Although the “social contract” concept was brought into the open by the Committee of Economic Development in 1971, organizations until recently focused primarily on maximizing profits. However, in recent decades, many business leaders have recognized the importance of corporate social responsibility, and organizations worldwide are adopting it as an integral part of their corporate values.
This realization has resulted in the emergence of enterprises that identify as socially responsible. Even though corporate social responsibility is voluntary in many developed nations like the United States of America and Canada, private companies and government bodies are increasingly establishing standards and certifying companies that meet corporate social responsibility requirements.
But what is corporate social responsibility? Most importantly, why is it of paramount importance in the current world, and what are its various forms?
What Does Corporate Social Responsibility Entail?
Corporate social responsibility (CSR) is giving back to people, the environment, and society. It is the idea that an organization has a social responsibility to help those in need in the community. According to the 1971 social contract, corporations must provide jobs and economic growth via well-run businesses. They must also run the business honestly, keeping the overall well-being of employees and customers at the forefront, and become more involved in improving the condition of the society in which they operate.
Corporate social responsibility is primarily divided into four categories: philanthropic, environmental, economic, and ethical responsibility.
1. Philanthropic responsibility
Philanthropy is an act of serving humanity and being a good corporate citizen. It is charitable giving by organizations to worthy causes. The donation could be in terms of money or other forms of altruism to promote and enhance human welfare and goodwill. In general, corporates driven by philanthropic responsibility dedicate a specific portion of their revenue generated by the business. Donations to causes, funding educational programs, and supporting health initiatives are examples of philanthropic responsibility.
2. Environmental responsibility
Corporate social responsibility is implemented differently by each firm. Many businesses strive to contribute significantly to making the world a better place. Environmental responsibility by organizations aims to reduce pollution and greenhouse gas emissions leading to climate change. A business must perform in a way to keep the planet safe while abstaining from damaging the natural environment. Companies seeking to embrace environmental responsibility can reduce the use of single-use plastics, water consumption and pollution.
3. Economic responsibility
The economic responsibility of a business aims to improve the business operation of a company while participating in sustainable practices. The goal is to positively impact the environment and society, besides maximizing profits. For example- the increased use of recycled products, a new manufacturing process to reduce wastage and generating a consistent level of profitability.
4. Ethical responsibility
Ethical responsibility is the act of following the morally correct path. It ensures a company operates fairly and ethically while complying with the standards within a given field. Some examples of ethical responsibility include improved labor practices, higher minimum wage, gender equality, and competitive pay for all employees.
Despite the fact that corporate social responsibility is a broad term, and every company implements it differently, its underlying idea is to operate it socially, economically, ethically, environmentally, and sustainably. Studying CSR will help you understand the business case for sustainability and effective business strategies to drive change. Sign up for the course to arm yourself with specific CSR strategies you can leverage in your business.