Corporate social responsibility is the practice of integrating social and environmental goals into business operations. Rather than focusing solely on the bottom line, companies that employ the concept of corporate social responsibility examine how their business practices affect their employees, customers, local communities, human rights and environment on a larger scale.
Corporate social responsibility initiatives can help control costs, improve a company's brand, attract top-quality talent, and facilitate long-term financial success.
Corporate Social Responsibility Functions
The United Nations Industrial Development Organization notes that common corporate social responsibility functions include:
- Responsible sourcing of materials and supplies
- Employee, vendor, customer and community engagement and relations
- Adherence to labor standards
- Environmental protection and management
- Anti-corruption measures
- Upholding social equity, gender equity and other human rights goals
- Conservation of resources, like water and energy, in production
Purpose and Benefits of Corporate Social Responsibility
Sustainable business practices can benefit a company's bottom line as well as the environment. Forbes points out that by developing products that use less energy or less packaging, a company can also save on utility bills and materials expenses. One notable example is General Mills, which is on track to reduce energy consumption by 20 percent after installing energy-monitoring meters on various equipment.
Borgen Magazine notes that investing in the community and supporting local organizations can set a business brand apart from the rest. Responsible business practices can improve public perception of a company's brand, which can increase its customer base and overall sales. It can also garner interest from investors that only invest in socially-responsible companies.
Corporate social responsibility helps companies attract and retain top-quality talent. McKinsey & Company, a consulting firm, notes that employees increasingly look for employers that display ethical behavior and have values that align with their own. The firm notes that a variety of companies saw employee motivation and loyalty increase after engaging them in corporate social responsibility initiatives, and these companies felt they were able to obtain better-quality employees as a result.
Executives who receive quarterly or annual performance-based incentives -- a common practice among corporations -- often focus primarily on a company's short-term financial results. While this is an important component ensuring profitability, it doesn't necessarily mean that profits are sustainable for the long-term.
Corporate social responsibility functions help a company ensure long-term, sustainable financial health. For example, reinvesting profits into the local community and universities helps create a thriving local economy, which makes it easier to find talented employees and contractors. Committing to sourcing inventory and materials in a sustainable, environmentally-friendly way ensures that the company won't run out of resources in the future for developing products.