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What is corporate social responsibility (CSR)?

What is corporate social responsibility (CSR) and why is it important?

Why do businesses exist? For many years people believed that the existence of a corporation was unique to have profit. These days are long gone. In today’s world, companies need a purpose. But both of these things can, for sure, be achieved together. To be able to sell and make a profit, companies need to care enough about their clients to have an excellent product to offer. They also need to treat people well; otherwise, clients will not come back. And now, companies also have to care about the things their clients care the most about. In this scenario, the term Corporate Social Responsibility (CSR) was born.

Milton Friedman, a renowned American economist, was quoted by the New York Times Magazine when he said:

“There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

Many people use this quote as proof that corporations are only after profit and nothing else. Truth is that profit is not the end goal. The real goal of corporations is to enchant clients, to make products that transform their lives for the better, and to serve a bigger purpose.

Of course, corporations know that holding themselves accountable for their social and environmental impact will lead to a closer relationship with their clients, employees, shareholders, and communities. It is undeniable that nowadays, businesses need to gain profit in a way that meets the needs of their stakeholders. This is the only way to keep the business viable in the long run.

Corporate social Responsibility (CSR) strategy importance

Now that you have understood the importance of giving back to society, another question might pop up in your mind: how to create a CSR strategy that connects with your core business and is effective for both society and your corporation. 

When it comes to CSR strategies, there are two different types. The first one is known as the out of business strategy. This strategy is usually is more philanthropic-oriented, and many times it funds projects in education, healthcare, environmental protection. There are many corporations, mainly in the United States that have created foundations to use this type of strategy. In this case, the core business and the projects funded are not related and are done sporadically. 

The second one is a strategy that is integrated into the core business of the company. This means that the corporation will follow its social responsibility guideline across every single activity: a healthy work environment for its employees, the use of environmental-friendly products, utilization of sustainable development, and others. When this CSR strategy is used, the corporate responsibility developed finds its place in a continuum between symbolic actions and global actions.  

Connecting your CSR activities with your core business is indeed a great way of creating a corporate social responsibility strategy. As a matter of fact, the ISO 26000 certification argues that social responsibility only truly happens when corporations are accountable for their actions in the whole business cycle. The document defines it as “responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that: contributes to sustainable development, including health and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behavior; is integrated throughout the organization and practiced in its relationships.” 

The document also points out principles that should be kept in mind when creating a CSR strategy: accountability, transparency, ethical behavior, and respect for stakeholder interests. Such principles should guide corporations within their projects internally and externally. 

But you might be wondering: in practice, how to create a CSR plan from scratch? To do so, you can take five basic steps. First, think about the mission of your corporation. What is its ultimate goal? The second step is to find causes that catch up with that mission. In the third phase, you will implement programs or support organisations that are aligned with those causes. Evaluating the effectiveness and the return on investment of your CSR activities should be the fourth step. Lastly, you should think of additional ways to expand the reach of your CSR projects. 

Another essential point that you should address in your CSR strategy is the key performance indicator or KPIs. Some of the KPI you can use to measure the success of your CSR activities are: number of foundations supported, number of hours volunteered by employees, amount used to fund social and economic projects, number of people directly impacted, countries or regions where social projects took place, etc. 

 As mentioned above, reporting is also a vital point of the CSR strategy. This is the moment in which you will be able to evaluate the impact of your corporation’s activities. In this way, you can measure and improve your operations to have a more efficient CSR strategy. Furthermore, the report is an important PR tool and an instrument to influence other organisations also to give back to society. 

Corporate social responsibility importance in practice

Costco’s former CFO Richard Galante once mentioned how a corporation can benefit from being socially responsible. According to him, from the day one, the company runs the business with the philosophy that: if they pay better than average; have a positive work environment and good benefits; they would be able to hire better people. These employees will also stay longer and be more efficient. In the end, the mindset of providing a pleasant work environment and quality of life to its employees brings benefits to both the community and the corporation itself.

And that is the great learning we should take from CSR. It is a win-win movement, after all, being good is a driver of business. Corporations can and should help communities while achieving continuous growth. Many companies, such as MichelinJohnson & Johnson, and L’Oreal, have been proving that in order to consolidate with high profitability does not have to come at the expense of society.