Corporate Social Responsibility: Definition and Impact
Defining Corporate Social Responsibility (CSR)
Corporate Social Responsibility (CSR) can be defined as a way of managing companies based on taking responsibility for the impacts that their activity generates on their clients, employees, shareholders, local communities, the environment, and society in general. It’s a “balanced approach for organizations to address economic, social and environmental issues in a way that aims to benefit people, communities and society” (International Organization for Standardization).
Following the European Commission, CSR is ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’.
Today’s companies play a larger role than the purely economic. CSR implies the acceptance of a network of relations with social agents, society at large, and the environment, meaning that they are affected by the company’s decisions and therefore must be taken into account in the decision-making processes. It’s important for sustainability, competitiveness, and innovation.
The Origin of CSR
CSR was created mainly due to the failures of the process of globalization. CSR has helped reduce the negative impact of companies in general, and multinationals in particular, regarding social and labor rights, the environment, and human rights.
Core Principles and Elements of CSR
Key Principles of CSR
The core principles guiding Corporate Social Responsibility are:
- Legal Compliance: Accomplishing the law and regulations.
- Global and Integrated Scope: Being global and transversal across all operations.
- Ethics and Consistency: Operating ethically and coherently.
- Impact Management: Taking responsibility for and managing all generated impacts.
- Stakeholder Focus: Satisfaction of expectations and needs of stakeholders.
Essential Elements of CSR
The main elements that define CSR are:
- Company Engagement: Adding value to society.
- Voluntary Decision: Actions taken beyond legal requirements.
- Stakeholder Benefits: Focusing on the well-being of stakeholders.
- Ethical Behavior: Business conduct guided by ethical values.
- Adaptability: Adjusting to the reality of the societal and environmental context.
Benefits of Implementing CSR
Implementing CSR brings significant advantages, including:
- Increase worker productivity.
- Increase customer satisfaction.
- Improve company image and reputation.
- Decrease operational costs.
- Enhanced diversity, often resulting from legal compliance and ethical hiring.
It also brings benefits for risk management, cost savings, access to capital, customer relationships, and human resource management.
CSR and Stakeholder Management Strategy
How should CSR affect any company’s management strategy and the relations with its stakeholders?
Who are the Stakeholders?
All agents mentioned above are known as stakeholders. Examples include: employees, shareholders, government, communities, customers, suppliers, and the environment.
Edward R. Freeman defined stakeholders as ‘social groups, individuals or entities affected in any way by a given company’s existence and acting, with a legitimate (direct or indirect) interest in its progress; and at the same time they can affect the performance and survival possibilities of the company.’
What all these agents have in common is that they have demands towards the company, some of which are common to all (e.g., transparency, participation) and some that are specific. A socially responsible company will take all necessary measures to deal with its social impact, thus taking into account the interests of the various stakeholders.
The Role of Ethics and Responsibility
We can determine that a company has an economic responsibility: it must earn a return for its stockholders within the confines of the law. However, corporate social responsibility means that organizations also have ethical and societal responsibilities that go beyond their economic responsibilities.
CSR requires organizations to expand their understanding of their responsibilities to include other stakeholders such as employees, customers, suppliers, local communities, state governments, international organizations, and the environment. Ethics is a crucial component of individual and group behaviors at the heart of organizations’ responsibilities.