Corporate social responsibility

Overview of CSR

Corporate Social Responsibility (CSR) is the term used to describe the "continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large."[82] The World Bank sees CSR as involved in areas such as community economic development, education, disaster relief, environmental protection, health promotion.[83] The European Commission defines CSR as "A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment; a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis".[84]

CSR is also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB) and corporate social performance.

Most research on CSR points out that it can mean different things to different societies across the world, but all are linked to the relationship that business has with wider society and the role it has in making the society better.[85] In the United States, CSR has followed a philanthropic model where companies make profits, unhindered except by fulfilling their duty to pay taxes, and then give a certain share of the profits to charitable causes. The European model is much more focused on encouraging, and occasionally legislating around, businesses to operate in a socially responsible way and invest in communities for solid business case reasons.

The European model [86] is seen as being more rigorous and sustainable than the US model due to the fact that it:

• Makes social responsibility an integral part of business success, which can enhance competitiveness
• Unlike in the US, during economic downturns or company difficulty, there is still pressure on the business to support its CSR actions, whereas in the US these are often cut.

Forms of CSR have been present in society since the turn of the twentieth century when companies like Kellogg's in the US expressed their commitment to the health of their own community and Cadbury in the UK has a strong history of philanthropy and social awareness in its development of Bourneville and community trusts. In the 1970s the term CSR started to be used as business identified stakeholders, in addition to shareholders, as those that it wanted to involve in some aspects of business decision. In recent times, companies such as ice cream manufacturers Ben & Jerry's and the Body Shop have led the way in defining ethical and campaign-driven marketing which has been as much about changing attitudes as it has been about selling products.

The 1990s raised awareness of issues like climate change and international poverty, and firmly placed CSR on the public radar. This increased attention, together with campaigns on organic food, the fair-trade movement and environmental sustainability, led to businesses starting to report out on CSR.  In addition annual awards and rankings around CSR and sustainability gained media attention, pressuring companies slower to act to up their involvement around community and environmental impact. Indeed, prior to the recent economic downturn some leading business thinkers [87] were proposing that CSR could become an additional aspect of the traditional "bottom-line" and success and failure be measured in the same way as financial aspects.

There is an ongoing debate on what the impact will be upon CSR during the current recession, as many fear that its progress came on the back of economic success. There are deterrents to businesses taking action around CSR, as some organisations have expressed fears of being found wanting if they set themselves up as being ethically conducted. Others struggle to demonstrate the value of such principles. Businesses have tended to see making the maximum amount of money and doing good as mutually exclusive alternatives.

However others argue that CSR makes economic sense, particularly given current legislation around environmental sustainability. Business in the Community (BITC) carried out research that shows that companies consistently running their business according to responsible principles outperformed the FTSE 350 on total shareholder return between 2002 and 2007 by between 3.3 per cent and 7.7 per cent per year. Many Businesses have benefited from increased reputation as a result of the work they have done in this area, resulting in improved customer trust and staff loyalty. In another recent development both the FTSE and Dow Jones operate stock market indices that rank businesses according to various responsible business criteria.

In 2004 the "CSRNETWORK" a leading CSR consultancy organisation published their "10 benefits of engaging in CSR", with strong evidence for each statement. The 10 were:

• Increased profit
• Reduced operating costs
• Increased operational efficiency
• Enhanced brand image and reputation
• Increased sales and customer loyalty
• Increased productivity
• Increased quality
• Increased ability to attract and retain employees
• Reduced regulatory oversight
• 'Keeping up' with the market [88]

 

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