Corporate Social Responsibility Explained: What It Is & Why It Matters

As consumers have become more aware and educated on social issues like global warming and unethical labor practices, they have begun demanding businesses institute policies that benefit all of society rather than just the business’ bottom line.

So, what happens if companies don’t practice corporate social responsibility? Simply put, consumers will take their money and business to a company that does.

What is Corporate Social Responsibility?

Corporate social responsibility (CSR) refers to business initiatives that benefit society. These initiatives fall into three categories, often called the triple bottom line, that include: social, environmental, and economic.

At first, many businesses didn’t take corporate social responsibility seriously, or at least pretended to when it came to the environment in what’s known now as greenwashing.

Why Corporate Social Responsibility Matters

While it was widely held in previous decades that companies should only focus on their bottom lines, the past decade has seen a change in this thinking.

Corporate Social Responsibility improves customer loyalty

In fact, 66% of online consumers said they would pay more for products or services from companies that are socially and environmentally responsible, according to a 2015 Nielsen survey. That same survey also found that consumer goods brands with a commitment to sustainability outperform those that don’t.

Corporate Social Responsibility attracts top talent

Besides the potential loss of socially conscious consumers, CSR impacts a business’s ability to attract top talent and affects employees’ job satisfaction levels and retention rates.

The next generation of workers currently entering the workforce seek out employers with a clear and effective CSR strategy.

Corporate Social Responsibility improves employee retention

Quality talent in 2016 wants to be employed by a transparent company with the goal of doing good, while also making a profit. Businesses that don’t prioritize a corporate social responsibility strategy risk losing top talent to companies that are doing so.

Additionally, businesses that practice CSR have happier and more satisfied employees. This is because employees feel working for a socially conscious employer gives them a sense of purpose. Also, businesses practicing corporate social responsibility tend to invest more in their employees and work harder to create a workplace that employees enjoy returning to each day. 

Given that the current average in the U.S. for employee tenure is 4.2 years, implementing an expansive and effective CSR strategy can help employers retain their current employees for longer.

Corporate Social Responsibility boosts brand reputation

The rise of social media has also impacted the importance of corporate social responsibility. Today, companies with unethical business practices are exposed harshly on social media and can have their reputation damaged greatly in a matter of a few hours.

Alternatively, social media also works as a tool to highlight companies implementing CSR or those with ethical business models, which can lead to increased sales, a larger audience reach, and free positive publicity.

5 different types of Corporate Social Responsibility to practice

Different types of Corporate Social Responsibility to practice include environmental responsibility, ethical responsibility, and economic responsibility.

1. Environmental Responsibility

Companies can adopt several sustainable business practices, including reducing waste, conserving energy, utilizing renewable resources, and minimizing the environmental footprint of production and operations.

These green initiatives enhance a company’s brand image by showcasing a commitment to environmental stewardship. They also lead to cost reductions over time through more efficient resource use and compliance with environmental regulations.

Furthermore, such practices can significantly contribute to a company’s competitiveness in the market by aligning with the growing consumer demand for eco-friendly products and services.

2. Ethical Responsibility

Ethical responsibility encompasses ensuring hiring fairness, maintaining operations transparency, and upholding integrity in business dealings.

It also involves enforcing ethical labor practices to prevent exploitation and providing employees a safe, respectful work environment.

These practices build stakeholders’ trust, help prevent legal issues, and significantly improve employee morale and retention.

3. Philanthropic Responsibility

Philanthropic responsibility involves participating in acts of charity, such as donating money, products, or services to various social causes and volunteering and investing in community development projects.

Engaging in these activities strengthens the ties between the company and the community and enhances the company’s image as a socially responsible entity.

Not only that, but such philanthropic practices boost employee engagement and instill a sense of pride among workers by contributing to a greater good beyond the confines of the company.

4. Economic Responsibility

Economic responsibility is about operating the business profitably while making strategic decisions that contribute to the long-term economic benefit not only for the shareholders but also for the stakeholders involved, such as employees, customers, and suppliers.

This encompasses investments in employee development, fostering innovation, and supporting sustainable business practices.

The benefits of adhering to this responsibility include ensuring the company’s sustainability, supporting local economies, and creating valuable job opportunities.

5. Legal Responsibility

Legal responsibility in corporate social responsibility entails adhering to all local, national, and international laws and regulations that govern business operations.

This includes strict compliance with labor laws, anti-corruption laws, and regulatory requirements.

Adhering to these legal standards helps companies avoid legal penalties and fines, maintain a good standing in the industry, and provide a solid foundation for fulfilling ethical and economic responsibilities.

Successful Corporate Social Responsibility Examples

Major companies like Ben & Jerry’s, Target, and Google have successfully implemented CSR strategies that have not only positively impact their brand awareness but have also resulted in millions of dollars being donated to worthy causes.

Ben & Jerry’s Corporate Social Responsibility Policy

This Vermont-based brand is well-known for its corporate social responsibility. In fact, it’s a cornerstone of how this company operates.

In addition to speaking out and creating various flavors around social issues, the company has a history of proven social responsibility dating back to 1985 when it established the Ben & Jerry’s Foundation.

The brand uses only fair trade ingredients and also developed a sustainability program for dairy farms in Vermont.

This is a great example of a business that is prioritizing environmental and social issues, while also donating to various additional charities, organizations, and movements.

Target Corporate Social Responsibility Policy

Many critics of CSR claim a major corporation cannot afford to prioritize social or environmental justice while still being profitable, but Target clearly proves this wrong.

The massive company has worked since 1946 to provide local and environmental support to the communities its stores are located in.

Along with implementing sustainable business practices, Target also organizes and donates to various charity campaigns and initiatives. Since 2010, the company has donated more than $875 million to the area of education alone.

Target also made headlines this year for social justice when they came out with their pro-transgender bathroom policy, which was and still is a divisive issue across the U.S. Showing consumers they are not afraid to take a stand for what’s right.

Google Corporate Social Responsibility Policy

Despite being one of the largest corporations in the world, Google is an excellent example of a business that is constantly working for the betterment of society.

In addition to various other CSR initiatives, the company has implemented a widely successful environmental policy called Google Green, which is a corporate effort to use resources more efficiently and support renewable energy sources.

It has led to an overall reduction in power requirements for their data centers by 50 percent.

Looking Ahead at the Impact of CSR

Consumers want to do business with a company they can trust. Due to this, it’s now commonplace for a business to have a sustainability report and various CSR initiatives in place.

In order to remain competitive in today’s marketplace, which is only growing more interwoven with social and environmental issues, businesses must practice corporate social responsibility.

Those that don’t will be unable to attract or retain top talent, continue to experience decreased sales, and risk going viral for all the wrong reasons on social media leading to a damaged reputation.

If your business has an effective corporate social responsibility strategy in place, but are unsure how to best market it to consumers in order to generate more sales, contact Mondo today. We’ll match you with the digital marketing and social media marketing talent you’re missing.

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