Importance of Corporate Social Responsibility for Companies

Corporate Social Responsibility or CSR has become an important aspect for companies after the Millennia until today; even though it was unheard of decades before. In the 1990s, companies always had one goal – increase the shareholder’s return of investment. Any other aspect doesn’t matter.

Back then, companies wanted to get as much revenue as possible and spend little money as possible. Freely giving away company fund for activities that won’t generate any return was considered a bad move.

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Image: Pixabay

But, that was 1990s. As the time went by, experience grew and knowledge expanded; experts found out that companies shouldn’t focus only on shareholder’s return.

No matter how high the return gets, if the company can’t survive the competition and stay for a long time, then it’s over for everybody: the managements, the employees, the customers and even the shareholders themselves.

That’s why, in the modern day business, the keyword for a thriving business is not “return of investment” but “sustainability”. Many companies, even the biggest global names at their time like Xerox  have wilted away because they were not able to sustain their business in the changing environment.

But what does Corporate Social Responsibility have to do with sustainability? In this article, you will find out what Corporate Social Responsibility is; and its importance for a company, in term of aiding sustainability.

You will also find the advantages and disadvantages of Corporate Social Responsibility, as well as the types of it and the best practices among them.

What is Corporate Social Responsibility

In brief , Corporate Social Responsibility is a company’s responsibility to improve society in any way.
Corporate Social Responsibility is a way to give back to the society with what the companies have received from them.

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Image: Wikimedia

Companies get their raw materials, employees, and customers from society. Through this exchange of resources, a symbiosis is formed. One simply can’t exist without the other; or if they can, then it won’t be as convenient.In a relationship like this, what you get is what you give rings true.

For example, Google wants to contribute to the society by creating a product that is not only cheap, but also more environment-friendly. With this spirit, their creative team manages to create a smart phone that need less energy. This product benefited both the party. People think the product is worth to buy, they can conserve energy, and the company gets the recognition as well as profit.

Many Types of Corporate Social Responsibility

There are many types of Corporate Social Responsibility; from the one that requires minimum effort and cost, to the one that is grand and expensive. There is no such thing as better Corporate Social Responsibility; it all comes back to the company’s ability and motivation.

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To look at the big picture, here are several types of Corporate Social Responsibility that companies all over the world typically use.

Indirect Participation

1.    Establishing better policies:

Example for this is to promise the use of less packaging and less energy. While, usually this won’t be published under CSR (Corporate Social Responsibility) section in your annual report, but it still retains CSR spirit because it contributes to the environment where the society lives.

The advantage for your company is direct enough; better policies lead to better practices. For example, updating the technology in your factory to be more environment-friendly may cost you quite a sum of investment this year; however, in the long run it can decrease your production cost and expense in general.

2.    Producing better products and services:

Creating products or services that have better quality will benefit both the company and the society. While this won’t be covered under CSR (Corporate Social Responsibility), in motive this can still be called Corporate Social Responsibility. For example, the previous example of Google’s energy saving smart phones.

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Image: Pixabay

Direct Participation

1.    Donation:

Some companies, usually the smaller ones realize that they don’t really have resources to spend on fancier CSR (Corporate Social Responsibility) practices.

They don’t have people to spare on creating a new department of Corporate Social Responsibility or even if they do, they realize that they still lack the expertise.

For these companies, donation is the simplest solution on how they can participate in improving society even with limited resources.

Companies can donate money, goods, or services to other organizations and communities. The organizations or communities can then use the donation for the works that they need the most.

Donation builds a good relationship between companies and communities, because there is a real interaction between companies and the society.

2.    Holding charity events:

Bigger, richer companies may prefer to hold the charity events on their own. For example, they can establish a project to build a school for the disabled or install public facilities for the elderly.

Compared to donation, you will get better publicity and reputation this way.Interaction between the company and the public will be established as well, because employees from your company can meet the people directly and inform them about the company.

This way, they will bring awareness to your company. If the events work well and society gets the benefits, engagement between them and your company will be formed.

Policy on Corporate Social Responsibility

Policy on CSR (Corporate Social Responsibility) differs in every country. In the US, however, CSR (Corporate Social Responsibility) is stated in US National Action Plan on Responsible Business Conduct established in 2014. To support this action plan, the US government will promote and incentivize businesses doing responsible work for the society.

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Image: Wikimedia

Advantages of Corporate Social Responsibility

In the above explanations, you may have already understood how Corporate Social Responsibility and sustainability are connected. Aside from that, there are other advantages a company can get from Corporate Social Responsibility.

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1.    Better Customer Engagement:

Customers nowadays are smarter than customers were in the past, because they are more knowledgeable and are more demanding as well.

They not only want a product or a service that is working and effective, but also with the best price, and with a clear reputation as well.

Customers prefer brands that comply with environmental and societal regulation.There are more and more people who are concerned with the environment.

Internet as well as other Media have helped people to voice their opinion about environmental changes. People are more interested to buy products from a company that is known to have given back to the society and environment.

2.    Better Media Coverage:

Business as usual is hardly interesting for other people to read. However, when you have an event that involves society or environment, it becomes much more interesting.

Media loves content that attracts people’s imagination, and because CSR (Corporate Social Responsibility) is essentially an altruistic act of humanity, there are lots of points they can be written in an article about a company’s CSR program.

3.    Better Employee Engagement:

People like to work in a company that promotes good cause. It allows them to be proud of their company and their work.

With more and more employees become aware of social and environmental issue, companies and its employees can form a better relationship with stronger engagement.

Corporate Social Responsibility can work as a bonding factor between a company and its employees.

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Image: Pixabay

Disadvantages of Corporate Social Responsibility

Despite the numerous advantages, there are also slight disadvantages to CSR (Corporate Social Responsibility). However, these disadvantages depend on your intention toward the CSR itself.

Some people argue that Corporate Social Responsibility is nothing, but a new form of veiled marketing from companies, especially when the companies are known to have caused negative impacts on environment and society.

When the company is in this position, pushing CSR (Corporate Social Responsibility) can cause people to react negatively and accuse the company of greenwashing.

To avoid this, make sure your company has no previous projects or work that might have impacted the environment or communities before pushing CSR. Corporate Social Responsibility will not work as a mask for problems in a company.

However, when CSR is done right, with the right motive, appropriate amount of effort; then it can make the intended improvement for the society. Corporate Social Responsibility can be a powerful image builder to boost growth and longevity of a company.

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Best Practices of Corporate Social Responsibility

1.    Set Measurable and Relevant Goals:

Practicing Corporate Social Responsibility is admirable, but always keep in mind that it should not take away your focus from your business. Keep the goal of Corporate Social Responsibility sincere, measurable and relevant.

You will be tempted to start investing in various good causes, but think through and choose the one which your business can contribute the most.For example, if you work in financial business, you can contribute to the development and financing of SMEs.

2.    Don’t Leave the Stakeholder Behind:

Often, choosing your Corporate Social Responsibility work is a decision made by the internal team of the organization. However, you may want to involve the views of your stakeholder.

For example, you can engage your customers to submit ideas of what social project you should take or holding a competition for them to come up with new ideas of how to help the environment or society.This way, you can generate interest and awareness from the public, as well as get help in decision making.

3.    Sustainable Management System:

Develop a system to handle the Corporate Social Responsibility program. Start by choosing goals and activities, followed by thorough analysis of the legal regulation.

Collaborate with social experts and consultants to create a project that will impact the society. Choose the right people to run the project and monitor them. Finally, educate and train your other employees to care about the project, even if they are not directly involved in it.

4.    Transparent Reporting:

Of course, Corporate Social Responsibility activities should be reported, because it involves your company’s money. Make sure the report is accurate and transparent.

Do not exaggerate the result or the resources you’ve been spending; because your stakeholders may lose their trust in you. Constantly monitor the team and periodically audit them as well, so when a problem arises, you can instantly take care of it.

5.    Branding and Communication:

Finally, you can publish your Corporate Social Responsibility work in the media to gain awareness not only for your company; but also for the project you have and the people you will help.

Tell the public about your activity in various social media platforms your company has. If you can engage the help from real media, like newspaper or magazine or TV, then it will be better.

Corporate Social Responsibility can help in a company’s branding. It is especially true for startups and small organizations. It can help in creating awareness about the company and its offering.

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