Corporate social responsibility facts for kids
Corporate social responsibility (CSR) means that businesses act in a way that benefits society and the environment. It's like a company being a good citizen. This can involve helping out through volunteering, giving money to charities, or making sure their business practices are fair and ethical.
In the past, CSR was often a choice for companies. But now, many governments and international groups encourage or even require businesses to have a positive impact. Some companies also use the idea of "creating shared value". This means they try to do good for society while still making a profit.
When a company practices CSR, it often helps its reputation. It shows that the company cares about more than just making money. This can make customers, employees, and investors feel good about supporting the business. Some companies do CSR because their leaders believe it's the right thing to do. Others do it because it can help them succeed in the long run.
Some people argue that companies should only focus on making money. They believe that social issues are the job of governments. But many others think that businesses have a big role to play in making the world better.
Contents
What is Corporate Social Responsibility?
Since the 1960s, people have used many names for corporate social responsibility. These include "corporate sustainability," "responsible business," and "corporate citizenship."
There isn't one perfect definition, because different groups see CSR in different ways. A business might see it as a plan to help their company. A charity might see it as a way to get companies to do good. A government official might see it as a way for companies to follow rules.
One popular idea of CSR is like a pyramid. It suggests that companies have different levels of responsibility:
- Economic responsibility: Making money to stay in business.
- Legal responsibility: Following all laws and rules.
- Ethical responsibility: Doing what is right and fair, even if it's not required by law.
- Philanthropic responsibility: Giving back to the community and helping others.
So, CSR means a company cares about its community and the environment. They show this by reducing pollution, supporting education, and making enough money to keep their business strong.
How Consumers See CSR
Most customers agree that companies should work on CSR while also reaching their business goals. Many people believe that companies that do charity work will get a good response. Customers are often loyal and willing to spend more money at stores that support good causes. They also like businesses that sell local products.
However, some customers might worry that environmental efforts could make customer service worse. Not all CSR activities appeal to everyone. Companies should pick one or two main activities to focus on. It's also important that a company's social efforts match its overall goals. If they don't, it might not have a positive effect.
Different Ways Companies Do CSR
Companies can approach CSR in many ways. Here are some common ones:
- Giving to charity: This is when companies donate money, goods, or services to non-profit groups and communities. They might support arts, education, health, or environmental causes.
- Fair Trade: Some companies make sure their products are sourced fairly. For example, they might buy Fair Trade tea or coffee. This means the farmers and workers who produce these goods are paid fairly and work in good conditions.
- Creating Shared Value (CSV): This idea suggests that businesses can succeed financially while also helping society. For example, a company needs healthy and educated workers to do well. And society needs successful businesses to create jobs and wealth. CSV looks for ways where business goals and social goals can help each other.
Many companies also compare their CSR efforts to others. This is called benchmarking. They look at what their competitors are doing. They also measure how their own policies affect society and the environment.
What CSR Includes
CSR has grown over time. At first, it focused on what a single company did. Now, it also looks at how suppliers act, how products are used, and how they are disposed of.
Helping the Supply Chain
The "supply chain" is the whole process of how a product gets from where it's made to the customer. It includes suppliers, factories, and delivery services. In recent years, companies have paid more attention to CSR in their supply chains.
If a company's suppliers act irresponsibly, it can really hurt the company's reputation. For example, if a factory collapses and workers are hurt, the main company that buys from that factory will also face problems. This makes companies want to work with suppliers who also care about social responsibility. They want to make sure everyone in their supply chain is acting ethically.
Types of Social Initiatives
Companies can get involved in social causes in several ways:
- Company donations: Giving money, goods, or services to charities.
- Employee volunteering: Organizing activities where employees volunteer their time, sometimes even during work hours.
- Responsible business practices: Making products in an ethical way that appeals to customers.
- Promoting causes: Running campaigns to support a specific social issue.
- Cause-related marketing: Donating money to a charity based on how many products are sold.
- Social marketing: Campaigns funded by the company to encourage positive behavior changes in society.
Some of these activities, like cause-related marketing, aim to both help society and increase profits. Others, like pure donations, are more about giving back without expecting a direct financial return.
How Companies Put CSR into Practice
CSR efforts are often managed by a company's human resources, business development, or public relations teams. Sometimes, there's a special CSR department.
Planning for Impact
A good plan helps a company reach its goals for CSR. A team sets clear goals and objectives. Having a dedicated budget shows that the company is serious about its commitment to CSR.
Reporting on Progress
Companies often share reports about their social and environmental impact. This is called "social accounting." It helps them show how their actions affect society and the environment. These reports help show that companies are being accountable for their actions.
There are many guidelines and standards for how companies should report their CSR efforts. Some countries, like France, even have laws requiring social reporting. However, it can be hard to compare reports from different companies because they use different methods.
Checking the Facts
It's important for customers to be able to check if a company's CSR claims are true. Many industries have groups that help verify these claims. For example, the Forest Stewardship Council checks if paper and wood products come from responsibly managed forests.
Ethics Training
Many companies offer ethics training to their employees. This helps employees make good decisions, especially when things are not clear. This training can help prevent problems like fines or damage to the company's reputation. It can also make employees feel more loyal and proud of their company.
Common CSR Actions
Here are some common things companies do for CSR:
- Environmental sustainability: This means protecting the environment. Companies might recycle, manage waste, save water, use renewable energy, or use reusable materials. They might also make their supply chains "greener" or reduce paper use.
- Helping employees grow: Companies might offer training, adult education, or language classes to help their local employees improve their skills.
- Community involvement: This includes raising money for local charities, providing volunteers, sponsoring local events, hiring local workers, and supporting local economic growth.
- Ethical marketing: Companies that market ethically treat their customers with respect. They don't try to trick people or make false claims in their ads. This helps them be seen as ethical.
Social License to Operate
The idea of a "social license to operate" means that a company needs the support and approval of the community and other groups to do business. It's like getting permission from society. Companies earn this license by acting responsibly and meeting society's expectations.
If a company doesn't have this social license, communities might try to stop its projects. Employees might leave for companies that are better corporate citizens. And the company might face legal challenges. Building trust and good relationships with local communities is very important for a company to keep its social license.
Benefits for Businesses
Many experts believe that CSR can help businesses in many ways, even if it's hard to measure exactly.
People, Planet, Profit
This idea, also called the "triple bottom line," is a way to measure CSR.
- People: This refers to fair treatment of workers, and how the company affects the community.
- Planet: This means using sustainable practices that protect the environment.
- Profit: This is the money the company makes after all costs.
The goal is to balance these three things: economic success, environmental care, and social well-being. This helps companies be more aware of their responsibilities.
Helping with Employees
A good CSR program can help companies find and keep good employees. Many job seekers, especially young graduates, look at a company's CSR policy. CSR can also make current employees feel better about their company, especially if they can get involved in volunteering or fundraising. Employees tend to avoid companies with a bad reputation.
Managing Risks
Managing risks is a big job for company leaders. A company's good reputation, built over many years, can be destroyed quickly by scandals or accidents. These problems can bring unwanted attention from regulators, courts, and the media. CSR can help reduce these risks by showing that a company takes safety, diversity, and the environment seriously.
Making Your Brand Stand Out
CSR can make a company's brand look better. When a company does good things, customers might want to support it. This can lead to customers having a better opinion of the brand and its products. Some companies even use their commitment to CSR as their main way to attract customers.
For example, Whole Foods promotes organic foods and sustainable practices. Even though their prices are higher, customers are happy to buy from them because they know the products come from good sources.
Companies can also use CSR to improve how they operate. For instance, making supply chains more sustainable can reduce costs and increase profits. This shows customers the company's commitment while also boosting sales.
Less Scrutiny
Companies often want to avoid too much government interference, like new taxes or rules. A strong CSR program can show governments and the public that a company is responsible. This might make it less likely that the company's actions will be watched too closely.
Better Supplier Relationships
Having good CSR programs can make a company more attractive to other businesses as a supplier. For example, a clothing brand might prefer to work with an overseas factory that uses CSR. This reduces the risk of bad publicity if problems are found. Companies that are leaders in environmental, social, and governance (ESG) efforts often have a higher value than their competitors. They look for suppliers who share their values. This can lead to new ideas and attract more customers for everyone in the supply chain.
Handling Crises
CSR strategies can help companies manage crises. For example, if a company faces a boycott, showing a commitment to CSR can help. After a crisis, companies that have helped the local community or donated to those in need have often been able to regain trust.
Criticisms and Concerns about CSR
Some people have concerns about CSR. They question why businesses do it and if it's truly helpful.
What is the Main Goal of a Business?
Some people, like Milton Friedman, argue that a company's main goal is to make as much money as possible for its owners. They believe that companies should just follow the law. They think that spending company money on social causes is like putting a "tax" on customers without their permission.
Others argue that CSR can sometimes impose outside values on local communities, which might not always be helpful. They believe that strong government rules and enforcement are better than voluntary CSR efforts.
Why Do Companies Do CSR?
Some critics think that companies use CSR programs to distract people from other problems in their business. They argue that the good reputation companies get from CSR shows that it's not always truly selfless. Some studies even suggest that managers might use CSR to serve their own interests, rather than just the company's.
Others believe that CSR helps companies keep their power and influence. As the gap between rich and poor grows, businesses might feel they need to show they are doing good for society.
There's also the idea of a "halo effect." This means that if a company spends money on CSR, it might get a lighter penalty if it breaks other laws. For example, some research found that companies convicted of bribery received lower fines if they had strong CSR practices.
Some studies suggest that companies often engage in CSR because they expect financial benefits, not just because they want to be responsible. Customers also tend to like CSR efforts less if they think the company is only doing it for selfish reasons.
Misdirection
Sometimes, companies make claims about being socially responsible that aren't fully true. This is called "greenwashing" if it's about the environment. This can make customers lose trust. Companies might use CSR to draw attention away from harmful practices. For example, McDonald's Corporation supports children's charities, but its food has been criticized for promoting unhealthy eating habits.
Some companies have even funded scientific research that seems helpful but actually distracts from their harmful products. For example, a tobacco company once funded research into genetics and viruses, which critics say was a way to shift attention away from the link between smoking and cancer.
Controversial Industries
Industries like tobacco, alcohol, or weapons make products that can harm people or the environment. These companies might still do charity work, just like other industries. This makes it tricky to judge their CSR efforts.
Who Influences CSR?
One reason companies adopt CSR is to satisfy different groups of people who have a stake in the company, not just the owners.
Ethical Shopping
More and more people are choosing to buy products from companies that are ethical. This is called "ethical consumerism." Customers are becoming more aware of how their purchases affect the environment and society. They sometimes make buying decisions based on these concerns.
However, there's a "CSR-Consumer Paradox." Many people say they would only buy from responsible companies, but in reality, ethical purchases are a small part of what they buy. This might be because of "bystander apathy"—if others don't seem to care, why should I? Or it could be "reciprocal altruism"—people only do something if they get something back. Ethical products often cost more, but the personal reward for the customer might not seem worth the extra cost.
Responsible Investing
Investors are also using their money to encourage responsible behavior. This is called "socially responsible investing" (SRI). Investors choose to put their money into companies that meet certain ethical standards. However, what counts as "ethical" can be different for different investors.
Government Policies
Some governments encourage companies to be socially and environmentally responsible. Many European governments have pushed companies to develop sustainable practices. Some argue that governments should set the rules for social responsibility through laws.
For example, in Germany, collective bargaining (where unions negotiate for workers) helps promote CSR. In countries like Sweden and Iceland, a higher percentage of workers are in unions, which helps ensure good working conditions and fair wages.
Rules and Laws
Many countries in the European Union are working on CSR rules. These efforts vary from country to country. Canada also adopted CSR standards for its mining companies in 2007.
In Denmark, since 2009, the largest companies have to include CSR information in their financial reports. They must state their CSR policies, how they put them into practice, and the results. If a company has no CSR policy, it must say so.
India passed a law in 2013 making it mandatory for certain large companies to spend at least 2% of their average net profits on CSR activities. This law shifted the focus of CSR in India from building institutions to community development.
Crises and Their Impact
Major crises have often led to companies adopting more CSR. For example, after a big oil spill in 1989, new environmental principles were created. Other incidents, like lead paint in toys or food contamination, have forced companies to improve their risk management and quality control. These events show how quickly a company's reputation can be damaged and how CSR can help them recover.
CSR Around the World
Companies don't always act the same way regarding CSR in every country. What's considered ethical in one place might not be in another. For example, some places have different rules about how women are treated in the workplace.
CSR in Europe
The European Union has been promoting CSR since 2001. At first, they defined CSR as companies voluntarily including social and environmental concerns in their business. By 2011, they saw CSR as important for companies to be competitive. They now say that companies should integrate social, environmental, ethical, human rights, and consumer concerns into their main business plans.
UK Retail Stores
A study in 2006 found that retail stores in the UK were very involved in CSR. Many big stores joined the Ethical Trading Initiative. This group works to improve working conditions and health for workers.
Major UK retailers focus on four main CSR areas: environment, social welfare, ethical trading, and being a good workplace. They look at things like how they treat suppliers, how their products are made, and how they impact the environment.
CSR in US Companies
A 2017 study rated the top US companies for corporate social responsibility. It looked at how consumers saw a company's governance, its positive impact on the community, and how it treated its employees. Companies like Lego, Microsoft, Google, and Walt Disney Company were highly rated.
Many young people today want to do business with brands that have good social themes, use sustainable manufacturing, and have ethical practices. A 2015 report showed that 66% of consumers would spend more on products from sustainable brands.
The NAACP, a civil rights organization, believes that American companies can help achieve social justice. They think all citizens should ensure democracy works for everyone.
Important Documents
- United Nations Guiding Principles on Business and Human Rights (2011)
- OECD Guidelines for Multinational Enterprises (2011)
See Also
In Spanish: Responsabilidad social corporativa para niños
- Business in the Community
- Business philosophy
- Carbon neutrality
- Corporate governance
- Corporate sustainability
- Customer engagement
- Ethical banking
- Ethical code
- Ethics
- Green economy
- ISO 26000
- Socially responsible investing
- Socially responsible marketing
- Stakeholder engagement
- Sustainable finance
- Voluntary compliance
Images for kids
-
CSR approaches
