CSR is a way to ensure that economic development and technological progress benefit the greatest number of people. But simply committing to reduce CO emissions and improving labour policies are no longer enough. The gap between corporations and local communities has been way too big for way too long, and the need of having an ecosystem in which all parties of the society easily connect is undeniable. This is why the corporate social responsibility business model was created.
The importance of having a CSR game plan
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 about the most. 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. The 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 to 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 its stakeholders. This is the only way to keep the business viable in the long run.
CSR in practice
Costco’s former CFO Richard Galante once mentioned how a corporation could benefit from being socially responsible. According to him, from day one, the company runs the business with the philosophy that: if they pay better than average; have a positive work environment and excellent 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 excellent 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 Michelin, Johnson & 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.
The triple bottom line business model
The triple bottom line is a business model that the British author John Brett Elkington created to explain how multi-dimensional the responsibility of corporations can be. According to Elkington’s model, a company should not base its targets purely on profit anymore.
He advocates that every corporation should measure its performance based on profit, people and planet. This means that a company can be only considered successful once it provides a financial, social and environmental return.
Of course, everyone is familiar with the importance of measuring the profit of their business. For many years, companies which are considered successful usually are profit-maximisers. But many still struggle to understand the importance of the two other lines of the model: planet and people.
The “planet” part of the model measures the impact of business on the environment, such as emissions and the use of sustainable inputs. Meanwhile, the “people” line of the model concerns the extent to which businesses are socially responsible. This last part of the triple bottom line model can be somewhat subjective and hard to calculate.
This model has been encouraging corporations to think beyond profit as the unique way of measuring performance. Businesses from different parts of the world have left behind such a narrow way of calculating their success. To do so, many have been using tools such as Optimy that support the measurement of environmental and social impact.
How to create a CSR strategy
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 which 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, utilisation 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 organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour 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 behaviour; is integrated throughout the organisation and practised in its relationships.”
The document also points out principles that should be kept in mind when creating a CSR strategy: accountability, transparency, ethical behaviour, 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.
How to avoid fraud
Once you have a CSR strategy in place, some policies and procedures should be followed to avoid fraud. Besides creating a document that gives specific instructions on how to carry tasks, it is also essential to take other measures.
The first step to avoiding fraudulent grant and sponsorship proposals is to check with the taxes authorities of your country if the organisation requesting funds has ever been blacklisted before.
Appointing someone to lead each project is also one of the ways to avoid fraud. This person should be responsible for overseeing data and verifying documentation. Additionally, asking for the right documentation is essential. Therefore, having a standardised grant request procedure can help not only on the decision-making process, but it can also avoid fraudulent requests.
CSR and technology
In this era of increasing internet penetration and growing social network, is inevitable the alignment of technology and CSR. Embracing digital technology has become vital to any business. But even though many corporations have been using it in their sales or customer success departments, many still have a manual process when it comes to their corporate social responsibility activities.
CSR projects entail the participation of several stakeholders may it be directly or indirectly. This means that the process can get complex once both documentation and project management need to be followed by many people.
Incorporating technology into your corporate social activities can not only improve the confidence of stakeholders but also streamline the process of collecting requests, managing CSR projects and reporting the ROI on your philanthropic activities. In the end, these points can help you identify and create long term relationships with NGOs and other stakeholders, bringing shared value to all parties involved.