Beyond the Minimum: Why Corporate Social Responsibility Matters for Every Business
(PRODUCT) RED by Gap. “Real Beauty” by Dove. Ethically sourced coffee beans at Starbucks.
Nearly every large corporation today seems to have Corporate Social Responsibility (CSR) integrated into their advertising campaigns. But CSR is not only for large corporations; it should be a piece of every entrepreneur’s strategy. Research shows that 91 percent of consumers believe that companies must go beyond the minimum standards required by law to operate responsibly.
In a previous post, I discussed the definition of social entrepreneurship and how entrepreneurs can help solve social issues. However, it is important to draw a distinction between social entrepreneurship and CSR.
In an article in the Harvard Business Review, “The Truth about CSR,” researchers broke effective CSR into three arenas: (1) philanthropy focused, (2) improving operational effectiveness, and (3) transforming the business model. The three offer a strong framework for understanding different ways to effect significant social and environmental change.
- The philanthropy focus provides a framework for businesses to donate money or time to charities and organizations that better people’s lives and care for the community. It does not to affect profit or improve business performance.
- Improving operational effectiveness is incorporating a CSR initiative as part of a company’s business model to “deliver social or environmental benefits in ways that support a company’s operations across the value chain, often improving efficiency and effectiveness.” These are efforts that focus on things such as environmental sustainability or efforts to improve employee working conditions or well-being.
- Transforming the business model is the innovation of new businesses that specifically develop in order to address social and environmental issues. Of the three, transforming the business model relates most closely to the traditional idea of social entrepreneurship.
These methods are not a one-size fits-all approach, and the research suggests that an inter-CSR approach may be effective, with some combination of the different approaches to CSR.
The 2013 Cone Communications/Echo Global CSR Study reports that:
- 96 percent of global citizens will have a more positive image of a company engaging in CSR
- 94 percent will be more likely to trust a company engaging in CSR
- 93 percent will be more loyal consumer to a company engaging in CSR
How Does A Business Build Authentic CSR Initiatives?
According to a working paper out of Harvard Business School, CSR is simply a necessity for businesses. On one hand, consumers may not buy into the legitimacy of a CSR program, believing it only serves as a public relations campaign, rendering its CSR initiatives meaningless. However, without one, a business can be seen as purely interested in financial returns.
The researchers note: “[o]n the ideological right, critics reject the role of CSR in a capitalist society where the primary responsibility of business is seen as creating financial returns for its shareholders and the larger economy.” Regardless, CSR remains here to stay, and presents itself as vital for a successful business.
Concurrently, deciding what challenges a business chooses to help undertake is a mountainous feat. It is often circumstances, organizational stakeholders, and communities who dictate what is most important in a CSR plan, be it natural disaster relief support or a consumer group focused on sustainability.
In the paper, Globalization of Social Entrepreneurship Opportunities, the researchers note that the opportunities for CSR plans are often discovered by looking at the challenge’s prevalence, relevance, urgency, accessibility, and radicalness in relation to their community. Therefore, for each business, CSR plans will vary according to the community for which they engage, and the resources and abilities available to the business.
For new startups, a CSR plan should be in place to help better engage with the community and consumer. One startup, Sevenly, established a socially conscious clothing brand, advertising that 7 percent of sales benefit charity partners. The startup includes statistics on how much charitable giving they’ve raised each week and to date, as well as how many people they’ve helped. This ties in to the brand’s overall tagline, “People Matter.”.
While it may not be feasible for every company, startup or corporate, to establish all three arenas of CSR into its business plan, I believe that every company has not only the responsibility, but the opportunity, to address unique environmental and social challenges.
In a future post, I’ll discuss the “halo effect” of social responsibility: businesses engaging in CSR strictly for public relations reasons and their policy implications.
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