Corporate Social Responsibility

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What is Corporate Social Responsibility?

There is no universal definition of Corporate Social Responsibility ("CSR") but the concept has been said to include:

• A commitment by business to contributing to sustainable economic development, and to working with employees, their families, the local community and society at large to improve their quality of life.
• Operating a business in a way that meets or exceeds the ethical, legal, commercial and public expectations that society has of business.
• Integrating  business operations and values so that the interests of all stakeholders -- including customers, employees and investors, and the environment -- are reflected in the company’s policies and actions.
• A set of management practices that ensures that a business minimises the negative impacts of its operations on society and maximises the positive impacts.

Why is Corporate Social Responsibility essential?

Research shows that doing the right thing because it is the right thing can in fact be more profitable than being motivated solely by profit.

The recent woes of AWB provide a good example: by putting making a buck so far ahead of legal and ethical obligations, it lost far more than it gained.  Many other big companies, from James Hardie to Enron, have learnt similar lessons.

The key point is that business is operating in an increasingly complex web and having to juggle the various interests of many stakeholders.  For managers who want to future proof a business -- ensuring more contented workers, avoiding negative publicity and brand damage and generally developing more profitable practices -- CSR is not a choice but a necessity.

Numerous studies testify to these benefits. 

Is it possible for businesses to increase profits with Corporate Social Responsibility?

Some proponents of CSR have boldly forecast the day when companies are ranked not by their financial performance but by their CSR activities.  Although that day may be some way off I certainly hope they are right.

Until then we have to rely on the studies that suggest that when managers do the right thing because it is the right thing to do, rather than from pure profit motive, they achieve maximum financial benefits. But equally as important, businesses that actively engage in Corporate Social Responsibility (CSR) can obtain competitive advantages, reducing operating risks, increase their sustainability and build a political constituency to support their operations.  At the same time, responsible operation provides a basis for reducing government regulations, the regulators themselves and hence the dead weight cost of government.

This knowledge is not lost on the big national and multinational corporations: one need only look at the advertising of multinational oil companies and financial institutions, and of large national operators like banks and resource giants, to see that they recognise the value of being seen to be socially responsible corporate citizens.

And the benefits are not limited to the big players.  All companies and businesses stand to gain by adopting and implementing the principles of CSR.  Implementing those principles facilitates policies and practices that meet the demands of regulators, industry bodies and stakeholders, so compliance issues are reduced while there is a beneficial impact on other areas ranging from customer loyalty, business reputation and employee satisfaction through to risk management.

Corporate Social Responsibility is relevant to all businesses, large and small, and it is here to stay. Businesses which are the first to adopt and practice CSR will obtain the greatest benefit.

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