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Thomas Minshell

Thomas Minshell

Managing Director

1 September 2023

What is Corporate Social Responsibility?

Corporate social responsibility (CSR) is a mechanism for businesses to assess the impact they have on society and consider putting responsible, ethical policies in place to support individuals, the local community and the environment.

Corporate social responsibility (CSR) is a mechanism for businesses to assess the impact they have on society and consider putting responsible, ethical policies in place to support individuals, the local community and the environment. Despite its relatively new name, it is not a new concept; some businesses already had ethical and social aims in place before CSR became a phenomenon.

Also known as corporate responsibility, corporate citizenship or responsible or sustainable business, CSR requires that an organisation assesses its stakeholders, such as its employees, customers, suppliers, communities and environment and evaluates its responsibilities to them. Good CSR strategies then focus on creating policies that benefit society in a variety of ways, with the organisation’s individual circumstances in mind.

Corporate social responsibility strategies consider areas of concern to organisations. Effective policies address initiatives that are designed to improve relationships with local communities, employees and customers, and aim to put systems in place to encourage and monitor ethically and environmentally responsible activities. The goal is often sustainability, complementing business activities with socially responsible actions that support communities, individuals and the environment.

The benefits of corporate social responsibility

Organisations large and small sometimes struggle to differentiate themselves from their competitors. However, doing so is vital in order to stand out, win funding bids or gain business. A strong sense of corporate social responsibility can provide an organisation with a way of distinguishing itself from others in their field, offering extra benefits to buyers or investors in the form of ethical and environmental policies and happy employees and customers.

A good sense of social responsibility can also lead to innovation in business, creating the opportunity for thought leadership and improved influence, as organisations become frontrunners in conducting their affairs in an ethical and sustainable way. This can improve a brand’s reputation and even generate the potential for extra investment and funding.

Corporate social responsibility can also be a boost for businesses in terms of sales. According to the UK Small Business Consortium, 88% of consumers said they were “more likely” to buy from a company that “supports and engages in activities to improve society”. Corporate social responsibility policies, therefore, can be an effective way of improving an organisation’s reputation and promoting sales.

As consumers become more aware of ethical purchasing and environmental sustainability, organisations with effective CSR policies promote the kind of responsibility that customers are increasingly reacting positively to. All organisations can benefit from being proactive in this area.

Corporate social responsibility frameworks also allow businesses to deal with issues that could cause friction between the organisation and local communities, employees, customers or suppliers. This could include local environmental damage or childcare provision for workers, for instance. Addressing these factors can lead to better community and employee relations, benefiting the organisation and its reputation.

Effective corporate social responsibility policies also provide brands with the opportunity to create ‘good news’ stories to share with the press and supporters, demonstrating that organisations have concerns beyond their bottom line. Every organisation is looking for effective ways to generate good press, and a happy ending about a customer relationship or a charitable donation can do exactly that.

Another factor to consider is that consumers respond well to openness and accountability, and corporate social responsibility promotes social, ethical, environmental and community accountability within organisations, corporations and businesses. Demonstrating a proactive stance on these issues can be an effective way of garnering significant customer support and can even encourage positive reports on social media (which is increasingly important for the majority of organisations) and in reviews and feedback.

Some organisations focus their social responsibility efforts on sourcing ethical products, such as fairly traded tea and coffee, or locally or charitably sourced items. This can also have a positive impact on both the company’s sales and its reputation. It gives a business a unique selling point and offers a sustainable, responsible approach.

This means that businesses can win new business as a result of implementing corporate social responsibility policies, but an effective policy can also result in improved customer retention. When somebody is impressed by the way an organisation conducts its ethics, they are more likely to stick around and become a loyal customer.

CSR activities can also have an impact on attracting a higher quality workforce, when the ethical and sustainability policies appeal to competitive and experienced applicants. Dedicated employees who feel they work for an ethical and responsible company will also be keen to continue working there, so staff retention can be improved.

Employee and contractor relations can be improved, resulting in a happier workforce and potentially a boost in productivity.

When business processes are streamlined and made more accountable, this can result in a much more efficient operation, saving money on operating costs and energy expenditure. This demonstrates why suitable corporate responsibility strategies can make good business sense, even if you look at them from a purely financial viewpoint, disregarding the PR, customer and staff relations and environmental factors they can involve.

Things to consider when creating corporate social responsibility policies

Organisations considering creating or adapting their ethics and sustainability will want to consider which department will be responsible for a corporate social responsibility strategy. In some businesses, it will be managed by the human resources department, the public relations department or by those in charge of business development, while other organisations will have a dedicated department specifically to manage CSR matters. For smaller organisations without the resources to dedicate a full-time team, allocating members of staff who will take responsibility for CSR activities will focus the campaign and result in a clearer, more coherent CSR strategy overall. Leaving it to chance is unlikely to see any effective results. A defined budget, team and goals and objectives are far more likely to lead to success.

One of the ultimate goals of corporate social responsibility policies is sustainability, and this is not just in relation to environmental sustainability. The policy itself must be sustainable, even as the fortunes of the organisation may change. The aim of CSR is to promote ethical and sustainable activity, as well as to generate goodwill and a positive reputation.

The contents of a corporate social responsibility policy will vary, depending on the focus of an organisation.

Choosing the right area of corporate social responsibility is important. Sociological and business studies have found that, while businesses that sell local products or support charities are greeted by local consumers who will spend more money, those that focus on social initiatives that seem out of alignment with company goals can see a negative impact on public perception. This means that it is important to take into consideration which areas of ethics, responsibility and sustainability fit with the image of your organisation, as well as the image you would like it to have.

Some aspects to consider include:

  • Employee relations: do employees receive a living wage? Are their working conditions safe and reasonable? Do they get time off and have union representation? Do they have consistent and socially responsible employment contracts? Are employees given training and development opportunities in the course of their work?

  • Diversity policies: does the organisation have a reliable equal opportunities policy? Is that policy implemented? Does the business go out of its way to support members of minority groups within its workforce and customer base? Does it deliberately expand its recruitment policies to appeal to members of minority groups to apply for jobs?

  • Community investment: does the organisation invest in its local community? Do larger businesses that employ a large proportion of a community reflect this local interest in their actions? Does the organisation take care to avoid polluting or damaging the local assets?

  • Ethical marketing: does the organisation refrain from false advertising and manipulation in its self-promotion?

  • Environmental policies: does the organisation reduce waste, including water and energy usage? Do the organisation’s production practices include recycled or recyclable materials? Does the organisation maintain paperless offices? Are local environmental concerns taken seriously and addressed?

  • Charitable activities: does the organisation donate a proportion of its income to a designated charity? Are fundraising activities undertaken with staff or customers? Do certain products generate profits for charities? Are staff allowed time off to donate their time to volunteer at local non-profit organisations? Is payroll giving in place for employees?

  • Socially responsible investing: does the company use its financial investments in ethical ways? Does it avoid investing its capital into funds that promote arms sales or tobacco, for instance?

In order to ultimately measure the success of a corporate responsibility policy, it is vital to put goals in place, early on. Without set objectives, it will never be clear whether the policy is effective or whether it is missing the mark. And, if the policy involves other stakeholders, for example, a charity or community organisation, the goals should be decided upon mutually. This ensures that the time, money or resources that are invested are done so efficiently and effectively, benefiting all parties and resulting in a truly ethical, accountable system.

What do UK law and regulations say about corporate social responsibility?

The UK Corporate Governance Code is a guide to “facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of a company”, focusing on the actions of a company’s board of directors and how it “sets the values” of a company.

The Governance Code does not specifically discuss corporate social responsibility, but it does acknowledge that a board of director’s duties do go further than benefiting its shareholders, by stating that a company should meet its obligations to its shareholders and others. Further guidance insists that risk assessments should cover health, safety and environmental risks, risk to reputation, and risk to business probity (i.e. integrity), as well as purely financial risk.

Pressure has now been raised by the Companies Act 2006, which requires that company directors take community and environmental issues into account when they are promoting their companies and making disclosures.

However, corporate social responsibility remains more of a matter of best practice than legal requirement, with accountable and sustainable business activity offering organisations a boost in reputation, sales, and employee and community relations. Many aspects of CSR policy may not be legally mandated, but they make good business sense, as well as being a boon for an organisation’s ethics and sustainability.

Corporate social responsibility policies are generally self-regulated and require a certain degree of accountability and self-disclosure but, in organisations of many sizes, a good policy is a realistic and recommended goal to have. Organisations generally monitor their own success, but when partnerships with community organisations or charities are involved, external accountability also comes into play.

It could, in fact, be argued that it is the self-regulated aspects of corporate social responsibility that make it even more worthwhile for businesses to engage in. The organisations that are the most socially responsible can be perceived to be those that chose to take positive, affirmative action rather than those that did so because they were required to by law. The more proactive an organisation is seen to be, the better the boost in its reputation and results.

Reporting on corporate social responsibility

Promising reports on the success of corporate social responsibility activities is a way of ensuring compliance with the programme and encouraging accountability and good results. Even where some aspects of the policies were less than successful, remaining open and honest is a smart approach that suggests the organisation is aiming for better results and will continue to be accountable and ethical. And, of course, the most successful elements of the strategy should be widely shared and promoted.

The form and style of CSR reports do not have to fit a particular format, but they do need to be comprehensive and portray honesty and accountability to their readers. As long as some people remain sceptical about whether brands are using corporate social responsibility as some kind of veil to comply with reputation management objectives, rather than as a genuine good to society, openness is required to overcome this doubt.

Corporate social responsibility offers organisations the opportunity to promote themselves, while doing good for the community and society. It’s a win-win situation for many businesses, and can be undertaken with some simple planning and implementation.

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