What Is Corporate Social Responsibility?
Corporate social responsibility (CSR) is a management concept in which companies integrate social and environmental concerns into their business operations, from employing codes of conduct to applying various actions beyond those required by baseline laws, regulations, and trade rules.
By practicing corporate social responsibility, companies are more conscious of the impact they have on society and the environment and are taking the necessary steps to make a positive contribution.
For example, if a company operates in a country where there are no restrictions on imports they are free to import goods from any country they please. Say this company has the option of receiving imports from two countries: Country A and Country B.
While Country A may provide the imported goods at a lower price, they are known for mistreating and exploiting workers. Imports from Country B, on the other hand, are more expensive; however, they are more established and provide benefits for their workers. If the importing company prioritizes corporate social responsibility in their business approach, they would choose to import the more expensive but more responsibly-sourced goods from Country B.
Why Is Corporate Social Responsibility Good?
Besides creating goodwill, CSR can improve a corporation’s bottom line. These strategies help improve public perception and foster a positive attitude toward the company. This, in turn, improves consumer trust, company reputation, and brand sentiment.
When a company improves its corporate image, it can translate to increased sales, loyal customers, and increased interest in company stock. CSR efforts can also help build a buffer against scandals, rumors, and other events that may be damaging to a company’s reputation.
Why Is Corporate Social Responsibility Potentially Bad?
While there are many advantages to CSR, there are some critics who argue that it can harm the company’s bottom line. The general belief is that secondary processes, such as CSR, can distract from the expansion of profits and other practices that benefit the company.
Opposers to CSR believe corporations should have a responsibility to its shareholders first and foremost; in other words, the company’s priority should be to optimize operations to maximize profits only.
Approaches to Corporate Social Responsibility
- Engage in charitable endeavors – Multinational financial company Wells Fargo donates up to 1.5% of their revenue to various housing, disaster relief, and military-focused charities. Additionally, Wells Fargo employees are given two days of paid leave annually for volunteer work.
- Improve labor policies – The thought process behind improved labor policies is that the happier employees are, the better they will perform, and the lower turnover is likely to be. Netflix, for example, offers 52 weeks of parental leave for both parents. During that time, employees are free to return to work or resume paid leave at any time. In 2015, LinkedIn started offering employees unlimited vacation time.
- Implement environmentally friendly and sustainable business practices – Companies that show an interest in sustainability not only contribute to the environment but are also viewed in a positive light by the general public. Method, a cleaning product company, creates packaging for its dish and hand soaps using plastic recovered from the ocean. They also use renewable energy sources, such as wind and solar, to run their production plants.