Why is Corporate Social Responsibility Important?
The Basics

Why is Corporate Social Responsibility Important?

The Basics is a series exploring the essential questions of purposeful business.
12th Jan 2022

Jeroen van der Veer, former CEO of Royal Dutch Shell, once reflected on how business will change in the future: “the successful companies of the future will be those that integrate business and employees’ personal values. The best people want to do work that contributes to society with a company whose values they share, where their actions count and their views matter.”

Van der Veer’s vision of a corporate culture that marries together personal values, societal contributions and business practice is becoming closer to reality. And one way to guide businesses towards this future is through Corporate Social Responsibility (CSR) frameworks.

So how does it help stakeholders and society?

CSR puts business practices into a framework that ensures they are accountable to shareholders, stakeholders and the general public. The framework allows companies to have an awareness of their impact on the world around them, and to mitigate any negative consequences of their business. The business model attempts to guide companies into practices that improve society and the world around them, rather than degrading them. 

The benefits of a company investing in CSR are broad and varied. The good news is there is more than one way for companies to have a positive impact on the world around them. Large companies may have the capital to invest in green technology, provide wellness packages to their employees or go carbon neutral. Smaller companies may lack the financial resources for grand gestures like that, but could instead engage in community volunteer programmes, improve their labour policies for employees or participate in Fair Trade.

“Corporate social responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it… because it is good for our business.”

Niall FitzGerald

Clearly CSR is also not one or the other; an authentic CSR policy is not a tick box exercise but a way for an organisation to invest in and engage with the world around them in a positive way – so, the more they can do, the better. 

Who’s doing it?

Having a CSR department has been the norm in large companies for many years, but there are a growing number of organisations who are centering their business practices around it: Ben and Jerry’s, Starbucks and Disney to name a few. They’ve explicitly measured their impact on the world and have laid out plans to make it a positive impact. 

Starbucks set up their C.A.F.E. regulations to protect everyone involved in the coffee industry, from farmers to consumers, Disney founded a Conservation Fund in 1995 and raised $75 million to protect plants and wildlife, while Ben and Jerry’s have been creating and engaging with projects to help communities, workers and the planet since 1988.

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Lego has managed to top Forbes’ list of companies with the best CSR a few times now with their sustainability pledges (they have committed to making all their Lego bricks fully sustainable by 2030). They’re also ahead of target in their goal of generating as much renewable energy as they consume. 

Another CSR heavyweight is Danone with its “One Planet. One Health” initiative. They collaborated with non-profits in Argentina to build an early learning centre for children, while their North American division became a B Corp in 2017, reflecting the highest standards of commitment to stakeholders and sustainable business. 

But what’s in it for the companies themselves?

Little or no attention given to CSR puts an organisation’s reputation on the line, as well as risking low customer and employee loyalty, high staff turnover and a messy brand image. Comprehensive CSR frameworks are not only great for stakeholders and planet, but they have the potential to massively improve a business’s reputation – which in turn means attracting loyal customers, talented employees and favourable media engagements.

Niall FitzGerald, former CEO of Unilever, comments that, “corporate social responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it… because it is good for our business.” In short, it’s a competitive advantage, not just a PR stunt. 

Investment in a good CSR framework also reduces risks. By investing in the future of the communities, landscape and world around them, businesses reduce risks across supply chain, operations, product and societal. Sunil Misser, Head of Global Sustainability Practice at PwC, acknowledges that commitment to CSR can not only reduce risk, but leave them behind altogether: “Corporate social responsibility is not just about managing, reducing and avoiding risk, it is about creating opportunities, generating improved performance, making money and leaving the risks far behind.”

“Goodness is the only investment that never fails.”

Henry David Thoreau