Why CSR?

Source: Wikimedia_The_pyramid_of_corporate_social_responsibility_By Michel Awkal – Own work, CC BY-SA 4.0

Recently, Corporate Social Responsibility (CSR) has transformed from a less important business activity into an integral part of business management. When it first emerged, it was considered non-essential or not more than a promotional activity; today CSR has come to be accepted as a necessary driver toward lasting business achievement. Firms which incorporate CSR within their business models are not only improving their external image but also creating significant business value.

Factors influencing this shift

With industrialization and competition, it has been the common practice for a capitalist economy to always focus on profit maximization, which tends to be the main goal. Nevertheless, Corporate Social Responsibility (CSR) is necessary on both theoretical and practical realms Increasing in importance this is due to the characteristics of developing countries like India where people are poor and socially deprived.

There has been a shift in focus among modern corporations to a new breed of leaders who are more focused on profit optimization instead of just profit maximization. There has been a change in the way in which firms recognize profit, in the sense that there are wider constituencies to whom accountability is expected; that includes workers, customers and the society in addition to shareholders.

The average shopper in today’s world is quite knowledgeable and does not accept poor ethical practices. Businesses are expected to go beyond just offering quality products and the concern for product welfare but also the social and environmental responsibilities. There is a loss of customer loyalty and possible public rage against the brand for failing to meet these expectations.
The investors are also affected by this shift to CSR. Many people look for opportunities that allow them to bring environmental, social, and corporate change. These asset owners invest in companies that have sustainable strategies which aim for long-term profits.
New laws and initiatives related to climate policy, labor rights, and corporate accountability and transparency are emerging all around the world. Prospective employers have to comply with these requirements in order to not only prevent incursion of law but remain relevant.
Employees are constantly on the search for organizations whose values are consistent with theirs. Adequate CSR strategies help in drawing in the best talent, enhancing employee morale and motivation as well as decreasing turnover by instilling a feeling of belonging and purpose.

Using CSR

Many big corporations have opted into making CSR-friendly strategies and their examples are very useful for understanding how CSR benefits both the company as well as the consumer:

Johnson & Johnson: This big pharma company has used the principles of CSR to reduce their carbon footprint on the planet, and their initiatives include using the wind to harness power and provide water to the needy communities. The company has significantly reduced pollution and aims to switch completely to renewable energy options.
Netflix: Netflix is a film distribution company which offers 52 weeks of paid parental leave to their employees- both birth parents and non-bird parents get access to these weeks. This leave can be taken anytime by the employees, and does well to support them and their families. The company also voices their support for movements like Black Lives Matter and Pride Month regularly which builds customers’ trust.
Lego: Lego has also started switching to sustainability initiatives, and now focus on making more eco-friendly and circular products. Right now, about 93% of the packaging is made by using paper, cardboard, and other paper-based things. They have also started working on replacing the single-use plastic pre-pack bags completely.
Microsoft: Microsoft has come up with a Disability Data Initiative which provides more accurate information about the disability community distributed all over the world. It will provide us information about representation, prevalence, and inclusion of the community. The company has collaborated with other tech giants to also create the Speech Accessibility Project which gathers data from people who have speech impairments and make voice recognition technology for these people.
Slack: This company has launched a playbook that tells us all about how to find, train, and hire people who are formerly incarcerated so that these people can make a comeback. This playbook tells the reader all about the legal and logistical challenges associated with building a career after being incarcerated.

Benefits

In recent years, companies have used corporate social responsibility (CSR) as an effective tool in their businesses by demonstrating the commitment of an organization towards the economy, environment and the society at large. This type of business structure operates under self-regulation, where not only the company self-governs but also its avoided and its public.

Increased Brand Recognition: Any of such tools in the easily standardized and implemented engagement and customer related marketing will attract new people who are not already brand aware. In a world where positive news is scarce and thus, demand for them is high, there is great value in making your brand associated with a nobler course that normally earns a lot of publicity to a level that money cannot purchase.
Boosted Company Reputation: Recognition isn’t much help if the reputation of your company is not that good in the first place. Hence, if you work towards helping others and engaging in sustainable business practices, the reputation of your organization will only grow and attract the consumers.
Increased Public Trust: Once reputation and recognition is established, you can start working on supporting community initiatives by increasing funding and thinking of egalitarian strategies. This will help you build trust which will go a long way.
Improved Customer Loyalty: When the customers realize that their efforts are returned and the company is working to return their loyalty, they will automatically support your company and choose it over the competitors. Something as simple as a fundraising event can boost the public’s perceptions quite a lot and encourage them to choose your brand.
Accelerated Capital Growth: Once all of this happens, it will become incredibly efficient to reach a wider consumer base and accelerate your capital growth.

Resources

Factors influencing this shift

Oh, J. (2021, September 30). 3 paradigm shifts in corporate sustainability to new era of ESG. World Economic Forum. https://www.weforum.org/agenda/2021/09/3-paradigm-shifts-in-corporate-sustainability-to-esg/
‌Wu, CC., Cheng, FC. & Sheh, DY. Exploring the factors affecting the implementation of corporate social responsibility from a strategic perspective. Humanit Soc Sci Commun 10, 179 (2023). https://doi.org/10.1057/s41599-023-01664-4
admin. (2018, April 30). Latest CSR Trends and factors influencing CSR in India. – Fiinovation. Fiinovation. https://fiinovation.co.in/latest-csr-trends-and-factors-influencing-csr-in-india/

Using CSR