Published: 22 December 2023
Contributors: Amanda McGrath, Alexandra Jonker
Corporate social responsibility (CSR) is the idea that businesses should operate according to principles and policies that make a positive impact on society and the environment.
Through CSR, companies make decisions driven by financial gain and profitability, and the impact of their actions on their communities and the world at large. CSR goes beyond legal obligations: by voluntarily adopting ethical, sustainable and responsible business practices, companies seek to deliver benefits to consumers, shareholders, employees and society.
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Often, a company’s business model and practices are built around financial goals. However, CSR programs encourage business leaders to consider corporate citizenship or the larger impact of the business on society when making decisions. Corporate social responsibility helps companies ensure that their operations are ethical, safe and delivering positive impact wherever possible. Through CSR initiatives, companies work to limit environmental impact, contribute to solving societal problems (such as poverty and inequality) and ensure their brand identity reflects their values.
The theory of the “triple bottom line” can help organizations as they pursue corporate social responsibility. As a financial framework, the triple bottom line refers to the idea that a company’s business model should revolve around the three P’s: people, planet and profit. By maximizing all three, a company aims to make a positive impact on the world and remove barriers to growth.
Corporate social responsibility initiatives generally fall into four categories: environmental, ethical, philanthropic and economic. Each type of CSR contributes to a company’s overall CSR strategy.
More companies are assessing their overall environmental impact and engaging in CSR efforts that aim to protect natural resources and minimize any contribution to climate change. CSR encourages sustainability in business through eco-friendly practices, such as by reducing energy consumption, using renewable resources and minimizing waste.
Environmental responsibility hinges on eliminating negative impacts of business operations (primarily through limiting pollution-causing activities) as well as offsetting them through actions such as planting trees and engaging in programs that support biodiversity.
CSR initiatives often focus on social impact and human rights concerns, such as ensuring fair wages, safe working conditions and proper treatment of employees and suppliers. They also encourage accountability both internally and externally. Ethical CSR may include abiding by fair labor practices, ending workplace discrimination and ensuring supply chain transparency.
CSR practices include donating money, resources or time to positive causes and organizations, such as local and national charities, educational programs, disaster relief and more. Businesses who adopt philanthropic CSR engage with the communities where they operate, offering support through volunteer work, sponsoring local events, making contributions to local nonprofits or supporting skills training programs.
Corporate social responsibility involves ensuring that money is not a company’s sole motivator. To demonstrate this, companies enact policies and procedures to make sure their choices align with values, even if the alternatives may save money or boost profitability. Economic CSR also includes efforts to support the economic development and growth of the communities in which a business operates—for example, supporting job training and job creation efforts and forging local partnerships.
The benefits of CSR include:
CSR can have a positive impact on an organization’s brand identity as well as its bottom line. Some CSR efforts, such as improving energy efficiency, can reduce operating costs and might lead to savings in the end. Consumers increasingly prefer brands that share their values, and CSR policies offer ways for organizations to demonstrate those values, building trust and loyalty to fuel a competitive advantage.
CSR can also help attract top talent and drive employee engagement and retention, as more workers seek employers whose values align with their own. Additionally, a proactive approach to ethical and social issues has the potential to prevent legal problems, fines and reputational damage.
CSR initiatives can help people become more responsible consumers, making it easier for them to access products and services that align with their values and educating them on issues of sustainability and ethical consumption. It can encourage companies to prioritize and invest in testing, quality control and safety measures. CSR can also minimize the likelihood of defective or harmful products reaching consumers.
CSR can have a positive impact on the overall health of the planet, as it encourages environmental responsibility and sustainable practices. CSR initiatives can help companies reduce their greenhouse gas emissions or pursue net-zero emissions goals that are key to slowing climate change. They might also help conserve natural resources, reduce pollution and limit disruption of ecosystems. Additionally, a focus on CSR can support investment in research and development of eco-friendly products and practices.
Corporate social responsibility can help support local communities and address societal issues, such as poverty, inequality and environmental concerns. CSR initiatives can fuel economic growth by creating jobs. They can also shape public opinion as companies leading the way inspire others to follow suit, creating a positive ripple effect. A focus on ethical behavior at the corporate level reinforces a broader norm of ethical behavior across other parts of society.
Consumers are increasingly seeking products and services from socially responsible companies. Meanwhile, many investors are prioritizing companies whose values are clear and aligned with their own. To meet these demands, businesses are integrating CSR into their operations. In addition, global expansion and the increasingly interconnected nature of supply chains pushes companies to comply with a growing web of regulatory environments and to better confront the impact of their business on communities around the world.
With increased awareness of environmental issues, labor practices and ethical concerns, combined with better research and communication, CSR is now more central to business strategies. Some companies even have dedicated CSR departments.
Examples of CSR include:
- Donating a percentage of profits to environmental or social causes
- Committing to using recycled and eco-friendly materials
- Sourcing fair-trade materials and ingredients
- Engaging in social activism or fundraising on behalf of social causes
- Using technology such as artificial intelligence (AI) to drive energy efficiency and reduce carbon footprints
- Creating programs for the ethical use and disposal of products, such as electronics recycling programs
- Instituting diversity, equity and inclusion (DEI) programs that support efforts to diversify and grow the workforce in new ways
- Supporting programs that replenish the natural resources, such as water or timber, used for production
- Turning to renewable energy sources and other strategies that help in the pursuit of net-zero or carbon-neutral goals
- Establishing employee well-being programs that support their physical and mental health
Corporate social responsibility is the overall ethos that drives a company to adopt policies and practices that support sustainability, societal and other ethical ends. Environmental, social and governance (ESG) is about the ways in which their impact is measured or quantified. While both CSR and ESG are about reflecting the company’s values, CSR is typically seen as more of an internal framework, while ESG frameworks are often used externally as a way of demonstrating real-world impact.
Because the parameters of corporate social responsibility are continually evolving, there is no single standard by which CSR initiatives are measured or governed. Companies that embrace CSR are guided by local and international laws, including environmental regulations, labor rules and consumer protection standards.
Some efforts are also held to industry-specific standards; for example, the Global Reporting Initiative (GRI) provides reporting standards for sustainability. Organizations like the United Nations have introduced global guidance, such as the Sustainable Development Goals (SDGs), which encourage businesses to adopt sustainable practices.
Many companies that embrace CSR will also engage in CSR reporting, through which they document performance of non-financial metrics and provide transparency on social and environmental impact. CSR reporting is typically voluntary; however, some jurisdictions mandate that large organizations disclose social and environmental performance, so that investors and consumers can assess CSR efforts.
Some organizations have designated corporate social responsibility teams that oversee a company's CSR activities. People on these teams plan and run the social and environmental programs that align with the company's values and goals. They work with company leadership to devise the overall CSR strategy and engage stakeholders, including employees, customers, investors and community partners, to help them succeed. They also typically track and report on their progress by using metrics and other methods of assessment, deal with compliance and regulatory issues and manage communication about the company’s CSR efforts both internally and externally.
CSR reporting is the practice of reporting an organization’s performance of non-financial metrics, providing transparency on the organization’s impact on society and the environment.
Net zero is the point at which greenhouse gases emitted into the atmosphere are balanced by an equivalent amount removed from the atmosphere.
The goal of the CRSD is to provide transparency that will help stakeholders better evaluate EU companies’ sustainability performance as well as the related business impacts and risks.
The triple bottom line (TBL) is a sustainability framework that revolves around the three P’s: people, planet and profit.
Sustainability in business refers to a company's strategy and actions to eliminate the adverse environmental and social impacts caused by business operations.
Decarbonization is a method of climate change mitigation that reduces greenhouse gas (GHG) emissions, as well as removes them from the atmosphere.