What Is CSR? Corporate Social Responsibility Explained

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1. Guide to Socially Responsible Investments (SRI)
2. Why Social Responsibility Matters to Business
3. Investing in Unethical Stocks: The Pros and Cons for Trader
4. Socially Responsible Investing vs. Sin Stocks
5. Racial Justice Investing

Investing in SRI

1. Top 5 Impact Investing Firms
2. Socially Responsible Mutual Funds
3. The Rise of the Socially Responsible ETF
4. Demand for ESG Investments Soars Emerging From COVID-19 Pandemic
5. A Guide to Faith-Based Investing
6. Socially Responsible Investment for Gender Empowerment

1. History of Impact Investing
2. Impact Investing vs. Venture Philanthropy
3. How ESG, SRI, and Impact Funds Differ
4. Ethical Investing

1. Social Responsibility
2. Corporate Social Responsibility (CSR)

What Is CSR?

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public.

By practicing corporate social responsibility, also called corporate citizenship, companies are aware of how they impact aspects of society, including economic, social, and environmental. Engaging in CSR means a company operates in ways that enhance society and the environment instead of contributing negatively to them.

Key Takeaways

• Corporate social responsibility is a business model by which companies make a concerted effort to operate in ways that enhance rather than degrade society and the environment.
• CSR can help improve society and promote a positive brand image for companies.
• CSR includes four categories: environmental impacts, ethical responsibility, philanthropic endeavors, and financial responsibilities.

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Understanding Corporate Social Responsibility (CSR)

Through corporate social responsibility programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands. A socially responsible company is accountable to itself and its shareholders. CSR is commonly a strategy employed by large corporations. The more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry.

Small and midsize businesses also create social responsibility programs, although their initiatives are rarely as well-publicized as those of larger corporations.

Types of CSR

• Environmental responsibility: Corporate social responsibility is rooted in preserving the environment. A company can pursue environmental stewardship by reducing pollution and emissions in manufacturing, recycling materials, replenishing natural resources like trees, or creating product lines consistent with CSR.
• Ethical responsibility: Corporate social responsibility includes acting fairly and ethically. Instances of ethical responsibility include fair treatment of all customers regardless of age, race, culture, or sexual orientation, favorable pay and benefits for employees, vendor use across demographics, full disclosures, and transparency for investors.
• Philanthropic responsibility: CSR requires a company to contribute to society, whether a company donates profit to charities, enters into transactions only with suppliers or vendors that align with the company philanthropically, supports employee philanthropic endeavors, or sponsors fundraising events.
• Financial responsibility: A company might make plans to be more environmentally, ethically, and philanthropically focused, however, it must back these plans through financial investments in programs, donations, or product research including research and development for products that encourage sustainability, creating a diverse workforce, or implementing DEI, social awareness, or environmental initiatives.
  

Volunteering

Some corporate social responsibility models replace financial responsibility with a sense of volunteerism. Otherwise, most models still include environmental, ethical, and philanthropic as types of CSR.

Benefits of CSR

According to a study published in the Journal of Consumer Psychology, consumers are more likely to act favorably toward a company that has acted to benefit its customers. As a company engages in CSR, it is more likely to receive favorable brand recognition. Additionally, workers are more likely to stay with a company they believe in. This reduces employee turnover, disgruntled workers, and the total cost of a new employee.

For companies looking to outperform the market, enacting CSR strategies may improve how investors view the company's value. The Boston Consulting Group found that companies considered leaders in environmental, social, or governance matters had an 11% valuation premium over their competitors.

CSR practices help companies mitigate risk by avoiding troubling situations. This includes preventing adverse activities such as discrimination against employee groups, disregard for natural resources, unethical use of company funds, and activity that leads to lawsuits, and litigation.

CSR programs can raise morale in the workplace.

Company Examples

In its 2022 Environmental and Social Impact Report, Starbucks (SBUX) highlights taking care of its workforce and the planet among its CSR priorities through stock grants and additional medical, family, and educational benefits. The company's goals include achieving 50% reductions in greenhouse gas emissions, water consumption, and waste by 2030.

Home Depot (HD) has invested more than 1 million hours per year in training to help front-line employees advance in their careers, aims to produce or procure 100% renewable energy to operate its facilities by 2030, and has plans to spend $5 billion per year with diverse suppliers by 2025.

General Motors won the Sustainability Leadership Award from the Business Intelligence Group in 2022. The automaker provided $60 million in grants to more than 400 U.S. nonprofits focusing on social issues, and it has agreements in place to use 100% renewable electricity at its U.S. sites by 2025.

Why Should a Company Implement CSR Strategies?

Many companies view CSR as an integral part of their brand image, believing customers will be more likely to do business with brands they perceive to be more ethical. In this sense, CSR activities can be an important component of corporate public relations. At the same time, some company founders are also motivated to engage in CSR due to their convictions.

What Is ISO 26000?

In 2010, the International Organization for Standardization (ISO) released ISO 26000, a set of voluntary standards to help companies implement corporate social responsibility. Unlike other ISO standards, ISO 26000 provides guidance rather than requirements because the nature of CSR is more qualitative than quantitative, and its standards cannot be certified. ISO 26000 clarifies social responsibility and helps organizations translate CSR principles into practical actions.

What Are the Benefits of CSR?

CSR initiatives strive to have a positive impact on the world through direct benefits to society, nature and the community in which a business operations. In addition, a company may experience internal benefits through the initiatives. Knowing their company is promoting good causes, employee satisfaction may increase and retention of staff may be strengthened. In addition, members of society may be more likely to choose to transact with companies that are attempting to make a more conscious positive impact beyond the scope of its business.

What Companies Have the Best CSR?

Since 1999, Corporate Responsibility Magazine has ranked the top 100 Best Corporate Citizens each year among the 1,000 largest U.S. public companies. Rankings are based on employee relations, environmental impact, human rights, governance, and financial decisions. In 2023, the top-ranked companies include Hewlett-Packard Enterprise Company, Accenture, and Hasbro.

The Bottom Line

Companies striving to measure success beyond bottom-line financial results may adopt CSR strategies that target environmental, ethical, philanthropic, and fiscal responsibility that extend beyond the products they sell.

1. Society for Consumer Psychology. "Good Guys Can Finish First: How Brand Reputation Affects Extension Evaluations."
2. Boston Consulting Group. "Your Supply Chain Needs a Sustainability Strategy."
3. Frontiers in Psychology. "Corporate Social Responsibility and Employee Engagement: Enabling Employees to Employ More of Their Whole Selves at Work."
4. Starbucks. "2022 Starbucks Global Environmental and Social Impact Report," Pages 6 and 32.
5. Home Depot. "ESG Report (2022)," Pages 9-10.
6. General Motors. "2022 Sustainability Report," Pages 6-7.
7. International Organization for Standardization. "ISO 26000, Social Responsibility."
8. 3BL Media. "100 Best Corporate Citizens of 2023."

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1. Guide to Socially Responsible Investments (SRI)
2. Why Social Responsibility Matters to Business
3. Investing in Unethical Stocks: The Pros and Cons for Trader
4. Socially Responsible Investing vs. Sin Stocks
5. Racial Justice Investing

Investing in SRI

1. Top 5 Impact Investing Firms
2. Socially Responsible Mutual Funds
3. The Rise of the Socially Responsible ETF
4. Demand for ESG Investments Soars Emerging From COVID-19 Pandemic
5. A Guide to Faith-Based Investing
6. Socially Responsible Investment for Gender Empowerment

1. History of Impact Investing
2. Impact Investing vs. Venture Philanthropy
3. How ESG, SRI, and Impact Funds Differ
4. Ethical Investing

1. Social Responsibility
2. Corporate Social Responsibility (CSR)

The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.

Green tech is a type of technology that is considered environmentally friendly based on its production process or supply chain.

A social audit is a formal review of a company's procedures, code of conduct regarding social responsibility, and the company's impact on society.

Environmental, social, and governance (ESG) investing refers to a set of standards that socially conscious investors use to screen investments.

Impact investing aims to generate specific beneficial social or environmental effects in addition to financial gains.

Conscious capitalism is a philosophy with a central premise that businesses should serve all stakeholders, including employees, society, and the environment.

Carbon trade is the sale of credits that permit a certain level of carbon dioxide emission with the goal of reducing overall emissions over time.

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