Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern are environmental protection and the wellbeing of employees, the community and civil society in general, both now and in the future.
The concept of CSR is underpinned by the idea that corporations can no longer act as isolated economic entities operating in detachment from broader society. Traditional views about competitiveness, survival and profitability are being swept away.
Some of the drivers pushing business towards CSR include:
1. The shrinking role of government
In the past, governments have relied on legislation and regulation to deliver social and environmental objectives in the business sector. Shrinking government resources, coupled with a distrust of regulations, has led to the exploration of voluntary and non-regulatory initiatives instead.
2. Demands for greater disclosure
There is a growing demand for corporate disclosure from stakeholders, including customers, suppliers, employees, communities, investors, and activist organizations.
3. Increased customer interest
There is evidence that the ethical conduct of companies exerts a growing influence on the purchasing decisions of customers. In a recent survey by Environics International, more than one in five consumers reported having either rewarded or punished companies based on their perceived social performance.
4. Growing investor pressure
Investors are changing the way they assess companies’ performance, and are making decisions based on criteria that include ethical concerns. The Social Investment Forum reports that in the US in 1999, there was more than $2 trillion worth of assets invested in portfolios that used screens linked to the environment and social responsibility. A separate survey by Environics International revealed that more than a quarter of share-owning Americans took into account ethical considerations when buying and selling stocks. (More on socially responsible investment can be found in the ‘Banking and investment’ section of the site.)
5. Competitive labour markets
Employees are increasingly looking beyond paychecks and benefits, and seeking out employers whose philosophies and operating practices match their own principles. In order to hire and retain skilled employees, companies are being forced to improve working conditions.
6. Supplier relations
As stakeholders are becoming increasingly interested in business affairs, many companies are taking steps to ensure that their partners conduct themselves in a socially responsible manner. Some are introducing codes of conduct for their suppliers, to ensure that other companies’ policies or practices do not tarnish their reputation.
Some of the positive outcomes that can arise when businesses adopt a policy of social responsibility include:
1. Company benefits:
Improved financial performance;
Lower operating costs;
Enhanced brand image and reputation;
Increased sales and customer loyalty;
Greater productivity and quality;
More ability to attract and retain employees;
Reduced regulatory oversight;
Access to capital;
Product safety and decreased liability.
2. Benefits to the community and the general public:
Employee volunteer programmes;
Corporate involvement in community education, employment and homelessness programmes;
Product safety and quality.
3. Environmental benefits:
Greater material recyclability;
Better product durability and functionality;
Greater use of renewable resources;
Integration of environmental management tools into business plans, including life-cycle assessment and costing, environmental management standards, and eco-labelling.
Nevertheless, many companies continue to overlook CSR in the supply chain – for example by importing and retailing timber that has been illegally harvested. While governments can impose embargos and penalties on offending companies, the organizations themselves can make a commitment to sustainability by being more discerning in their choice of suppliers.