Corporate social responsibility (CSR) is a management concept that describes how a company contributes to the well-being of communities and society through environmental and social measures. CSR plays a crucial role in how brands are perceived by customers and their target audience. It may also help attract employees and investors who prioritize the CSR goals a company has identified.
Learn about the importance of CSR and how it can impact the success of your business below.
Why CSR is important
There are many reasons for a company to embrace CSR practices.
1. It improves customers’ perception of your brand.
It’s increasingly important for companies to have a socially conscious image. Consumers, employees, and stakeholders prioritize CSR when choosing a brand or company, and they hold corporations accountable for effecting social change with their beliefs, practices, and profits.
“What the public thinks of your company is critical to its success,” said Katie Schmidt, founder and lead designer of Passion Lilie. “By building a positive image that you believe in, you can make a name for your company as being socially conscious.”
To stand out among the competition, your company needs to prove to the public that it is a force for good. Advocating and raising awareness for socially important causes is an excellent way for your business to stay top-of-mind and increase brand value.
The Kantar Purpose 2020 study demonstrated a direct correlation between perceived positive impact and brand value growth. Companies that the public considers highly impactful demonstrated a brand value growth of 175% over 12 years, while businesses with a low positive impact showed only 70% growth.
Schmidt also said that sustainable development could help a business financially. For example, using less packaging and less energy can reduce production costs.
CSR practices play a crucial role in attracting new customers, whose purchasing decisions are strongly influenced by the company’s values, reputation, and social and environmental activism.
2. It attracts and retains employees.
Consumers aren’t the only ones drawn to businesses that give back. Susan Cooney, head of global diversity and inclusion at Symantec, said that sustainability strategy is a big factor in where today’s top talent chooses to work.
“The next generation of employees is seeking out employers that are focused on the triple bottom line: people, planet and revenue,” she said. “Coming out of the recession, corporate revenue has been getting stronger. Companies are encouraged to put that increased profit into programs that give back.”
According to Deloitte’s 2021 Millennial and Gen Z Survey, the modern workforce prioritizes culture, diversity, and high impact over financial benefits. An estimated 44% of millennials and 49% of Gen Zers rely on their personal ethics in determining the type of work and companies they’d join. The respondents of the Porter Novelli Purpose Tracker 2021 report go even further, with 70% saying they wouldn’t work for a company without a strong purpose.
What’s more, employees that share the company’s values and can relate to its CSR initiatives are much more likely to stay. Deloitte’s 2020 Global Marketing Trends Report shows that purpose-driven companies retain talent up to 40% more than their competitors. Considering that the estimated cost of losing an employee averages 40% of their annual salary, according to a report by the Washington Center for Equitable Growth, offering your team a sense of purpose and meaning in their work is worth the effort.
3. It increases your appeal to investors.
By demonstrating a developed CSR program and initiatives, your company is bound to become more appealing to both current and future investors. CECP’s influential 2021 Giving in Numbers report shows that investors play a growing role as key stakeholders in corporate social responsibility. Almost 80% of surveyed businesses were open to providing them with data and considering their perspectives on sustainability. Just like customers, investors are holding businesses accountable when it comes to social responsibility.
At the same time, a company that takes CSR seriously signals to both investors and partners that it’s interested in long-term as well as short-term gain. CSR goes hand in hand with environmental, social, and governance (ESG) metrics that help external analysts quantify the company’s social efforts, and becomes a key factor for investors’ consideration and continued interest.
Don’t wait until investors ask you to provide social impact data. Get ahead of current trends by sharing ESG scores, sustainability reports and CSR metrics.
4 types of corporate responsibility your business can practice
In recognition of how important socially responsible efforts are to their customers, employees and stakeholders, many companies focus on four broad CSR categories.
- Environmental efforts: One primary focus of CSR is the environment. Businesses have large carbon footprints, regardless of size. Any steps a company can take to reduce its footprint is considered good for both the company and society.
- Philanthropy: Businesses can practice social responsibility by donating money, products or services to social causes and nonprofits. Larger companies tend to have plentiful resources that can benefit charities and local community programs; however, even as a small business, your efforts can make a difference. If you have a specific charity or program in mind, reach out to the organization. Ask them about their specific needs and whether a donation of money, time or your company’s products would best help them.
- Ethical labor practices: Companies can demonstrate CSR by treating employees fairly and ethically. This is especially true of businesses that operate in international locations with labor laws that differ from those in the U. S.
- Volunteering: Participating in local causes or volunteering your time (and your staff’s time) to community events says a lot about your company’s sincerity. When your company does good deeds without expecting anything in return, you express concern (and support) for specific issues and social causes.
While many companies self-assess their CSR efforts, often the most practical and trusted way to prove your company’s social accountability to the public is to undergo a third-party social impact assessment.
These three corporate social responsibility certifications can help you achieve public recognition for your sustainability and CSR efforts.
Certified B corporations, or B-corps, are companies verified by B Lab to meet high standards of social and environmental performance, accountability, and transparency. To become a B-corp, a company must undergo a rigorous and holistic verification process every three years, integrate B-corp commitments to all stakeholders (rather than only shareholders) into its governing documents, and pay a sales-based annual fee.
While B-corp status is mainly associated with multinationals like Patagonia or Ben & Jerry’s, small businesses and startups that strive for social and environmental excellence can also receive this CSR certification. The first step is to complete the free and confidential B Impact Assessment on the B Lab website and receive a minimum score of 80. If you meet the baseline, you can submit the impact assessment for review and start the verification process.
The world’s most searched-for B corporation is the Australia-based educational platform Moodle. Its mission is to “empower educators to improve our world.”
ISEAL code compliance
ISEAL Alliance is a global membership organization for credible sustainability standards whose members include Fairtrade International, Gold Standard, Alliance for Water Stewardship and more. An assessment from ISEAL is carried out by an independent third-party verification provider that determines whether a business meets Codes of Good Practice and can be deemed ISEAL Code Compliant. This assessment offers a reputable seal of approval for companies that emphasize sustainability.
In some circumstances, verifications from ISEAL members can directly impact business continuity. For example, the absence of a certification from the Roundtable for Sustainable Palm Oil can effectively close down a supply chain for some consumer brands.
The Sustainability Accounting Standards Board is one of the most established environmental, social, and governance (ESG) guidance frameworks, providing standards for disclosing the financial impact of a company’s sustainability efforts. In other words, it allows businesses to communicate the financial outcomes of their CSR and ESG measures to investors and other stakeholders.
SASB Standards are evidence-based, cost-effective, market-informed, and industry-specific, covering 77 industries. These standards help produce structured, comparable, and standardized data that is perfect for both internal and external communications of CSR and ESG impacts.
Examples of CSR companies
If you’re looking for CSR inspiration for your business, here are six companies practicing corporate social responsibility on a large scale.
- LEGO: The toy company has invested millions of dollars into addressing climate change and reducing waste. LEGO’s environmentally conscious efforts include reduced packaging, sustainable materials, and investments in alternative energy.
- TOMS: TOMS donates one-third of its net profits to charities that support physical and mental health as well as educational opportunities. During the pandemic, the brand directed all charitable donations to the TOMS COVID-19 Global Giving Fund.
- Johnson & Johnson: The brand Johnson & Johnson focuses on reducing its environmental impact by investing in alternative energy sources. Globally, Johnson & Johnson also works to provide clean, safe water to communities.
- Starbucks: The global coffee chain has implemented a socially responsible hiring process to diversify its workforce. Its efforts are focused on hiring more veterans, young people looking to start their careers, and refugees.
- Google: Google has demonstrated its commitment to the environment by investing in renewable energy sources and sustainable offices. CEO Sundar Pichai is also known to take stands on certain social issues.
- Pfizer: The pharmaceutical company’s focus on corporate citizenship is reflected in its healthcare initiatives, which include spreading awareness about non-infectious diseases and providing accessible health services to women and children in need.
No matter the size of your company, socially responsible practices can not only benefit your business, but also make a positive impact on the world.