DOING GOOD IS GOOD FOR BUSINESS.
What Is Corporate Social Responsibility?
Corporate social responsibility (CSR) refers to business decision-making based on ethical values, compliance with legal standards, and respect for communities, their citizens and environment. Business for Social Responsibility defines CSR as "operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business...a comprehensive set of policies, practices and programs that are integrated throughout business operations and business decision-making processes.
Some companies have established CSR initiatives as a reflection of their mission and business core values in response to emerging issues. Other companies have taken on CSR initiatives in response to constituent pressure in the form of consumer boycotts, government intervention and investor demands.
In the last 20 years alone, environmental issues, employment issues, and human rights issues have aroused stakeholder retaliation against businesses worldwide. In the 1980s, corporations with connections to Apartheid South Africa took a beating from many constituencies including investors and consumers. In the 1990s, concerns about sweatshop and fair labor practices yielded a similar pattern of stakeholder behaviors.
CSR has become an expectation of ethical business operations in the 21st century. Watchdog groups like Corporate Watch have made it their business to investigate CSR on an international level. Social research firms and investor groups like the Investor Responsibility Research Center and Kinder Lydenberg, Domini counsel investors and companies on making informed decisions concerning CSR activities.
Research studies indicate that both corporations and communities benefit from these initiatives in a symbiotic relationship. The results point to corporate citizenship as potentially fruitful practice not only for society as a whole but also for the morale and performance of the businesses.
For some corporations, social responsibility is built into the mission statement from its inception. Other corporations have developed and redesigned their mission and operations to include CSR components. Regardless of when CSR elements have been addressed, stakeholder relationships are a key concept in the development and implementation processes.
Stakeholders Are Affected by CSR
Corporations are expected to benefit financially from strengthening their relationships with key stakeholder groups. Growing evidence supports a social responsibility reporting process as a valuable tool in developing these relationships.
Consumers, investors, community members and potential employees are all seeking and demanding information on a corporation's social performance. In today's business environment, management cannot deny its obligations to its stakeholders.
While management and investors are concerned with the economic impacts of business operations, succeeding in business is about relationships. A growing body of empirical research demonstrates that CSR has a positive effect on business performance across key constituencies and business sectors.
As a stakeholder group, employees and potential employees are concerned about wages, benefits, health and safety of the work environment, training and advancement opportunities.
The results of a survey of job seekers in 2000 indicated that job seekers with high levels of job choice judged potential employers by their corporate social performance and used this factor in selecting employment opportunities.
Companies can use their corporate social responsibility track record to entice high-quality job applicants and to improve the morale of existing employees. Employees have better self-images if they are working for a company with a reputation for socially responsible behavior.
The community is a large and visible stakeholder group for any corporation. This group is often defined as local and global for large international corporations. Community concerns for CSR may include charitable giving, local employment, the environmental impact of the corporation's business activities, political activity and government regulatory compliance that affects the well-being of the community.
Some investors want to be associated with socially responsible corporations that are creating positive social change. More and more investors base their decisions on a company's social and environmental policies. Socially responsible investing today represents one out of every eight investment dollars in the U.S. and accounts for more than US$2 trillion in investment assets under management, reports the Social Investment Forum.
Consumers may be the most visible of the stakeholder groups. Their concerns about product performance, safety and contents, and advertising practices make news.
In CSR Europe's 2000 study of consumer attitudes toward CSR in 12 countries, 70 percent of the consumers surveyed said that a company's commitment to social responsibility is important to them when they make a decision about buying a product or service. One fifth of consumers responded that they would be willing to pay more for products that are socially and environmentally responsible. Two-thirds of the respondents indicated that they believe the responsibility for addressing social issues lies increasingly with large companies, as well as with governments. The CSR Europe study results indicate that European consumers want companies to demonstrate greater corporate citizenship.
According to a consumer survey in 2000 conducted in France, Germany and the U.S., French and German consumers appear more willing than their U.S. counterparts to actively support responsible businesses. U.S. consumers were found to value corporate economic responsibilities, whereas French and German consumers are more concerned about businesses conforming to legal and ethical standards.
As a stakeholder group, environmentalists often coalesce many of the other stakeholder groups defined above. Activists watch for corporate compliance with regulatory standards, emissions and use of hazardous materials, waste reduction and recycling program in the company, and environmentally friendly packaging.
Models far CSR
One view of global corporate social responsibility encompasses models of corporate philanthropy, corporate partnerships on social issues within communities and strategic business interest activities for business development purposes. Corporations today focus their community involvement in areas that draw on the resources and talents of their everyday business.
Corporate philanthropy activities may include organized volunteering, fund-raising events, cause-related marketing, social investments, and donated advertising. Most companies select corporate philanthropic activities based on their business expertise.
Companies that tend to be the largest givers are those that are achieving results in their communities and adding value to their corporate reputations. Pharmaceutical and high-tech companies make substantial product donations.
Corporate giving has been critical to the success of education, community development, health and human services, the arts and the environment. The largest single recipient of corporate giving in the U.S. is health and human services. This includes support for thousands of national and local agencies and access to health care services and disaster relief on a global scale. Companies also invest heavily in educational initiatives as a means of developing and recruiting a talented workforce.
Corporations are taking advantage of opportunities to generate public awareness with successful community partnerships. These corporate partnerships are links between the company and any or all sectors of society -- corporate, government, and civic. Through a partnership these sectors work together to benefit mutually and act strategically on an issue of local or global significance.
Corporate partnerships are becoming more popular as corporations develop a global infrastructure. Corporations with multinational locations find partnerships with non-governmental organizations an asset for dealing with stakeholder issues like decentralization, environmental decay, and income disparities. These partnerships are one effort to bring public and private interests together to resolve common social issues. Educational reform, welfare-to-work, school-to-work, and community and economic development are a few popular areas for partnerships.
Strategic Business Interest Activities
Many companies see good corporate citizenship as involvement of corporations in social arenas purely for strategic business development reasons. Although this may sound mercenary, it means corporations support issues or partnerships using their best resources and talents in a way that benefits the business bottom line and the community culture or environment.
A popular activity in this category is venture philanthropy. Modeled after venture capital investment, venture philanthropy tries to be for nonprofits what venture capital is for businesses by providing funds, strategy consultants, technology experts, and other needed talent to build a more effective organization.
Businesses and organizations like the Caux Round Table, an international organization of corporate executives, have developed sets of principles to help them consider CSR in everyday business practices.
Communicate and Report CSR
Today, measuring, communicating and reporting corporate social responsibility is the process by which corporations articulate their values and practices to key constituencies. Reporting on CSR activities affects an organization's financial bottom line as well as its reputation.
Companies need to communicate their CSR strategies effectively with all stakeholders, including the public and defined constituencies. Reporting on CSR initiatives must include company policies, current activities, outcomes and continued development of initiatives. CSR Europe, a business-to-business network organization concerned with CSR, has developed a matrix from which companies can benchmark CSR communication and reporting practices. The CSR Matrix includes data on 100 companies worldwide.
According to a report by Business for Social Responsibility, corporations can measure the effects of CSR initiatives in a number of ways: improved financial performance; reduced operating costs; enhanced image and reputation; increased sales and customer loyalty; increased productivity of employees and quality improvement; increased ability to attract and retain employees; reduced regulatory oversight; and increased access to capital and investors.
Some common means for communicating CSR to stakeholders include: information on product labeling; voluntary reports by the company; media coverage; internal communication strategies; information on company web site; compulsory governmental reporting, paid advertising, publicity of corporate mission and values and retail marketing materials.
A corporate social responsibility report can also serve as a risk-management tool for a corporation, providing the corporation with advance warning of potential challenges.
Aside from governmentally regulated compliance in areas including workplace health and safety, child labor, compensation, and discrimination, communicating and reporting CSR should also include social performance through policies, procedures, special programs, and specific data collection like focus groups and surveys with stakeholders. It is suggested that this type of data be disclosed in a company's annual report.
Just as corporations must disclose financial information as a cost of doing business, it is reasonable to hold them responsible for disclosing information on matters of importance to various stakeholder groups.
Tamara Gillis, Ed.D., ABC, is associate professor of communication at Elizabethtown College and is chairman of the IABC Research Foundation. Natasha Spring is director of the ABC Reserch Foundation.
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|Title Annotation:||corporate social responsibility|
|Date:||Oct 1, 2001|
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