Corporate Social Responsibility

 

Intro

“ Corporate social responsibility is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public”.¹ There are various benefits that companies will reap by being socially responsible, however, the main ones are that they are likely to have a better brand image (which in turn will increase revenue and the number of investors) and that they are more likely to avoid legal action or government intervention. Some more general benefits of companies being socially responsible are shown in the graph. This article will focus more on how a company's social responsibility will affect society and the local areas where the business operates, as opposed to the businesses themselves, however, it is important to note that social responsibility does also benefit the company. From here on out corporate social responsibility will be referred to as CSR.

Section 1

Types of social responsibility

The first type, and arguably the most current and important, of social responsibility that a business will take into consideration is the environment. This does not only include the local area the business is operating but the entire world. Companies will/ should try to limit the impact their operations have on the environment. This is because there has been an increased concern towards global environmental issues such as pollution and climate change. Issues such as global warming affect the whole population, living and future, as they cannot be reversed and generations 200 years from now will be affected by actions committed by large companies today. A short-term lens cannot be used as any cost-cutting, swift solutions to problems could have huge implications on the environment which cannot be undone and, unfortunately, due to the gravity of the situation mistakes cannot be made. An example of a company that is actively taking environmental concerns into account and adapting its business model is the outdoor clothing brand Patagonia. They are doing this in many ways, for example using recycled materials to manufacture their clothes; creating long-lasting, high-quality products to reject fast fashion; they also operate a repair shop to prevent waste.

The second branch of social responsibility is whether the company is ethical or not. “Ethical responsibilities are self-enforced initiatives that a company puts in place because they believe it is the morally correct thing to do rather than out of any obligation. Businesses consider how stakeholders will be affected by their activity and work to have the most positive impact.”² The brand Starbucks is known for being a very ethical company due to the fact they pay their coffee bean farmers fair prices and don’t rip them off as they are a giant, international corporation. Furthermore, when coffee prices fell drastically in 2018, Starbucks donated $20 million to the small coffee farmers as they knew this price decrease would negatively affect one of their key stakeholders. Being an ethical company doesn’t mean abiding by the law or any trade rules, it's going beyond them and doing things that will benefit anyone that is affected by the company’s actions. For example, paying someone minimum wage would not be considered ethical as the company, by law, must do that but paying someone minimum wage and putting them through an educational/ training course that will benefit them would be.

The last type of social responsibility that this essay will address is philanthropy. This is where companies will go above and beyond to help society, it is a step up from ethical social responsibility. Examples of how businesses can be philanthropic would be donating some of their revenue to charity or investing in the local area. Coca-Cola is considered a philanthropic brand as in 2015 they gave back $117.3 million, with that money being focused on “economic empowerment and entrepreneurial development of women; the education and youth development of local communities across the globe; and access to and the conservation of clean drinking water in deprived areas.”³

As stated above, ethical and philanthropic social responsibility is not required, it’s an active choice the company will make to help its stakeholders. A popular model that showcases CSR was created by Carroll in 1991, where the pyramid provides a building block system for corporations to improve on their social responsibility. The pyramid can be seen to the right.

Section 2

How being socially responsible benefits society

There are many ways that companies can benefit society by being socially responsible, these can be seen in the graph below. This essay will focus on natural environment protection and economic development.

 

It is inevitable that companies' actions will have an impact on the environment around them, however, there are ways this impact can be minimised. If companies actively try to limit their environmental impact, it not only will help against issues like global warming, but it will help maintain the relationship with the local people in which the company is operating. For example, in the paper industry a socially responsible company, such as International Paper, will only use wood fibre from sustainable sources. This means that they will not use wood that has been derived from illegal logging, furthermore, any tree that is felled will be replaced with a new seed that will eventually grow into a mature tree. Many paper companies will also recycle and reuse materials as well as, as far as they can, use renewable energy in the manufacturing processes. The CSR systems implemented by the paper industry not only reduce the carbon footprint but protect valuable habitats which benefits society as a whole. They also show respect for the people in close proximity as they are not wastefully using their resources, which will allow the company to continue operations there. It seems backwards that an international company can enter a country and leave them in a worse off position when it's their resources that are being depleted.

The second way CSR can benefit society, that this article will cover, is the potential for economic development in the country/ area. Economic development is an umbrella term for many benefits as economic development not only brings more money into the area, but it can also lead to new skills being developed, new infrastructure, and an increased standard of living and quality of life. Usually, the companies operating in less economically developed, small countries will be international, multimillion/ billion-dollar companies. This means that they have the resources and skills to help improve the local community which will lead to economic development, this can be done through training and subsequently hiring a local workforce, investing in the area (for example in local projects or local infrastructure) or offering volunteering services to the disadvantaged people in the area.

Conclusion

In conclusion, this essay has aimed to describe what corporate social responsibility (CSR) is and provided modern-day examples of businesses that have adapted their models to incorporate it. CSR is becoming an increasingly popular model for businesses to adapt due to the many benefits it provides both to the business itself as well as the local and global society.

1 (Jackson, 2021)

2 ibid

3 (CareerAddict, 2018)