At its best, corporate social responsibility (CSR) empowers businesses to be the best versions of themselves. At its worst, it can be a trite marketing buzzword — one that consumers might even learn to distrust.
What do companies with good corporate social responsibility policies do differently? What can you achieve when you stand in their ranks, with a CSR program genuinely dedicated to the common good? Find out below.
What Is Corporate Social Responsibility?
Corporate social responsibility is not-for-profit practices maintained by brands seeking to operate under a higher ethical standard.
In simpler terms, it’s the trend of companies today pledging to better society according to environmental, cultural, charitable and social activities.
Specific types of corporate social responsibility vary, but tend to fall into one of four categories:
- Philanthropic giving: Organizations with philanthropic giving programs provide direct donations, in-kind donations and pro-bono work to nonprofit partners. The charities can be local, regional, national or international and dedicated to a litany of causes, from environmentalism to human trafficking to veteran assistance.
- Environmental sustainability: Businesses with environmental CSR programs pledge to reduce their carbon footprints. While also support environmentally sustainable, or “green,” research and initiatives.
- Economic responsibility: Brands practicing economic responsibility promise not to put profits over principles. Production, service, labor or operational changes are made only when aligned with larger, just social values.
- Ethical business stewardship: Business stewardship institutionalizes ethical operations and practices, particularly when it comes to material sourcing and workers’ rights. Ethical business stewardship includes tenets such as paying living wages, practicing equal pay for equal work, participating in fair trade deals and maintaining ethical business vendor networks.
Importance of Corporate Social Responsibility in Business
Being a good corporate citizen does more than deliver a feel-good brand boost. In fact, these programs are growing due to consumer pressure. Nearly 88% of customers look to brands to help them make more ethical and environmentally sustainable decisions. Consumer demand for sustainable products continues to grow. According to Nielsen, another 61% will pay more for sustainable products and services.
When you implement a successful CSR program, you distinguish yourself as a brand with a social and moral compass. There are numerous advantages to this within your organization and industry:
- CSRs are a self-imposed differentiator: CSR programs are not mandatory. There are no laws, regulations or governing bodies requiring their existence. This means companies choose to create these programs entirely on their own, identifying causes and concerns relevant to their own values, then putting changes into practice. Transparent CSR programs result in a competitive differentiator, one made more authentic because it started within.
- CSRs make employees happy: Most people employed by CSR-practicing companies are proud to participate in their organization’s program. These employees report higher levels of job satisfaction, employer trust and job impact. To compound the importance of CSR in business today, America’s Charities Snapshot Employee Research reveals 71% of people believe it’s “imperative” or “very important” for organizations to support philanthropic giving and volunteer opportunities. They’ll increasingly work elsewhere when those goals are reflected.
- CSRs create industry authority and leadership: Organizations dedicated to ethical and sustainable business models become exemplary leaders in their fields. For example, organizations become known for competitive salaries and benefits offerings, reduced carbon emissions, technology adoption and community reinvestment. These corporate characteristics inspire a positive public image and force your competitors to respond accordingly.
Benefits of Corporate Social Responsibility
Companies with good corporate social responsibility policies see objective, data-backed benefits, including:
- Greater brand trust: Nielsen also reports that over 60% of global consumers see brands committed to ethical and environmental sustainability as more trustworthy. That’s a powerful motivator. One not to be underestimated at a time when consumer trust in brands as institutions is at an all-time low. Companies today benefit greatly when associated with these positive brand identifiers, which back their products and services and separate them from the pack to retain new and current customers.
- More innovation: CSR compels businesses to commit to new practices and standards. Yesterday’s “business as usual” tactics won’t cut it. After all, it was these old operations, supply chains, sourcing practices and production techniques that led to inefficiency and waste. CSR programs spur radical innovation in nearly every branch of a company, from research and development to warehousing to customer support.
- Overhead cost-savings: Certain environmental CSR initiatives actually save businesses money in the long-term. These efforts can reduce energy expenditures, fleet fueling and distribution expenses, electricity costs, product packaging and water consumption and many other variables bleeding red across your budget.
- Boosted shareholder confidence: Research from Northwestern’s Kellogg School of Management and the University of Iowa, among others, reveals an interesting CSR benefit — companies that announce social and environmental programs experience a positive stock return, even if CSR spending exceeds initial proposals. When CSR investments don’t generate a positive ROI or when CSR spending is below investor expectations, the opposite occurs — stock returns actually dip.
- Improved overall business performance: Other studies have found well-researched and implemented CSR programs, particularly green projects, tend to produce superior operating performance metrics such as revenues, costs and profit margins. These superior benchmarks are especially pronounced two years after CSR implementation and can compound from then on.
Companies With Great CSR Programs
When evaluating the impact of corporate social responsibility programs on consumers and culture alike, a few brands rise to the top. Here are our top examples of companies with good corporate social responsibility policies.
Outdoor apparel company Patagonia sets the standard when it comes to living out its brand values, which include statements like “cause no unnecessary harm” and “use business to protect nature.”
Its entire corporate social responsibility platform revolves around limiting its ecological footprint while restoring just and sustainable business systems. In short, the company has positioned itself as a leader in mitigating fashion’s effects on the climate crisis. It seeks to uphold this mission through sustainable changes to its entire business model, including:
- Ethical material sourcing: As far back as the mid-1990s, Patagonia began revamping its material sourcing and supply networks to reduce problematic, even damaging, practices. For example, it switched to using all organic cotton in 1994, plus launched a farmer foster network to create deeper relationships between cotton growers at the start of its supply chain and the suppliers and distributors in between. Patagonia also piloted one of the apparel industry’s first Traceable Down Standards, ensuring the ducks needed to produce down feathers are shielded from harmful practices like live-plucking and force-feeding.
- Benchmarking a living wage: Patagonia is currently working with Fair Trade USA and Fair Labor Association (FLA) to develop a fair living wage policy across its international factories.
- Donated sales proceeds: Patagonia donates 1% of sales annually to a myriad of conservation and environmental charities. In 2018, the company also gifted the entire $10 million it saved from corporate tax cuts to environmental awareness groups and programs.
The American manufacturing company 3M is known for producing a diverse set of products — and for maintaining a diverse corporate social responsibility program.
3M was one of the first corporations to establish a philanthropic foundation back in 1953. Since then, its philanthropic interests span scientific innovation, the environment and global humanitarian relief, giving $1.45 billion to its community partners. These priorities are reflected in two of 3M’s largest corporate social undertakings:
- Transitioning to 100% renewable energy: The past decade has seen 3M reduce its greenhouse gas contribution by 68%. Yet after completing its 409-acre, 100% renewable energy-powered new global headquarters in St. Paul, Minnesota, the company decided to go the extra mile. 3M has now committed to transitioning its entire global corporate ecosystem across 70 countries to run on 100% renewable power sources, with a 50% interim goal set for 2025.
- Childhood and continued education: The company maintains one of the most extensive and well-funded philanthropic programs dedicated to STEM education. They work with a network of national and international partners to increase student interest in the sciences, fund science-based community improvement projects and foster more diversity in STEM.
3. Ben & Jerry’s
No list of businesses with top corporate social responsibility programs would be complete without Ben & Jerry’s.
The premium ice cream maker’s CSR efforts go all the way back to its IPO in 1985. Well ahead of the corporate responsibility and philanthropy trend, Ben & Jerry’s board announced that 7.5% of its pre-tax profits every year would go directly to philanthropic endeavors. This figure is still well above today’s industry averages. It also led to the establishment of the Ben & Jerry’s Foundation, which remains a premier model for corporations committed to grassroots support.
Ben & Jerry’s corporate social responsibility is reflected in efforts such as:
- Animal and economic welfare: Ben & Jerry’s is a leading critic against the use of artificial growth hormones in dairy cows, particularly Recombinant Bovine Growth Hormone (rBGH). The company cites the hormone as key to the viability of factory farms and concentrated animal feeding operations (CAFOs), which directly produce economic hardships for family dairy farms as well as significant health and ethical concerns for cows.
- Racial justice: Ben & Jerry’s is outspoken about contemporary issues of racial equity, understanding and advocacy. Every year, they select roughly half a dozen nonprofit partners to support, whose organizations are dedicated to educating, empowering and correcting systemic racism.
- Fairtrade sourcing: Ben & Jerry’s sources many of its core ice cream ingredients from Fair Trade-certified, small-scale farmers worldwide. This practice ensures farmers and growers in developing nations can compete on a global scale while earning living wages and keeping capital in their communities.
Importance of Corporate Social Responsibility for Society
Businesses that spearhead CSR programs make a declaration about who they are as an organization. By committing to tenets larger than sheer profit, the structural and cultural impact CSR has on society cannot be underestimated.
1. Transparency as the Norm, Not the Exception
CSR programs put an onus on organizations to be as clear, open and accessible about their end-to-end operations. Increasingly, consumers and investors place a premium on participating only with businesses that operate ethically. That means organizations must find ways to showcase such activities, increasingly through public disclosures revealing its:
- Hiring and labor practices
- Complete supply chains
- Vendor ties and relations
- Investor ties and relations
- Financial disclosures
- Environmental footprint
- Business partnerships and coalitions
- Charitable foundation’s history of giving
In fact, Forbes reports that 85% of today’s S&P 500 companies now file a sustainability report, among other disclosure statements. These publications pull back the curtain on how a business conducts itself. As CSR-inspired demand for operational information increases, more and more businesses will pivot to meet the times, seeking ways to support more transparent and ethical business processes.
2. Leveraging Investors for Social Good, Not Fast Profit
Over 80% of mainstream investors today will consider a company’s “ESG” — environmental, social and governance — profile before deciding to invest.
That’s a historical precedent, one reshaping the investment landscape itself. CSR-dedicated investing is also up 25% since recent reviews in 2014. Worldwide, there are nearly 23 trillion U.S.-dollars worth of assets now professionally managed according to social responsibility and well-being strategies. That figure is so significant it exceeds the U.S. economy’s entire GDP — revealing just how powerful an impact CSR programs have grown to be.
3. More Informed, Connected and Engaged Consumers
CSR empowers people to move away from passive consumption to active involvement with the products or services they use. This ties a new sense of identity into purchased goods. According to Neilsen, nearly half (48%) of Americans today say they consider the impact their purchase has on the environment and intend to make more eco-minded decisions. This consciousness has led sustainable fast-moving consumer goods (FMCG) to see industry growth rates four times higher than conventional FMCGs, with the sustainable FMCG industry projected to reach $150 billion in sales by 2021.
Consumers now see themselves as influential linchpins in a fluid and impressionable business ecosystem, not just the recipients of whatever a business decides to produce, however they decide to produce it.
4. Critically Thinking Corporations
CSR’s influence on consumers parallels the effects it has on corporate consciousness. Organizations looking to implement their own corporate social responsibility program cannot do so in superficial half-measures. Only thoughtful, deliberate and long-term commitments to sustainability and ethical improvements translate into successful CSR.
While many of the societal benefits of CSR outweigh the risks, it’s essential for organizations to think critically before launching a program. Stakeholders must consider these factors before setting up CSR to ensure its smooth and authentic adoption:
- Costs: Many CSR initiatives require reinvesting in new equipment, components, product packaging and materials, and refurbished buildings and infrastructure. These are sunk costs that must be weighed against calculations of not changing operations, production or distribution practices.
- Time: Organizations must be realistic about making even small CSR-minded changes, particularly in the supply chain. Fortune 500 companies often adopt five, 10, even 20-year plans to account for the vendor and procurement shakeups these initiatives require.
- Scrutiny: Instating formal CSR invariably opens your organization up to increased public scrutiny. The public will increasingly look to see if you’re walking the walk while you talk the talk, particularly when it comes to issues like greenwashing.
Questions Your Company Should Consider Before Creating a CSR Program
Turn corporate social responsibility from a buzzword into a series of authentic best practices by considering these questions.
- Why are we doing this? Are we superficially hopping on the CSR bandwagon or truly looking to be the best version of ourselves?
- Who does this really impact? In our efforts to support more ethical and sustainable supply chains, material sourcing, labor practices and more, are we causing harmful ripple effects somewhere else?
- Who gets a say? Have we consulted stakeholders at every tier of the organization, including employees, investors and our customers themselves?
- What are our biases and blind spots? Are we letting personal, political or financial prejudices shape our decisions?
- How much can we invest? Corporate social responsibility is an investment, one that disproportionately affects small businesses rather than their larger or more established counterparts. Halfhearted investments result in halfhearted benefits — and may even backfire if customers interpret your efforts as shallow.
- How can we prove success? What tools do we have available to measure the impact of CSR? What will our benchmarks and success measurements be?
There are many reasons why companies should practice corporate social responsibility — including setting yourself apart from the competition. If you have concerns your business is treading water when it should be leading the pack, reach out with one of RSI Executive Search Firm’s talent consultants. We assist clients in over 35 vertical markets source top-tier talent instrumental for their needs and growth. Get in touch to learn more.