a company with a clear framework. The four areas of CSR are: The Workplace, Community, Marketplace, and Environment.

Ideally, a socially responsible company is active in all of the four CSR areas with respect to the type of business and the needs of the stakeholders:

 - Workplace: The workplace area deals with the most valuable asset of the organization; its people. In order to attract and retain the best talent, management should ensure that the company’s mission and values are well reflected internally and that the CSR culture is well-spread among the staff. The latest studies and surveys show that new graduates searching for jobs put social responsibility of the company high on their list of priorities.

 - Community: Engaging in community-based CSR activities and getting the staff directly involved in them can be a smart way to both help develop neighbourhoods while also building employees’ societal skills and engaging them with the company’s values.

 - Marketplace: The marketplace ideally combines all parties that the company does “business” with. From different representatives of the supply chain to shareholders, investors to customers, the marketplace is witnessing increasing pressure on businesses to enhance their role as responsible corporate citizens. Consequently, the company’s success is increasingly being measured in terms of its ability to meet needs, concerns, and expectations of its business partners and end consumers.

 - Environment: Working on minimizing negative operational impact on the environment and investing in clean and renewable resources can be profitable for the company as well as ensure its sustainability in the long run.

 MANAGING SOCIAL RISK

 Social risk is the risk of an empowered stakeholder taking up a social or environmental issue and applying pressure on a corporation, while sometimes exploiting its reputation and corporate image, so that the company will change policies or approaches in the marketplace.

Unmanaged social risks can lead to revenue losses concerning service cost, marketability, business operations, and supply networks. CSR, through integrated information flows between stakeholders and companies, can be used as a corporate risk management tool by providing intelligence about what the risks are and offering an effective means to respond to them.

With instability hitting our region, it is especially now that we must look to sustainability, trust and social responsibility for our businesses to endure through and thrive. As new policies and economic currents are formed, CSR will play an ever more important role in defining critical frameworks and meaningful relationships.

 

SourceResponsible Business Magazine

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All, 2012

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