Corporate Social Responsibility (CSR) is defined as the voluntary activities undertaken by a company to operate in an economic, social and environmentally sustainable manner. The Government of Canada understands that responsible corporate behavior by Canadian companies operating internationally not only enhances their chances for business success but can also contribute to broad-based economic benefits for the countries in which they are active and for Canada. Investing and operating responsibly also plays an important role in promoting Canadian values internationally and contributes to the sustainable development of communities. The Government of Canada is therefore committed to promoting responsible business practices; and expects and encourages Canadian companies working internationally to respect all applicable laws and international standards, to operate transparently and in consultation with host governments and local communities, and to conduct their activities in a socially and environmentally responsible manner.
Importance of CSR in Business
When companies operate in an economically, socially and environmentally responsible manner, and they do so transparently, it helps them succeed, in particular through encouraging shared value and social license. Management and mitigation of social and environmental risk factors are increasingly important for business success abroad, as the costs to companies of losing that social license, both in terms of share price and the bottom line may be significant.
As Canadian firms take advantage of global opportunities, there is an increasing understanding that incorporation of responsible business practices into investments and operations abroad not only benefits the local economies and communities, but makes good business sense.
Type of Corporate social responsibility
There are mainly four type of corporate social responsibility:-
- Economic Responsibilities:- A company’s first responsibility is its economic responsibility that is to say; a company needs to be primarily concerned with turning a profit. This is for the simple fact that if a company does not make money, it won’t last, employees will lose jobs and the company won’t even is able to think about taking care of its social responsibilities. Before a company thinks about being a good corporate citizen, it first needs to make sure that it can be profitable.
- Legal Responsibilities:- A company’s legal responsibilities are the requirements that are placed on it by the law. Next to ensuring that company is profitable, ensuring that it obeys all laws is the most important responsibility, according to the theory of corporate social responsibility. Legal responsibilities can range from securities regulations to labor law, environmental law and even criminal law.
- Ethical Responsibilities:- Economic and legal responsibilities are the two big obligations of a company. After a company has met these basic requirements, a company can concern itself with ethical responsibilities. Ethical responsibilities are responsibilities that a company puts on itself because its owners believe it’s the right thing to do not because they have an obligation to do so. Ethical responsibilities could include being environmentally friendly, paying fair wages or refusing to do business with oppressive countries.
- Philanthropic Responsibilities:- If a company is able to meet all of its other responsibilities, it can begin meeting philanthropic responsibilities. Philanthropic responsibilities are responsibilities that go above and beyond what is simply required or what the company believes is right. They involve making an effort to benefit society — for example, by donating services to community organizations, engaging in projects to aid the environment or donating money to charitable causes.
Potential business benefits
The following benefits from the Corporate social responsibility are mentioned below:-
- Triple bottom line:- “People, planet and profit”, also known as the triple bottom line form one way to evaluate CSR. “People” refers to fair labor practices, the community and region where the business operates. “Planet” refers to sustainable environmental practices. Profit is the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital (unlike accounting definitions of profit). This measure was claimed to help some companies be more conscious of their social and moral responsibilities. However, critics claim that it is selective and substitutes a company’s perspective for that of the community. Another criticism is about the absence of a standard auditing procedure.
- Human resources:- A CSR program can be an aid to recruitment and retention, particularly within the competitive graduate student market. Potential recruits often consider a firm’s CSR policy. CSR can also help improve the perception of accompany among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering. CSR has been credited with encouraging customer orientation among customer-facing employees.
- Risk management:- Managing risk is an important executive responsibility. Reputations that take decades to build up can be ruined in hours through corruption scandals or environmental accidents. These draw unwanted attention from regulators, courts, governments and media. CSR can limit these risks.
- Brand differentiation:- CSR can help build customer loyalty based on distinctive ethical values. Some companies use their commitment to CSR as their primary positioning tool, e.g., some companies use CSR methodologies as a strategic tactic to gain public support for their presence in global markets, helping them sustain a competitive advantage by using their social contributions as another form of advertising.
- Reduced scrutiny:- Corporations are keen to avoid interference in their business through taxation and/or regulations. A CSR program can persuade governments and the public that a company takes health and safety, diversity and the environment seriously, reducing the likelihood that company practices will be closely monitored.
- Supplier relations:- Appropriate CSR programs can increase the attractiveness of supplier firms to potential customer corporations. E.g., a fashion merchandiser may find value in an overseas manufacturer that uses CSR to establish a positive image and to reduce the risks of bad publicity from uncovered misbehavior.
Steps to conducting the CSR
Step 1: Conceive and Initiate
A corporate social responsibility program is never one-size-fits-all. While crafting a program, it is important to keep the Three Pillars of Sustainability in the forefront: People, Planet and Profit. Create opportunities and multiple ways for employees and other stakeholders to engage with the program. Incorporate opportunities across a wide spectrum of engagement that include volunteer days, traditional giving, recycling events, peer to peer fundraising, and disaster assistance. Consider taking your CSR program a step further and incorporate cause marketing into the program. Integrate your company’s products within the program, and take this as an opportunity to initiate commitments to supply chains and production processes. Consider where and how
it makes sense for your company to make a socially responsible and environmentally impactful investments and how to involve your company’s employees and leadership in that investment.
Step 2: Commit and Implement
Once the concept and details of the CSR program have been determined, it’s up to you to prove its value in terms of triple bottom line results for your company. This requires assessing and measuring your program’s impact. Develop a link between your social responsibility program and your company’s business results. How does your cause driven program impact your company’s sales, customer satisfaction, employee and brand loyalty, and market access? Prove that your program positively impacts the company reputation and the overall profitability. Track, measure, and communicate the impact that your program is making on the social, environmental, and economic factors.
Step 3: Communicate and inspire
For any corporate program to succeed, the program needs endorsement and acceptance from the top management. A corporate social responsibility program is no different. Communicating the impact and successes of your program to the top levels of your organization is critical. Communicate frequently about the program’s progress and accomplishments, and also be sure to convey the program’s impact to the company’s triple bottom line. Convince leadership to inspire employees and other stakeholders to make “cause” a priority, and encourage employees to participate and get each other involved. Track and share program outcomes and impact with employees, customers, community members, and program beneficiaries to build program recognition, loyalty, and momentum. The success of the program is all about inspiration and participation.