The value of Corporate Social Responsibility (CSR) – and how to get it right
The way companies behave has never been more important, or more visible. Here’s what to consider when designing and implementing your CSR program, plus some compelling facts to help you build the business case.
What is Corporate Social Responsibility?
CSR is everything a business does to make life better for the individuals, communities and places it touches. It’s also the policies and practices a company puts in place to make these things happen.
Although there are plenty of opinions out there, there’s no fixed, formal definition of CSR that the industry has reached a consensus on. Like many broad ethical concepts in business, it’s something that varies from company to company.
An insightful definition I’ve found comes from Michael Glauser’s book Main Street Entrepreneur. He divides corporate citizenship into two components –
What an organization does to society
This includes doing no harm to the communities and locations where they operate, including not polluting, mistreating employees or selling products that aren’t safe.
What an organization does for society
These are the actions companies take to benefit communities.
These are the actions companies take to benefit communities.
Another great summary of the concept comes from Investopedia:
CSR is a self-regulating business model that helps a company be socially accountable – to itself, its stakeholders, and to the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.
Examples of CSR in practice might include:
- Reducing carbon footprints
- Improving labor policies
- Participating in Fairtrade
- Charitable giving
- Volunteering in the community
- Corporate policies that benefit the environment
- Socially and environmentally conscious investments
CSR is a growing priority for businesses of all sizes, and something that’s seen as a key part of an organization’s vision and employee value proposition. According to the Governance and Accountability Institute, 86% of the S&P 500 Index companies published a sustainability or corporate responsibility reports in 2018. Many companies dedicate whole teams to developing and carrying out their CSR programs.
Why the investment in CSR? For one thing, it can increase revenue and build brand value. It can also spur social change. For example, a bar or coffee shop that stops supplying plastic straws and single-use cutlery is sending a message to its customers about re-use and sustainability.
What’s more, ignoring CSR comes with costs – having a poor reputation for social and environmental impact can damage the profitability and success of an organization. In the last decade, businesses like VW and Amazon have been held to account for failures of transparency on environmental and social issues.
CSR – the business benefits
Here are a few specific ways a CSR program can improve your business outcomes, short and long-term.
Better business performance
Organizations with a genuine commitment to CSR outperform those that don’t. In fact, CSR-led companies were found to have returns 19 times higher those with a poor CSR rating, according to a three-year study by the Kenexa High Performance Institute in London, which included 175 companies.
A better customer experience
The same Kenexa study found that CSR-oriented companies offered a markedly better standard of customer service.
Kenexa’s findings linked higher CSR ratings with higher levels of employee engagement. It’s also linked with a company’s ability to attract top talent. The next generation of employees is seeking employers that are focused on people and the planet.
Lower business costs
Sustainable development often goes hand in hand with cost savings. For example, using less packaging and less energy can reduce production costs. A great example is Levi Strauss & Co, whose Water<Less project reduces water use in manufacturing by up to 96%. Since launching the process in 2011, the company has saved more than 3 billion liters of water.
Brand differentiation and loyalty
As well as caring about great products, prices and service, consumers are now choosing and sticking with brands that help (or does not hurt) society and the environment.
CSR efforts can lead companies to new innovations. For example, GE’s Ecomagination program, which is dedicated to finding innovative answers to environmental problems, led to new LED lights that reduce energy usage. Ecomagination has generated $200 billion in sales according to the company.
Through CSR, a business can give back to the community and make lives better. Examples include TOMS shoes, which gives away a pair of shoes to a child in need for every pair they sell, and Starbucks. The coffee giant has committed to providing one million coffee trees to farmers via Conservation International’s “Sustainable Coffee Challenge.” In addition, the company plans to hire 10,000 refugees across 75 countries by 2022, and to hire 25,000 veterans and military spouses by 2025.
The growing trend for ethical consumption
Increasingly, consumers are looking at factors beyond price, range and quality when they shop. As Knowledge@Wharton described in a recent podcast, rather than thinking solely about the product – “I want a pair of sneakers, where can I find the best quality sneakers?” – decision making is now more about broader values. “Who is making those sneakers and what are they all about?”
Company behaviors and ethics have a significant impact on customers’ buying decisions, and more importantly, on who they remain loyal to. There’s also a growing belief that companies have a responsibility for social change – a phenomenon known as corporate social accountability.
The bar for companies is steadily being raised as consumers make more of their decisions based on CSR. Companies, in turn, are upping their efforts to meet expectations, creating a positive cycle of improvement.
To be among the companies consumers trust, transparency is highly important. Consumers may avoid and become detractors of businesses who are deemed to be less than honest or guilty of “greenwashing” – paying lip service to ethics and sustainability without truly committing to it.
Most research suggests that CSR is a greater concern among consumers in millennial and Generation Z age groups. In a study by Horizon Media’s Finger on the Pulse, 81% of millennials said they expect companies to make a public commitment to good corporate citizenship.
The 2015 Cone Communications Millennial CSR Study found that more than 9 in 10 millennials would switch brands to one associated with a cause.
CSR, employee engagement and attracting talent
As with consumers, so with employees. People want to work for companies they can believe in and whose values are aligned with their own.
When job seekers select a place to work, there’s a heightened emphasis on a company’s transparency and whether they feel they have a shared purpose. Companies committed to CSR and who include it within their employer brand are likely to appeal to potential candidates. There’s also an attraction for candidates who are looking to make an impact – something they feel enabled to do through CSR activities.
As well as helping attract top talent, a CSR program can have a positive impact on how employees behave within the organization.
Research indicates that when organizations implement CSR practices, employees are more likely to participate in OCBs (organizational citizenship behaviors) or demonstrate helping or cooperative behaviors, such as going out of their way to help coworkers.
In a study of North American businesses, employees who perceived that a company was a good corporate citizen had higher employee engagement and creative involvement.
CSR also seems to strengthen workers’ sense of identifying with the business – something that tends to be linked to engagement and intent to stay.
Finally, employees who feel more positively about their organization’s CSR efforts are less likely to want to leave, and feel more committed to their employer.
Visibility of CSR activities day-to-day can increase an employee’s awareness of the purpose behind their role, why they’ve chosen to work at that company and why they’re doing what they’re doing.
An example is the Qualtrics Green Team. This initiative is highly visible within our company and makes regular contact with staff, sharing ideas, tips and information on things like biking to work or recycling and composting. It’s one more way to strengthen a sense of shared purpose, as well as to support and socialize sustainable choices and behaviors.
Alignment and authenticity
Whatever your business, it’s likely that your overall aim is to have a positive impact on society, while also improving your company image and brand, business performance, and employee engagement.
Whatever you choose to do, the golden rule is that it needs to be aligned to your values and purpose as a company. A thriving CSR program is one that’s closely tied to the culture of a company, as well as being in the letter of its policies and guidelines. Successful CSR can be felt in your products and services, your customer experience, your charitable activities, how your staff behave and the kind of people you hire.
Without being embedded in the values and culture of your organization, your CSR program is at risk of coming across as insincere or disconnected from your wider identity.
Another reason to align CSR with your values in this way is to make it more effective and have an impact on the way you do business. CSR should be inherent in the outward-facing mission and vision of the organization and should be visible in marketing, both to consumers and to potential employees.
Key steps in developing a CSR program
1. Clarify your values and mission
Before implementing CSR initiatives, it’s important to clarify the “why” behind your actions. What does the organization value most? What are its CSR goals, and what does it expect to achieve? Doing this will ensure that the programs and activities you support are aligned to your purpose and values.
An example of a business with deeply integrated CSR is Johnson & Johnson, whose commitment to community is outlined in the company Credo:
“We are responsible to the communities in which we live and work and to the world community as well. We must help people be healthier by supporting better access and care in more places around the world. We must be good citizens — support good works and charities, better health and education, and bear our fair share of taxes. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.”
2. Identify your strengths and build around them
Determine what the top competencies and strengths of the organization are, so you can think about how to put them to work for your values and mission. What does the company do better than most others? What are we passionate about? What contributions do you want to make? Once you’ve identified the strengths of the organization, you can identify potential projects that align to them.
Collecting employee feedback at this stage could be a valuable step, as it will help you confirm your beliefs and maybe identify new strengths or directions for your CSR program. If your organization is a large one, make sure you achieve a representative sample across job roles, demographics and geographical areas.
3. Secure executive support
As with any major program, it’s important to secure buy-in from senior leadership for your new CSR project. They will be important champions and help you drive the project forward, both through practical support and in helping socialize the ideas and values by example.
4. Find potential projects that align to your mission
At this stage, you’re ready to start thinking about taking action outside of your business and partnering with communities, charities or other stakeholders. When selecting initiatives to get involved with, make sure they align with the purpose, skills, and values you’ve defined.
Tip: Start small. Consider kicking off with a pilot project, as you may have smaller resources and a bigger learning curve. You can then expand your program over time. There’s no limit to how ambitious you can be with this – some businesses get to the point of appointing whole teams or departments to maintain their momentum with CSR.
5. Know how you’ll measure success
Define the KPIs and metrics you’ll use to measure progress against your goals. Don’t forget to start out with an internal benchmark measurement so that six months or a year down the line, you’ll be able to see how far you’ve come.
Remember, it’s a long-term gain and you won’t necessarily see results immediately. The goals you set will also tend to be long term. Examples might include reducing emissions by a certain percentage in 5 years, or moving to 100% renewable energy by a certain date.
Discover how employees perceive CSR at your company, and how it tracks to engagement