Corporate social responsibility

Broadly speaking, CSR is the commitment of corporations to behave ethically and to take care of their employees, the larger communities, and the environment. In order to be socially responsible, companies should make social, environmental, ethical, human rights, and consumer concerns a part of their core business operations. 

With regard to the environment, companies can take several actions to ensure that their conduct is ethical and responsible. For instance, they can plant a tree for each product sold, cut down on plastic use, or invest in renewable energy.

As far as communities are concerned, socially responsible companies often provide training opportunities for young people. They can also invest in cultural events or share resources to tackle diseases, as we have seen during the COVID-19 pandemic.

In the workplace too, socially responsible companies can take various initiatives, such as encouraging diversity or offering their employees opportunities for career growth and development.

Up until recent years, companies have regarded sustainability and social progress as obstacles to profitability, and they have tried to find a balance between CSR engagement and economic success. However, currently there is a growing awareness among companies that profitability and societal needs go hand in hand, and that they can be brought together in order to create shared value. This awareness comes from the observation that it is not just economic needs that define the markets, but also societal and environmental needs.

For companies, creating shared value involves reconciling these needs. For instance, when a company invests in a wellness programme, it reduces absenteeism and improves productivity. Another example: companies need healthy and stable communities in order to create a demand for their products. On the other hand, societal and environmental issues can result in costs and losses for companies. 

The belief that companies have a responsibility towards society has been around for a long time but, up until the 1950’s, it mainly referred to philanthropic activities. In this decade, however, large companies began to consider the societal impact of their decisions.

In the years that followed, several events pushed the CSR agenda forward. For instance, in 1969, a major oil spill in the Santa Barbara Channel, California, sparked massive protests against the pollution caused by corporations.

Unsurprisingly, the concept of corporate social responsibility became increasingly popular and widespread, so much so that it became difficult to clearly define it.

New governmental bodies were established, such as the Equal Employment Opportunity Commission and the Consumer Product Safety Commission.

In the 90’s, globalization meant that multinationals were dealing with business environments where labour rights and consumers’ rights were often unregulated.

In order to insert universal values into the markets, the United Nations Global Compact was launched. Its goal was to help companies adopt universal principles on environment, human rights, and working conditions, among others.

The European Commission also organised campaigns and initiatives to promote CSR among businesses. Examples of this commitment are the 2005 European Roadmap for Businesses – Towards a Competitive and Sustainable Enterprise, and the Enterprise 2020 Manifesto, in which the European Commission focuses on companies’ societal impact, environmental impact, and employee engagement.

The growing world population and the changing lifestyle have led to an unsustainable use of limited resources (e.g. free lands) and to the mismanagement of renewable resources, such as water. Therefore, the pressure on companies to step up and to reconcile societal and environmental needs with economic needs is increasing.

Several companies have begun engaging with the so-called “circular economy”, which involves finding innovative ways to reduce, reuse, and recycle products and resources. For example, the Australian company “Close the Loop” is using old printer cartridges and soft plastics to produce a higher-quality road surface.

Interest in CSR activities has been increasing in the past few years. A variety of stakeholders such as investors, customers, the media, and non-governmental organisations seek information about how committed companies are to social responsibility. For instance, customers want to know how companies treat suppliers or how much emissions and waste they produce.

CSR communication should be both comprehensible and honest since this type of information is not without consequences. Companies that appear to be transparent and to engage with CSR activities generate more trust in stakeholders. Customers, for example, are more loyal to these companies.

Companies have multiple channels at their disposal to communicate about their CSR activities. They can use full reports, social media accounts, their websites, or product packaging. Reports tend to be long and contain detailed information that is of interest to a variety of stakeholders. For example, investors rely on this detailed information before making investment decisions. Customers, on the other hand, tend to prefer CSR information in a summarised format, as found for instance on corporate websites and social media accounts.