Corporate Social Responsibility (CSR) is rooted in the voluntary activities a company undertakes to operate in an economically, socially, and environmentally sustainable manner. It is also referred to as the triple bottom line: for “people, planet and profit.” Put more simply, CSR is a company’s efforts to improve society in some way. Implementing environmentally friendly policies, providing financial or volunteer support to non-profit organizations, and doing business with ethical suppliers are only some of the ways that companies can behave in a socially responsible manner.
Instead of being seen as an expensive business constraint, more companies are discovering CSR as a source of opportunity, innovation, and competitive advantage.
CSR is an important success factor because it demonstrates to both consumers and the public that the company’s values go beyond profit generation. Businesses are given a social “license to operate,” and, in exchange, people expect them to conduct themselves in a responsible manner. The strong social conscience of consumers is increasingly coming into play when they make purchasing decisions.
Being socially responsible is a great way for a business to differentiate itself from the competition. In a market with many players, being known as an ethically responsible company is a way to stand out from the crowd and create a sustainable competitive advantage. Given a choice to buy a product or service from two or more companies offering comparable price and quality, many consumers will buy from the company that best represents the values they stand for. This is competitive advantage at its finest.
Socially responsible businesses tend to attract positive media coverage. This can help to build or enhance a corporate brand, attract new customers, and retain existing ones. Socially conscious people want to know that their dollars are going to support businesses that share their beliefs and values. On the other hand, irresponsible business practices (pollution, low wages, safety violations, and so on) are surefire ways for a company to damage its reputation and drive customers away. Thanks to social media, negative corporate behavior can go viral in an instant, frequently causing irreparable damage. Consumers today are far less tolerant of companies who do not demonstrate a commitment to CSR and are swift to remove their dollars accordingly.
Embracing diversity is one way that companies can improve both their own business operations and society. It is no longer acceptable to avoid employing or doing business with someone based on race, gender, sexual orientation, or religion. In fact, one Gallup study showed that diversity within organizations results in higher employee satisfaction. This in turn benefits the organization. Satisfied employees are more engaged and productive, leading to greater customer satisfaction and higher profits. In addition, research has shown that socially responsible companies attract the best talent. The most sought-after employees can often choose where they work, and many choose companies that demonstrate a strong social conscience. In addition, by embracing diversity, businesses can become aware of new geographies, cultures, markets, and product uses. A company can help create partnerships that increase market share and distribution by leveraging its own varied assets, such as its products, services, capital, networks, and expertise.
Creating a green culture within an organization can result in tangible improvements to the bottom line. Recycling, conserving electricity and water, and creating more efficient shipping and delivery routes are just a few of the efforts that can help save the environment while being efficient and reducing costs. Companies should try to reduce the carbon footprint not only of their own manufacturing processes, but also their transportation, distribution, and procurement activities. These savings can then be passed along to consumers.
Being a socially responsible company doesn’t stop within a business’s own walls. CSR also means that you do business only with other ethically sound suppliers and companies. That commitment entails doing background research before entering into a business relationship. CSR involves monitoring the related activities of your extended supply chains as well (for example, knowing how your supplier’s supplier runs their business). This frequently involves doing significant research, including extensive site visits and interviews with potential vendors. Suppliers should be scored and compared, based not only on standard operational procedures, but also on their ethics and initiatives to improve society. Negative (as well as positive) events and publicity focused anywhere in your supply chain can trickle down and affect your business by association.
It is no longer acceptable for businesses to act as faceless entities, with profit generation as their sole purpose. Today’s consumers are well versed in social issues and want to do business with companies who are using their dollars to give back. Consumers are also very quick to stop supporting companies they perceive to be irresponsible. Companies that implement a culture of social responsibility will see the positive impact of their efforts not only on society and the environment, but also on their own employees and, ultimately, their bottom line.