“It takes years to build a reputation and only five minutes to ruin it.” — Warren Buffet.
Corporate Social Responsibility (CSR) is a type of business self-regulation with a motive of being socially accountable. There is no rigid documentation of how or what activities businesses must do to practice CSR which means there is no one "right" way for companies to practice CSR. But in the end, CSR activities are categorized or fall under the areas of economy, environment, social and ethical. With today’s business environment being socially conscious, employees and customers focus on working for or spending their money with businesses that prioritize CSR, one of the most important component that’s builds goodwill and name for any business.
Corporate Social Responsibility – What It Means?
A business is established initially for the business owners to earn a profit, for employee to earn a salary and for sustainable growth in business areas. As the business expands and grows, responsibilities also grow with it. Then the business is accountable, to not only the stakeholders, but also to the society, environment and the planet at large.
Corporate Social Responsibility (CSR) is a commitment of businesses to contribute to sustainable economic development, to creating a sustainable environment and working towards making an improved society at large. In short, working towards improving the quality of life and living for employees, their families, the society and the environment in ways that are a ‘win-win’ for both the business and for the world around in which we live.
Major Components of CSR
Moral Component of CSR: “With great power, comes great responsibilities.” Moral CSR reflects on the responsibility between companies towards the society within which it operates. It means that stakeholders of a growing number of companies are happy only when the company balances the impact of its business with socially responsible practices.
Economic Component of CSR: Economic social responsibility begins with being profitable. For a business to give back to society, it must first become self-sufficient and show sustainable growth and profits. Sustainability includes making a profit for shareholders, paying salaries and taxes on time, and meeting other financial obligations efficiently. Another aspect of economic social responsibility is for businesses to be transparent with their stakeholders regarding their financial status.
Legal Component of CSR: Products and services of a law abiding company is more likely to be utilized by consumers, since people lay their trust in such companies that has a clear record. Companies that follow rules, pay taxes on time, adhere to labor laws and allowing inspections are all examples of legal social responsibility. Any disregard to legal obligations can lead to the business being sued, or coming in the news for all wrong reasons. This can hurt the business’ reputation and goodwill – factors that hold key value and is vital for business success and survival.
Discretionary Component of CSR: Discretionary social responsibility means using company’s time and resources to contribute to the community, in whichever way it benefits the company and society at large. Examples of DCSR includes providing employees with opportunities to volunteer, do their bit for the society; donating money for various causes, starting a charitable organization, to do good for a section of the society like providing food shelter and education to orphaned children, opening an old age home, school for underprivileged children, adopting a village, etc.; The goal is to focus efforts on few meaningful contributions.
Four Ways Businesses can Practise CSR
Well executed socially responsible efforts go a long way in creating huge goodwill for the business with customers, employees and stakeholders. The advantages would come in the form of increased employee loyalty and retention, customer loyalty and retention, increased reputation and brand image, increased goodwill, all of which enables greater productivity and quality of products and services, access to capital, strong market reputation and a more stable stock value.
To achieve this, companies need to align their CSR activities with the company’s business activities. If corporate citizenship efforts do not demonstrate value to customers, employees, and shareholders, as well as the community, they’re less likely to be successful and serve a long term purpose. Below are four ways that businesses can practise an effective corporate social responsibility program that is strategic and sustainable:
Environmental Efforts: Environment is one of the primary focus point of CSR activities. Businesses, regardless of size, should practice waste management in the areas of energy use, water use, recycling. Companies must also take actions to reduce carbon footprints. Environmental CSR primary objective should be to reduce damaging effects on the environment from various business processes. Even the simplest environmental safety and sustainability measures can make a huge difference to the reputation of businesses. To give few examples that anyone can and must follow: - switching off lights - switching of computer, laptops and other office equipment and machinery, when not in use - regulating the use of water - regulating paper wastage
Support Social Causes: Social causes and non-profits look towards businesses and philanthropists for aid and support for their sustenance. Businesses can practice social responsibility by donating money, products or services to social causes and nonprofits. Larger companies can reach out to these causes in plentiful ways, either by being an integral part of their benefit charities and local community programs or can sponsor specific needs through donation of money, time or company's products and services. Such social activities not only benefit the social cause but also help create a caring and sustainable brand image of the company in the minds of consumers, employees and stakeholders.
Ethical Labor Practices: Ethical Labor practices is all about treating employees fairly and ethically. A business which supports ethical labor practices, is well-supported by employee engagement and loyalty, increased retention, and employee productivity. All these lead to positive business benefits. Also involving employees to be part of social responsibility activities is another reason for employees to stay with the company. They find the job more fulfilling when they are able to do their bit to make a positive impact on social and environmental issues. In addition, engaged employees not only stay with the company longer, they also help in creating goodwill for the business.
Volunteering for Social Causes: Making conscious efforts to volunteer and participate in local social causes and programs, organized to create visibility for the cause, says a lot for the company. Especially when the contribution, of time, money or participation, is selfless, and done solely to benefit the cause. Such participation increases the reputation of the business as a credible and responsible organization. They also serve as great opportunities to network, connect with other like-minded professionals and set the groundwork for future collaborations.
Business is not just about making money, come what may. A business can only be sustainable when it broadens its perspectives and include social responsibility activities as part of it culture. No matter the size of the business, implementing socially responsible practices can only benefit businesses, but can create a positive impact in the lives of many and society at large.
By being socially responsible, companies gain a positive and impactful reputation as a business that can be trusted and is sincere. The impact of such reputation can be seen in the increase in clientele, reputation as a great place to work, reputation as a company that can be trusted and a standing in the market as a premium brand.
CSR programs have the potential to help businesses and society progress, together. But one must be aware that this can happen only with understanding and definite CSR efforts. Once this consideration is in place, and time, efforts and revenue is spent to achieve results as anticipated, only then can businesses make their CSR program effective and sustainable.
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