Corporate social responsibility (CSR) is what an organization does to be a good “citizen,” with the goal of promoting social and environmental change. CSR initiatives likely don’t have an immediate financial payoff for a company – any profit gained is typically the result of goodwill built over the long term. Both global and locally based companies engage in CSR and, as we’ll explain in this article, this is becoming a mandatory element of corporate operations.
Business Motivations Behind CSR
Why would a corporation spend time and resources on something if they can’t make any money from it? What are the benefits of corporate social responsibility? The reasons vary.
Large organizations often use CSR to counteract any negative effects in an industry, economy, or geographic area that may have occurred as a result of doing business there. The most obvious example is ExxonMobil’s cleanup efforts after its massive oil spill in 1989 in the Prince William Sound.
ExxonMobil’s lackluster response to the Valdez spill caused a firestorm of criticism that spurred the company to launch a CSR plan, which included reforming operations, developing industry response contingencies, and becoming a founding member of every major oil spill response center worldwide. Many point to this moment in history as when CSR became a corporate mandate. Another example is Wal-Mart. To combat negative press around unethical labor practices, Wal-Mart began CSR initiatives in 2007 that focused on creating zero waste, operating with 100% renewable energy, and selling sustainable products.
On the other end of the spectrum, some organizations engage in CSR because it is integral to their ethos and mission. Most notable is Patagonia. The company has supported environmental causes since its founding in 1973, donating 1% of its annual sales to environmental charities and grassroots organizations for 30 years. Patagonia is famous for radically progressive CSR initiatives, such as encouraging consumers NOT to buy jackets due to overconsumption and closing stores on Black Friday, the biggest shopping day of the year.
Smaller organizations invest in CSR on a local level with more modest degrees of time and finances. The CSR focus of smaller companies is usually very closely tied to their mission, whether that’s diversity, the environment, or solving critical community issues. For example, LA-based Blaze PR regularly participates in beach clean-ups, which has the dual function of improving a vital element of their community and also generating great press for themselves.
The ultimate motivation behind corporate social responsibility is that it’s good business. Putting CSR initiatives in play helps companies counteract bad press and show that they are balancing the pursuit of profit with ethical business practices. It also genuinely creates positive change in communities – corporations wield tremendous social and political power.
Whether willingly or not, corporations’ business dealings and operations have never been more transparent because of the exploitative power of the internet and social media. Armed with this information, consumers increasingly shop with their ethics in mind and will invest their dollars and brand loyalty in companies they think align with those ethics.
Trends in Corporate Social Responsibility
As Investopedia phrases it, corporations are increasingly responsible for a triple bottom line: people, profits, and planet. And that triplet of concepts is another way of outlining corporate social responsibility for businesses. If corporations want to remain relevant to consumers and keep shareholders and investors happy, they must keep up with emerging CSR trends. Here are five of the top CSR trends for 2017 and beyond:
CSR is the New Norm
CSR has evolved from an optional internal initiative to a mandatory legislative and PR/brand-building strategy that companies can’t afford to blow off. The importance of corporate social responsibility is strongly correlated with a company’s sustainability – not only are consumers more attracted to socially conscious companies, but corporate stakeholders and regulators are demanding it.
As published in the KPMG Survey of Corporate Responsibility Reporting 2015:
- 73% of N100 companies (top 100 companies in 45 countries) and 92% of G250 companies (the world’s 250 largest companies by revenue) now report on corporate responsibility, compared to 24% of N100s and 35% of G250s in 1999.
- Almost two-thirds of G250 companies invest in third-party independent assurance of corporate responsibility information, firmly establishing this as standard practice among the world’s biggest companies.
- The main driver for corporate responsibility reporting continues to be legislative: There is a growing trend of regulations requiring companies to publish non-financial information.
In the past 10-15 years, corporate social responsibility has become mandatory, standard, and essential. There will be immense pressure for organizations to engage in CSR from regulators, as well as consumers.
Stricter Measurement and Evaluation
While the top companies in the world are routinely reporting on CSR, the need for more refined and integrated measurement strategies is still there. The benefits of corporate social responsibility have traditionally been difficult to quantify and report on through standard financial methods – positive community impact, brand loyalty, and similar elements play out over the long term and don’t often have a direct line from effort to revenue.
Corporations are looking to the nonprofit sector for measurement ideas and tactics that will allow them to adapt their reports and clearly display impact results. It’s important for the reports to be consumable for board members and stakeholders in order for them to learn more about corporate social responsibility and its benefits to the organization. This also involves using more sophisticated technology to gather, parse, analyze, and integrate CSR measurements into existing reporting structures. Decision makers are being asked to balance profitability with ethical business practices, and therefore must have the most accurate information relating to CSR possible. Stricter measurement and evaluation practices is a trend that will play a key role in empowering corporate leaders to make better decisions on where and how to invest in CSR.
More Opportunity for CSR Amid Global Political Change
Sweeping changes to U.S. governmental programs, shifting global power bases, and emerging market growth all present both an opportunity and a challenge for organizations. More than ever, corporations are being looked to for leadership on critical, controversial issues affecting their markets and employees. This is a delicate tightrope for companies to walk – what may be the most profitable and secure financial future could also be the most socially unpopular choice. And people are watching – in the age of smartphones and 24-hour news cycles, corporate leaders know their business decisions and actions can easily be publicized.
This is the brightest spotlight corporations have ever had, in a time that many are comparing to the social upheaval of the early 1970s. With that bright glare also comes a big opportunity for organizations to prove their commitment to CSR and step up as problem-solvers. Companies are expected to express their opinions and lean in to their values, demonstrating leadership and garnering trust that many see lacking in the political arena. Determining the most relevant issues related to operations and business, and how to focus on them in a socially responsible manner, will be critical for corporations in the immediate future.
Increased Investment in Employees
The importance of corporate social responsibility doesn’t always manifest in external programs or donations – it can very much have an internal focus, too. Increasingly, corporations are seeing the value of investing in their employees and making that an element of their CSR. For example, companies are focusing on internal issues like bridging the gender pay gap, developing training and mentoring programs, offering increased flexibility and better benefits, and building stronger cultures around social responsibility and volunteerism.
Recent studies and reports consistently reinforce the importance of keeping employees happy. According to the 2016 Employee and Job Satisfaction and Engagement Report, “Workers of all career levels and generations place high value on compensation- and benefit-related factors when determining job satisfaction, but nonfinancial factors also weigh heavily in employees’ satisfaction with their jobs.” To that point, 32% reported that the organization’s commitment to corporate social responsibility (balance financial performance with contributions to the quality of life of its employees, the local community and society at large) was “very important.”
When employees feel valued at a company and believe their company provides value to society, they are much more likely to be engaged in their work. The quality of work increases, as does employee retention. Not only do retention rates increase for corporations who invest in employees, but recruitment rates increase as well. It’s easier to get, and keep, the best talent, which is good business.
More Localized, Personalized CSR
Even the biggest global organizations are shifting focus to more local CSR initiatives because the value and impact is greater. A multi-national company will launch a social initiative that benefits a low-income neighborhood in a city where a new office location just opened. Or a company will mobilize the employees at its headquarters to volunteer at a food bank or park clean-up. The smaller, local initiatives have a far-reaching impact and can be more effective than simply writing a check for a massive donation to a nonprofit where you can’t actually see the impact of the philanthropic efforts. That’s not to say that the money or resources won’t be put to good use on a large scale, only that personalized storytelling around CSR initiatives get more traction.
From a marketing perspective, it’s the difference between an organization producing a one-page PDF listing all the CSR initiatives for the quarter, or a video showcasing one emotional CSR program. The latter is simply more engaging and a better story, which translates to more attention from consumers and media outlets, and ultimately converts into revenue. It is a better way to define corporate social responsibility for a specific company.
In the Forbes article, “6 CSR Trends to Watch in 2017,” 21st Century Fox’s SVP of Social Impact Liba Rubenstein says: “The world’s most respected companies focus not only on doing meaningful, measurable work in their communities, but also on telling compelling, multidimensional stories about who they are and why Social Impact is core to their identity. They’re also taking advantage of exciting mediums like virtual reality (VR) to increase empathy and understanding. A dry CSR report isn’t going to move the needle anymore – we all have to be storytellers.”
Improving CSR Efforts with Relationship Mapping Software
For regulatory, reporting, and brand-building reasons, it’s important that an organization’s CSR efforts align with its overall business goals. That means matching CSR departments with the right nonprofits and philanthropic causes.
RelSci is a relationship mapping software that bridges the gap between organizations looking for CSR initiatives that align with their interests and nonprofits seeking funding. The software plots connections between people, companies, and industries, revealing commonalities that will open doors and create mutually beneficial relationships. For example, if a nonprofit is trying to secure funding for refugees, RelSci will help it identify organizations whose CSR is to donate to humanitarian causes related to immigration. Or if an organization’s CSR department wants to invest in education, it can find viable connections to universities.
RelSci’s software gives both nonprofits and corporations access to a rich tapestry of relationship pathways, across a variety of industries. These are all contained within a robust database that’s easily accessible and searchable. RelSci also provides actionable development opportunities straight to your inbox. These reports are customized to your corporation or nonprofit and include:
- How to identify and connect with compatible organizations or prospects
- How to leverage your board and top donors for CSR or fundraising opportunities
- The latest news in your region and cause area
- The profile and makeup of your model nonprofit or donor
- Updates on executives, board members, top donors, etc.
Relationship mapping software improves the relevancy of CSR efforts and provides shortcuts to creating essential connections between corporations and nonprofits.
Conclusion
Corporate social responsibility has become more than a buzzword and more than an optional program. It’s now an essential part of the business model of the biggest companies in the world, and will soon become mandatory for all companies to engage in.