Corporate Social Responsibility
Benefiting Both Your Business and the Community
Today's societies often ask more from major corporations than simply making a profit and paying taxes.
There's a general expectation that companies should do their best to trade fairly, uphold human rights, and protect the environment. And the focus is not just on big corporations: small companies are often asked to support local causes and play their part in community development.
So, how can a business manage these expectations, but benefit its bottom line as well? A successful Corporate Social Responsibility (CSR) strategy can help.
No company exists by itself in a vacuum. Every business operates in society, whether on a global or local scale. Its impact and behavior – ethical, social, economic, and environmental – are open to examination and criticism, typically from politicians, the media, and other campaigners, as well as from its own customers.
Corporate history is full of examples of companies that have suffered commercially because they've behaved in ways that are unacceptable to the public. Clothing manufacturers have been damaged by the discovery of child labor in their supply chains, while oil companies have been charged with environmental damage and complicity with human rights abuses. And, of course, there have been many recent accusations (some devastating) that the financial houses of Wall Street and the City of London do not perform any "socially useful" activity.
These cases show the kinds of risk to reputation that can be associated with an organization's business activity. CSR helps manage such risk. It's not just about charitable giving or philanthropy. Effective CSR is about strategically positioning a company in society so that it can actually take advantage of public concerns, like poverty or global warming, rather than be damaged by them.
A company's CSR program needs to consider the social and environmental impact of the business. Of course, it must address the concerns of its most immediate stakeholders – including staff, customers, investors, and the community where the firm's offices or plants are based. At the same time, any CSR strategy also must look at the bigger picture, considering both backward and forward links in the business chain.
Looking backward, think about the company's suppliers and their subcontractors. What environmental standards and labor codes do they follow? Where do the raw materials come from? Are they from sustainable sources? And looking forward, what's the environmental impact of the distribution chain? Who can access the product, and who is denied the product? What is thrown away, and where does it go?
An organization's reputation is at stake at every stage of the production process. Many major corporations now have extensive CSR programs that look beyond the business basics to manage these risks not only successfully, but often profitably. The idea is that there's a benefit to both the company and the society in which it operates.
Elements of CSR
CSR programs typically have three main elements:
- Charitable giving – Many businesspeople have a sense of moral and social responsibility, and they want to support the disadvantaged through charitable giving. Although this is basically philanthropy, you can help develop your company's image by carefully selecting who receives your gifts.
- Community investment – Many organizations also see the advantage of developing local communities in ways that can bring real returns to the business. For example, a telecommunications provider might want to sponsor Internet access in schools. In practice, they're helping to create the right long-term social conditions for the business to succeed by improving their reputation among consumers and as an employer of choice in the area.
- Commercial initiatives – Carefully selected commercial initiatives can be very good for business, making a significant contribution to the bottom line. One possibility is working with a reputable charity on an issue that's relevant to your product, in a way that will be mutually beneficial. For example, a "Main Street" optician chain might support an initiative to improve eye care in the developing world. The idea of this "cause-related marketing" technique is to promote your brand and your reputation as a socially responsible company, with whom consumers will want to be associated.
What CSR Can Do for You
Clearly, CSR programs cost money and take some staff attention away from the organization's business. However, a good CSR program can bring you multiple business benefits, including the following:
- Improving your company's reputation, and its ability to manage reputational risks.
- Helping to promote your brand and image in an increasingly socially-aware and perceptive market place (this may be particularly important if your clients are public entities).
- Allowing you to create the right environment for your particular business to succeed.
- Giving you an effective way to manage the pressures on your organization for charitable giving. CSR allows you to make sure any charitable expenditure is effective and linked to business objectives, and that it can be properly accounted for, measured, and advertised.
- Improving your staff's motivation and retention rates, or broaden skill sets – for example, where your staff are directly involved in volunteering in the local community, or in other sponsorship activities.
CSR programs don't need to be, and shouldn't be, separated from your central business objectives. If done well, they can be a very real and measurable asset to a company – and they can help you understand, shape, and take advantage of the wider context in which your business operates.
CSR in Practice
What does a comprehensive CSR strategy look like? BT, the telecommunications company, has a community partnership program that's a good example. Essentially, BT's goal was to align the company with charitable causes that matched its business profile, so it would demonstrate its commitment to society while showcasing its technology.
BT set up, and continues to support, a confidential telephone line for vulnerable children, who can make free calls to discuss their concerns and get appropriate counseling. As part of the same initiative, the company sponsored a national "swimathon" event where the public could participate in raising money for the children's counseling service and selecting other young people's charities. Large numbers of people could get involved in the activity, so it had a big multiplier effect for the organization in terms of communicating the message that BT was socially committed.
In addition, BT combined its communication services for deaf people with sponsorship of sports events for the disabled. It also supported education programs that involve extending the use of videoconferencing and other new technologies to children with special needs.
The organization's workers were encouraged to volunteer at sporting activities for the disabled and to get involved with local schools. Company staff could receive grants to support their volunteering and fundraising efforts, and any money raised by them would be matched with an additional donation from company funds.
When the idea of CSR first emerged, organizations often didn't have an accurate picture of their total community involvement. Contributions were frequently unregistered, perhaps because they were made "in-kind" (donating goods instead of money – for example, giving old computers to a school or local charity), or because time devoted by staff was unrecorded, or because local offices made donations that were not recorded at headquarters.
These days, however, CSR initiatives are commonly measured as carefully as any other marketing or public relations spending. Many businesses devote considerable effort to gathering information on their CSR activities so they can more accurately report not just the inputs – money or staff time, for example – but also the end results or impact of a program. Once a company has a strong way of registering such output, it can identify and promote its CSR activities much more effectively.
There are several ways to measure CSR programs:
- Leverage – This is the amount of additional fundraising that your organization does for a particular cause. This could be as a result of sponsoring a charity's marketing campaign, or "matching" donations for a community project that's sponsored by a public program (where the government body matches funding from outside donors with funds of its own).
- Social impact – This could include measuring the number of people who benefit from an activity, whether directly (by participating in a program) or indirectly (due to the number of jobs created or additional facilities provided to a local community).
- Business benefits – This may cover things like evaluating improved brand recognition and business reputation, enhancing recruitment and retention, or increasing sales during a cause-related marketing campaign.
Some business performance models have been extended beyond the balance sheet to include measures of social and environmental impact. One example of this is the Triple Bottom Line. This combines measuring contributions toward ps People and Planet as well as Profit.
How Has the Global Recession Affected CSR?
The recession has proved to be a real test for CSR.
It's been a chance to find out whether it's just a "fair weather" pursuit, or something more integral to commercial success. Based on limited anecdotal evidence, after an initial slowdown in activity during late 2008, there may since have been a return to serious CSR reporting, engagement of stakeholders, and community involvement. While budgets may have largely survived, there's a greater focus on what programs actually achieve, for both the company and the community.
In effect, the recession has stimulated even more strategic and results-based CSR. Companies have questioned the validity of CSR, and the conclusion seems to be that it does make business sense.
Consumers are increasingly socially aware in outlook. Brand loyalty can be directly linked to how much a company is seen to support, rather than exploit, the community in which it operates.
A well-thought-out CSR strategy should not only address this kind of risk to reputation, but should also be linked to business objectives in a way that actually benefits the company. That way, everyone is happy!