How much do you know about Corporate Social Responsibility?

17/07/2018

How much do you know about Corporate Social Responsibility?

The principle of Corporate Social Responsibility (CSR) is that firms should be responsible for the general welfare of society, observing a social contract that extends beyond the commercial contracts they purse to maximise profits. A firm is expected to maximise profits and, taking this into account, following this goal is ethical whereas deviating from it becomes a violation of management’s responsibility to shareholders or owners. Maximising profit should allow the firm to invest, promote future growth and employment, so that it is socially and economically sustainable. Therefore, when successful corporations donate to non-business-related activities – supporting local communities, making funds to treat pollution, or financing social agendas, it raises the question of why some firms do engage in such activities and others do not.

Businesses and corporations in many sectors are initiating programmes and strategies aimed at enhancing social welfare, protecting the environment and defending human rights. There is evidence worldwide of the growing importance and impact of CSR. Companies do not function in isolation from the society around them. The more a social improvement relates to a company’s business, the more it leads to economic benefits as well. Preserving the environment benefits not only society but companies too, because reducing pollution and waste can lead to a more productive use of resources and help produce goods that consumers value.

The more a social improvement relates to a company’s business, the more it leads to economic benefits as well

That does not mean that every corporate expenditure will bring a social benefit or that every social benefit will improve competitiveness. Most corporate expenditures produce benefits only for the business, and charitable contributions unrelated to the business generate only social benefits. It is only where corporate expenditures produce simultaneous social and economic gains that corporate philanthropy and shareholder interests converge.

The relationship between charities and banks is a good example. For instance, the former depends on the later’s donations to carry out its activities such as prevention or relief of fuel poverty, education, community development, health, etc. However, in the aftermath of the 2008 recession, banks cut this channel to charities since it was one of the easiest ways of saving money. This suggests that charities can no longer focus only on raising money, they ought to look for partnerships with organisations whose investment is distributed in a way that is intrinsically related to their purpose. Having such an approach will prevent future ties from being cut so easily as happened 10 years ago.

Social responsibility allows an organization to nurture its assets, which include goodwill, trust and a good reputation. Businesses regard their good name and their brand to be one of their most valuable assets and, by showing that they take their social responsibility seriously, they are also encouraging the public to take them seriously.

In a recent study, it was revealed that consumers are much more willing to spend money on the products and services of a company that has proven itself to be socially responsible. In fact, 45% of consumers demonstrate this willingness, not even minding that they have to pay more, as long as it is with a company that they trust due, in large part, to their social responsibility measures. In fact, the effect is Triple Effective when the social impact is delivered in the direct market and operations in which the company is active. This is a very efficient brand investment growing customer base, loyalty and attracting new markets. The challenge is that most companies are under resourced in the emerging social science and many companies would benefit in a social impact audit.

SmartKlub builds resilient communities around energy by helping them achieve their social goals. whether it’s tackling fuel poverty, improving sustainability or connecting residents in a place or in cyberspace. If you can help us while delivering your CSR objectives too, please get in touch.