Corporate Social Responsibility (CSR)

Corporate governance strategies employed by firms employ that are ethical, societally friendly, and beneficial to its community

What is Corporate Social Responsibility (CSR)?

Corporate social responsibility (CSR) refers to strategies that companies put into action as part of corporate governance that are designed to ensure the company’s operations are ethical and beneficial for society.

 

Corporate Social Responsibility (CSR)

 

Categories of CSR

Although corporate social responsibility is a very broad concept that is understood and implemented differently by each firm, the underlying idea of CSR is to operate in an economically, socially, and environmentally sustainable manner.

Generally, corporate social responsibility initiatives are categorized as follows:

 

1. Environmental responsibility

Environmental responsibility initiatives aim at reducing pollution and greenhouse gas emissions, and the sustainable use of natural resources.

 

2. Human rights responsibility

Human rights responsibility initiatives involve providing fair labor practices (e.g., equal pay for equal work) and fair trade practices, and disavowing child labor.

 

3. Philanthropic responsibility

Philanthropic responsibility can include things such as funding educational programs, supporting health initiatives, donating to causes, and supporting community beautification projects.

 

4. Economic responsibility

Economic responsibility initiatives involve improving the firm’s business operation while participating in sustainable practices – for example, using a new manufacturing process to minimize wastage.

 

Business Benefits of CSR

In a way, corporate social responsibility can be seen as a public relations effort. However, it goes beyond that, as corporate social responsibility can also boost a firm’s competitiveness. The business benefits of corporate social responsibility include the following:

 

1. Stronger brand image, recognition, and reputation

CSR adds value to firms by establishing and maintaining a good corporate reputation and/or brand equity.

 

2. Increased customer loyalty and sales

Customers of a firm that practices CSR feel that they are helping the firm support good causes.

 

3. Operational cost savings

Investing in operational efficiencies results in operational cost savings as well as reduced environmental impact.

 

4. Retaining key and talented employees

Employees often stay longer and are more committed to their firm knowing that they are working for a business that practices CSR.

 

5. Easier access to funding

Many investors are more willing to support a business that practices CSR.

 

6. Reduced regulatory burden

Strong relationships with regulatory bodies can help to reduce a firm’s regulatory burden.

 

Example of CSR in Canada

In Canada, mining companies often engage with Aboriginal communities and groups. Converting land sites into mines can cause a significant environmental impact on the Aboriginal communities living near the sites. Several Canadian mining companies engage in corporate social responsibility with local communities to ensure that the adverse effects are minimized.

For example:

  • Cameco Corporation oversees education programs directed toward northern and Aboriginal peoples through their northern Saskatchewan five-pillar strategy.
  • Goldcorp Inc. strives to make a positive impact on their communities by supporting education and health initiatives and sponsorship of special events.
  • Softrock Minerals Ltd. contributes money for festivals, schools, and projects.

 

CSR of Starbucks

Starbucks is a well-known firm that practices corporate social responsibility. As indicated by the company: “Starbucks’ social corporate responsibility and sustainability is about being responsible and doing things that are good for the planet and each other.”

Starbucks’ CSR initiatives include:

  • Starbucks Youth Action Grants: Awarding grants to inspire and support youth action.
  • Ethos Water Fund: Raising clean water awareness and providing children with access to clean water.
  • Ethical Sourcing: Commitment to buying and serving ethically traded coffee.
  • Green Building: Using the U.S. Green Building Council’s LEED certification program to create energy and water-efficient store designs.

 

Related Readings

CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following CFI resources will be helpful:

  • Corporate Development
  • Employee Morale
  • A Sense of Purpose at Work
  • Soft Skills at Work

Financial Analyst Certification

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