The idea of modern businesses supporting social causes and giving back to their communities goes as far back as the era of Andrew Carnegie and John D. Rockefeller, wealthy philanthropists who donated more than $500 million to charities in their time. However, it wasn’t until 1953 that Howard Bowen coined the phrase “corporate social responsibility,” encouraging businesses to serve the needs of society. Bowen defined corporate social responsibility as the “commitment by businesses to behave ethically … while improving the quality of life of the workforce, the local community, and society at large.”
Today, CSR has transformed into a necessity for any successful business. By embodying the principles of CSR, brands and businesses can improve their market perception and company value as well as foster a healthy, diverse, and empowering work culture for their employees.
The ‘Internal’ Types of CSR
Internal social responsibility relates to an organization’s employees, and it includes topics from benefits and insurance to environmental practices, such as recycling initiatives and pollution reduction campaigns. It also encompasses the hiring and development practices of a company.
Type 1: A Genuine Commitment to Diversity
Responsible business leaders recognize the advantages of a diverse workplace and design policies and protocols to promote one. Teams function more efficiently when colleagues can collaborate and exchange perspectives. Recent scandals implicating high-profile executives in misconduct have only emphasized the need for effective and consistent standards of equality and diversity in order to prevent harassment, discrimination, and other negative scenarios.
By maintaining stringent protocols that dictate company action in the event of a violation or a complaint, management can build safe, harmonious, and productive work atmospheres and attract top-tier talent with a reputation as a good organization accountable to its employees.
Type 2: Ethical Business Practices
Ethical social responsibility practices are intended to provide fair conditions to all stakeholders in a business, from employees to consumers.
For businesses that sell a product, ethical CSR entails a responsibility to ensure that transparency, respect, and safety are promoted throughout the supply chain. Examples include proper training, continuing education programs, and daycare services.
In short, ethical CSR embodies a commitment to fairness for each level of the corporate ladder. Although these practices may be difficult to enforce, they are worthy endeavors that help attract and retain talented employees.
The ‘External’ Types of CSR
External CSR refers to the firm’s responsibility towards employees, shareholders, customers, suppliers, state, non-government organizations, and all other parties involved. These types can be further classified as humanitarian, philanthropic, economic, and environmental.
Type 1: Human Rights
This branch represents the external side of ethical business practices. Although maintaining high standards in one’s own workplace is critical, CSR recommends that businesses also exercise discretion regarding their suppliers and partners. It encompasses the enactment of fair workforce protocols, equal trade norms, and a commitment to ethical labor and product sourcing. Corporations should make sure they conduct business with organizations that uphold human rights and denounce child and forced labor, sexual assault, and discrimination.
Examples of organizations meeting this benchmark include ice cream brand Ben & Jerry’s, the first in its market to use fair-trade certified ingredients. Cosmetics company Lush takes the next step with its global campaign against animal testing and the annual Lush Prize for innovation in anti-testing methods. On the flip side, companies such as Mattel, Disney, and Walmart have faced routine public criticism after reports of their factories using child labor to produce their products.
Type 2: Philanthropy
Direct philanthropic giving is the most common and high-profile form of external CSR. It involves the “donation of time, money or resources” to the underprivileged or needy on local and international levels. Most larger businesses direct charity at their broader communities.
However, philanthropic CSR is not limited to charity. Other philanthropic actions include investing in community programs or participating in local projects. Although smaller enterprises don’t have quite the resources or responsibility of a multinational firm, local and regional businesses frequently sponsor and fund community sports teams, fundraising events, and gift drives in conjunction with nonprofits. Organizations utilize philanthropy to support a vast range of causes, from funding educational programs to endorsing public health initiatives or even donating time to beautify their communities.
By being a community partner, businesses enjoy employee and consumer loyalty through heightened brand awareness. It expresses a business’s commitment to society by demonstrating that its impact extends beyond providing a workplace. For example, businesses can allow their employees to claim volunteer hours on their timesheets or matching employee donations to charities.
Type 3: Economic
Corporate economic responsibility focuses on the long-term growth of a company. Companies can only be in business if they are able to generate revenue, which is of course used to pay employees and suppliers and reward shareholders. Consumers have begun exercising awareness and discretion when shopping, actively seeking companies with sustainable practices regarding the environment, labor, and more. Issues such as fighting the gender wage gap fall under this category, along with finding the most efficient practice to minimize wasted capital. Others include meeting business financial commitments such as paying business taxes.
By balancing economic decisions with societal impact, companies can sustainably grow. Companies that are not able to generate revenue end up out of business, which leaves their responsibilities to employees, vendors, and communities unmet. This means economic responsibility is a baseline requirement in a comprehensive CSR strategy.
Type 4: Environmental
Corporate environmental responsibility is another common form of CSR and is geared towards reducing negative impacts on the environment. At a different point in time, large emissions of greenhouse gasses and other harmful actions were seen as collateral business costs. Today, companies are under pressure to re-evaluate their waste output and cut their emissions where possible.
An example includes IKEA‘s carbon-positive initiative to convert all of their delivery vans to electric-run in 5 major cities by 2020. By 2019, Shanghai had met this goal by introducing an all-electric fleet to make deliveries. This idea was inspired by courier companies like DHL, working to incorporate a 70% electric fleet by 2025. IKEA’s carbon positive initiative is structured around not only cutting down the company’s carbon footprint but also contributing to the global campaign to reduce CO2 emissions.
Implementing CSR into a business’s structure brings credibility, success, and trust to an organization. Both internal and external branches of CSR make positive impacts on society and a company’s brand equity. The responsibilities placed upon organizations help align ethical obligations with economic decision-making and position businesses to thrive in a global, hyper-aware market.
Checkout our previous article on Theory of Change: What Is Theory Of Change And How Can It Help Me Further My Organization’s Mission?
If you’re interested in learning more about CSR best practices for companies in your sector, please schedule a time with us below or reach out to our CEO, Anish Nagar (email@example.com). Corecentra provides purpose-built digital solutions for socially conscious companies to improve their CSR performance with robust management, analysis, and reporting tools.
Corecentra provides advanced digital tools for organizations to manage, monitor, and report their social performance and impact. We help socially-conscious companies, impact investors, foundations, nonprofits, and frontline government agencies manage portfolios and programs, aggregate and analyze data, and easily report outcomes to key stakeholders. By seamlessly integrating program management, budgeting & finance, stakeholder engagement, predictive analytics, and impact assessment, our products empower organizations to increase their social impact and deliver a quantified view of social performance to investors, donors, beneficiaries, employees, and communities.
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