Corporations are accountable to many people and organizations, and corporate social responsibility (CSR) is the practice of being accountable for the social, economic and ecological impacts of a company’s operations. CSR is also known as good corporate citizenship, often undertaken by large corporations with a substantial effect on these areas and the resources to support them.
Most Americans prefer to do business with companies that share their values or do not actively engage in harmful activities that conflict with them. As part of CSR, companies acknowledge this preference in various ways, such as through environmentally safe practices, charitable giving, employee volunteerism, product and service donations, and social and political involvement. Over time, recognizing moral obligations defines an organization’s place in society and its relationship with its employees, customers, shareholders and community.
With today’s unprecedented outsider visibility into corporate activities through digital channels, including social media, CSR enables customers to find companies that align with their values. As a result, businesses can achieve positive impacts on brand image, corporate culture and societal well-being through consistent good corporate citizenship. In this article, we explore the landscape of CSR, challenges in implementation and approaches to realizing its benefits for current or aspiring business leaders.
Recent Changes in the CSR Landscape
The rise of social media has helped to create an environment where consumers, especially younger generations, are no longer content to simply purchase the products and services they prefer. Today, the consumer and employee ethos — especially in the younger generations — is to align with companies that share their individual environmental, social and governance (ESG) values.
Consider the following statistics from the PWC 2022 Global Consumer Insights Pulse Survey:
- 53% of consumers often/always trust a company/brand based on its governance policies.
- 52% of consumers often/always trust a company/brand based on its social values.
- 50% of consumers often/always trust a company/brand based on its environmental values.
The WaveX 2020 Employee Perspectives on Responsible Leadership During Crisis study also provides the following information:
- 95% of employees believe companies must benefit all stakeholders (customers, employees, suppliers, communities and shareholders), not just shareholders.
- 93% of employees believe companies must lead with purpose.
- 88% of employees believe it is no longer acceptable just to make money; companies must also positively impact society.
Challenges CSR Poses to Leaders
A new concept called the “triple bottom line” represents a business’s commitment to its social and environmental impact, sustainability efforts and profits. With three goals that can come into conflict, doing the right thing is often easier said than done in corporations. Here are a few of the most common challenges leaders must consider in implementing CSR:
- Limited resources. When investing in local organizations or national causes, decisions can cause internal disagreement and result in the alienation of some constituents.
- Short-term vs. long-term goal conflicts. Wall Street (shareholders) reward the achievement of short-term financial goals (though they also value a CSR commitment), while customers and employees reward the pursuit of longer-term goals.
- Value conflicts. Stakeholders, such as employees and community members, may disagree on which value takes precedence when values conflict, such as environmental impact vs. job creation or raising minimum wages, which may impact profitability and value for employees in the stock option program.
- Transparency and disclosure. Most stakeholders, from shareholders to community members to employees, want better ways of collecting and managing data for accurate and transparent reporting, but achieving this goal is resource-intensive.
- Communicating value. All stakeholders want to understand how investments in CSR create hard value (such as increased revenues or cost-savings) and soft value (appealing more to potential customers and employees). Therefore, leaders must make the right decisions and be effective at communication and persuasion.
CSR in Action: Companies Doing It Right
As an investor, you likely own shares of companies that are exemplars of CSR in your retirement portfolio. A major reason for their investor appeal is how well they have built hard and soft value into their CSR initiatives and communicated that to shareholders. Here are three recent examples:
- Google. The company’s data centers use 50% less energy than comparable data centers worldwide and have committed over $1 billion to renewable energy projects. Gmail has helped businesses to use less paper, reducing environmental impact.
- Netflix. The company offers 52 weeks of paid parental leave to the birth parent and non-birth parent. They also use their social media platforms to show support for social causes that appeal to their stakeholders.
- Starbucks. The company has pledged to hire 25,000 S. military veterans and spouses by 2025 and has a mentorship program to represent black, indigenous and people of color (BIPOC) in more corporate, retail and manufacturing roles.
Would you love to integrate CSR into your ambitions as a corporate leader? You can learn more about how to think strategically and overcome the challenges of CSR in Bowling Green State University’s online MBA program, which strongly emphasizes CSR throughout the curriculum.
Learn more about Bowling Green State University’s online MBA program.