Corporate social responsibility, often abbreviated "CSR," is the corporation's initiatives to assess and take responsibility for the company's effects on social and environmental well-being. The term is generally applied to efforts that go beyond what may be required by regulators or environmental protection groups.
CSR can also be referred to as "corporate citizenship" and may incur short-term costs that do not provide immediate financial benefit to the company, but rather promote positive social and environmental change.
Definition of "social responsibility"
Social responsibility is the idea that companies should balance profit-making activities with activities that benefit society; which implies the development of companies with a positive relationship to the society in which they operate. The International Organization for Standardization (ISO) emphasizes that society's relationship with the environment in which companies operate is “a critical factor in their ability to continue to function effectively. It is also increasingly used as a measure of your overall performance. '
Analysis of Corporate Social Responsibility
Large corporations are immensely powerful entities, to the point that they have often outstripped the interests of sovereign nations. American businessmen grew weary of the Hawaiian Queen in 1893, as they were outraged at her rate policies. The formerly independent country became an American territory a few years later. Business interests frequently harm local communities, as in 1928, when the Colombian army massacred an unknown number of striking United Fruit Company workers. The US had threatened a military invasion of Colombia to protect the interests of the company.
Corporations can have hugely damaging effects on the environment. Oil spills are some of the most striking examples, but industries as varied as chemical manufacturing, mining, agriculture and fishing can do permanent damage to local ecosystems. Climate change can also be largely attributed to business. While their responsibility is difficult to disentangle from that of consumers who demand electricity and transportation, it is difficult to deny that many companies have benefited from the deterioration of the global environment.
In many cases, damage to the environment and damage to vulnerable communities go hand in hand: indigenous groups in the Amazon rainforest, for example, have been decimated and even wiped out, whether intentionally or unintentionally, in order to make room for logging, ranching, gold mining, oil and gas drilling and hydroelectric power generation.
In light of this often dark legacy, some areas of corporate culture have begun to embrace a philosophy that balances the pursuit of profit with a commitment to ethical conduct. The motto of Google Inc. (GOOG) sums up the idea of corporate social responsibility very well: "Don't be evil."
The same amount of money and influence that allow large companies to cause harm to people and the environment allows them to effect positive change. In its simplest form, a corporation can give money to charity. Businesses can also use their influence to pressure governments and other companies to treat people and resources more ethically. When Martin Luther King, Jr. won the Nobel Peace Prize in 1964, Atlanta business leaders initially refused to attend a dinner to celebrate the Atlanta natives' achievement. The CEO of Coca Cola Co., recognizing the damage that such a display of segregationist attitudes could do to the firm's international brand, the threat that Coca-Cola would go out of town,it would cause an immediate change of heart in the local business elite.
Companies can invest in local communities in order to offset the negative impact their operations may have. A natural resources firm starting out in a poor community could build a school, offer medical services, or improve irrigation and sanitation equipment. Similarly, a company could invest in research and development in sustainable technologies, even though the project might not immediately lead to higher profitability.
In order to realize the importance of social and ecological aspects in doing business, some organizations advocate the concept of the "triple bottom line": social, environmental and economic or "people, planet, profit."
In recent years, supply chains have become a central focus of corporate social responsibility. The management of Company X could go to extraordinary lengths to recruit, promote, and empower a diverse workforce. They could offer to pay for generous maternity and paternity. They could sponsor after-school programs in crime-stricken neighborhoods, fund the cleanup of local river systems, and lobby elected officials with the needs of all citizens, rather than simply seeking political expediency.. None of that would change the fact that they source their raw materials, even indirectly, as costumes using slave labor.
The diamond industry, for example, has come under fire for profiting from injustices along its supply chain. "Blood diamonds" or "conflict diamonds" are diamonds that are supplied by war zones, where rebel groups often finance their campaigns through mining, often using forced child labor. Such situations have arisen in Angola, Liberia, the Ivory Coast, Mozambique, Zimbabwe, the Democratic Republic of the Congo and the Republic of the Congo. Consumer internment and NGO pressure have caused diamond companies to control their supply chain, and the number of diamonds reaching the market from conflict zones has decreased.
Today, there has been a change in the way of conceptualizing corporate social responsibility. For decades, it has been assumed that companies' business models must necessarily be detrimental to certain communities and resources. The intention was therefore to mitigate or reverse the harm inherent in doing business. Now many entrepreneurs consider profit and social-environmental benefit to be inextricable. Few tech startups present their ideas without describing how they will change the world for the better. Social media platforms believe they will facilitate democracy and the free exchange of information;renewable energy companies believe they will make money by selling sustainable solutions by sharing economic applications that they believe will reduce waste and inefficiency in a myopic post-war economy geared towards the individual consumer.
Certainly some companies are empowered to do greenwashing, or by feigning interest in corporate responsibility. Businesses can resell showcase contributions for "the common good," while engaging in morally questionable or inherently untenable conduct is ultimately unsustainable. Google's slogan "don't be evil" may seem hypocritical when viewed in terms of the company's collaboration with repressive regimes, not to mention the questionable practice of collecting large amounts of personal data from each customer.
Some think that corporate social responsibility is an oxymoron. Others see corporate social responsibility as a distraction of a different kind, that is, from the legitimate pursuit of profit. For them, the sole responsibility of a company is to generate returns for its shareholders, not to try to save the world or to worry about its own impact. Laws and regulations must be followed in all jurisdictions in which the company operates, but management must not go beyond that, as this could hurt its bottom line and violate its obligations to owners. Some are aware that this question is misplaced, as responsible initiatives can increase brand loyalty and therefore profits.This means that it may become increasingly true that the culture of ethical consumption is gaining wider acceptance.
Cynical executives inevitably try to present themselves as responsible when they are decidedly not. And for some critics, nothing short of a massive overhaul of the world system will suffice. The truth is that many large companies are dedicating real time and money to environmental sustainability programs and various social welfare initiatives. These activities must be encouraged, but at the same time continually questioned and reevaluated.
In 2010, the International Organization for Standardization ISO 26000 launched a set of voluntary standards aimed at helping companies implement corporate social responsibility.
The breakdown of "social responsibility"
Social responsibility, as has been said, means that individuals and companies have the duty to act in the best interest of their environment and society as a whole. Social responsibility that applies to business is known as corporate social responsibility (CSR). Many companies, such as those with "green" policies, have made social responsibility an integral part of their business models.
Additionally, some investors use a company's social responsibility, or lack thereof, as an investment criterion. As such, a dedication to social responsibility can be turned into profit reality, as the idea inspires investors to invest and consumers to purchase goods and services from the company. In short, social responsibility helps companies develop a good reputation.
In general, social responsibility is most effective in a company when it is done voluntarily, rather than being required by the government to do it through regulation. Social responsibility increases company morale, and this is especially true when a company is able to gain acceptance among its employees and actively engage them in its social cause.
Social Responsibility in Practice
Social responsibility acquires different meanings within industries and companies. For example, Starbucks Corporation and Ben & Jerry Homemade Holdings Inc. have blended social responsibility at the core of their operations. Both companies buy the ingredients in certified fair trade for the manufacture of their products and actively support sustainable agriculture in the regions of origin of the ingredients. By contrast, retail big box Target Corporation, also known for its social responsibility programs, has donated more than $ 875 million in grants to the communities in which the stores operate, including education grants, since 2010.
Social Responsibility concerns
Not everyone believes that companies should have a social conscience. The economist Friedman (1957) asserted that "corporate social responsibilities are notable for their analytical laxity and lack of rigor." Friedman believes that only individuals can have a sense of social responsibility. Businesses, by their very nature, cannot. Some experts believe that social responsibility challenges the point of being in business: profit above all else.
Responsible investments
An investment is considered socially responsible, due to the nature of the business of the company that it carries out. Common themes for socially responsible investing include avoiding investing in companies that produce or sell addictive substances (such as alcohol, gambling, and tobacco) and finding companies dedicated to social justice, environmental sustainability, and alternative efforts / clean energy technology. Socially responsible investments can be made in individual companies or through a socially conscious investment fund or exchange-traded fund (ETF).
Socially Responsible Investment - SRI
"Social conscience" investing is becoming a widely followed practice, as there are dozens of new funds and joint investment vehicles available to retail investors. Mutual funds and ETF's provide an added advantage, that investors can gain exposure to multiple companies in many sectors with a single investment. Investors should read the prospectuses across funds carefully to determine the exact philosophies being employed by fund managers.
There are two objectives inherent to socially responsible investment: social impact and economic benefit. The two do not necessarily go hand in hand; Just because an investment is advertised as socially responsible does not mean that it will provide investors with a good return. An investor has yet to assess the financial picture of the investment.
An example of socially responsible investment is community investment, which goes directly to organizations that have a history of social responsibility through helping the community and have not been able to raise funds from other sources, such as banks and institutions. financial. The funds enable these organizations to provide services to their communities, such as affordable housing and loans. The goal is to improve the quality of the community by reducing its dependence on government aid, such as welfare, which in turn has a positive impact on the community's economy.
History of Socially Responsible Investment
Socially responsible investments tend to mimic the political and social climate of the time. In the 1960s, investors were primarily concerned with contributing to causes such as women's rights, civil rights, and the anti-war movement. For example, Martin Luther King, Jr. played an important role in raising awareness for the civil rights movement, by companies that opposed the cause with a socially irresponsible orientation.
While knowledge has grown in recent years due to global warming and climate change, socially responsible investment has shown a trend towards companies that positively impact the environment by reducing emissions or investing in renewable energy sources. or clean. Consequently, these investments avoid industries such as coal mining, due to the negative environmental impact of their business practices.
Impact Investing
Impact investing aims to generate specific beneficial environmental or social effects in addition to financial gain. Impact investing is a subset of socially responsible investing (SRI), but while the definition of socially responsible investing encompasses harm avoidance, impact investing actively seeks to make a positive impact by investing, for example, in non-profit organizations that benefit the community or clean technology companies.
The term 'impact investing' was first coined in 2007, although the practice developed for years before. The basic objective of impact investing is to help reduce the negative effects of business activity on the social environment, and can be seen as an extension of philanthropy.
How does the work affect Invest?
Impact investing forces investors to consider the company's commitment to corporate social responsibility (CSR), or a sense of duty to positively serve society as a whole, before engaging with that company. This social impact differs depending on the industry and the specific company within that industry, but some common examples include giving back to the community by helping the less fortunate or investing in sustainable energy practices.
Impact investing includes many different forms of equity and investment vehicles. The outreach of impact investing is carried out by institutional investors, but a number of socially conscious financial services companies, web-based investment platforms and investor networks now offer individuals the opportunity to participate in it.. An important place is microloans, so it can provide small business owners in emerging countries with startup or growth. Women are often the beneficiaries of such loans. Impact investing doesn't always have to pay off; Investors often take profit or social goals into account.
Financial benefits of impact investing
Because socially and environmentally responsible practices tend to attract impact investors, companies can benefit financially from engaging in socially responsible practices, and investors tend to benefit as well. A study by GIIN (2013) and JP Morgan (2013) found that more than 90% of impact investors reported that their investments were meeting or exceeding their projections.
The future of impact investing
Impact investing greatly appeals to younger generations, such as millennials, who want to give back to society, so this trend is likely to increase as these investors gain more influence in the market. By impact investing, individuals or entities essentially claim that they support the message and mission of the company in which they are investing, and have an interest in the well-being of the company. As more people realize the social and economic benefits of impact investing, more companies will engage in social responsibility.
Social audit
A social audit is a formal review of the company's efforts on social responsibility. A social audit looks at factors such as a company's history of charitable giving, volunteer activity, energy use, transparency, work environment, and worker salary and benefits to assess what kind of social impact and environmental impact of a company is having in the places where it operates.
Social audits are optional. Companies can choose whether to carry out these, whether to release the results to the public or only use them internally.
A social audit is an internal examination of how a particular business is affecting a society. It serves as a way for a business to see if the actions taken are being received in a positive or negative way and to refer such information to the global public image of the company.
In the era of corporate social responsibility, when companies are often expected to deliver value to consumers and shareholders, as well as compliance with environmental and social standards deemed desirable by some members of the general public, Social audits can help companies create, improve and maintain a positive public relations image. Good public relations are key; the way a company is perceived often has an impact on its bottom line.
Products examined in a social audit
In a social audit, issues related to internal policies or practices and how they affect the identified company are examined. The activities included tend to refer to the concepts of social responsibility. This can include activities that affect the financial stability of a region, the environmental impact of operations, and transparency issues in standard reporting.
There is no standard as to what should be considered society during the audit. This allows a company to expand or narrow the scope based on its objectives. While one company may wish to understand the impact it has on a small-scale society, such as a particular city, others may choose to broaden the range to include an entire state, country, or the world as a whole.
Use of Social Audit Results
As a social audit is completely voluntary, the results of the audit are not necessary to be released to the general public or any regulatory agency. While positive results can be disclosed on a voluntary basis, negative results can be kept internal and are used to identify potential improvements that can make the next social audit results more favorable. For example, if a company found that the examined society did not believe it was adequately involved in charitable activities within the community, the company may choose to increase efforts in this area in the hope of improving public perception.
References
Friedman, M. (1957). A theory of the consumption function.
GIIN. (2013). Impact investment.
Morgan, JP (2013). Impact investment.
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