Corporate Social Responsibility (CSR)

Explained with Examples

By JASON FERNANDO Updated July 18, 2023

What Is Corporate Social Responsibility (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 can be conscious of the kind of impact
they are having on all aspects of society, including economic, social, and environmental.

Engaging in CSR means that, in the ordinary course of business, a company is operating 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 various aspects of society as well as promote a positive brand image
for companies.
 Corporate responsibility programs can also raise morale in the workplace.1
 CSR is often broken into four categories: environmental impacts, ethical responsibility,
philanthropic endeavors, and financial responsibilities.

Understanding Corporate Social Responsibility (CSR)

Corporate social responsibility is a broad concept that can take many forms depending on the
company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can
benefit society while boosting their brands.

For a company to be socially responsible, it first needs to be accountable to itself and its
shareholders. Companies that adopt CSR programs have often grown their business to the point
where they can give back to society. Thus, CSR is typically a strategy that's implemented by large
corporations. After all, 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.

Types of Corporate Social Responsibility

In general, there are four main types of corporate social responsibility. A company may choose to
engage in any of these separately, and lack of involvement in one area does not necessarily exclude a
company from being socially responsible.

Environmental Responsibility
Environmental responsibility is the pillar of corporate social responsibility rooted in preserving mother
nature. Through optimal operations and support of related causes, a company can ensure that it leaves
natural resources better than before its operations. A company can pursue environmental stewardship
through:

 Reducing pollution, waste, natural resource consumption, and emissions through its
manufacturing process.

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  Recycling goods and materials throughout its processes, including promoting re-use practices
with its customers.
 Offsetting negative impacts by replenishing natural resources or supporting causes that can
help neutralize the company's impact. For example, a manufacturer that deforests trees may
commit to planting the same amount or more.
 Distributing goods consciously by choosing methods that have the least impact on emissions
and pollution.
 Creating product lines that enhance these values. For example, a company that offers a gas
lawnmower may design an electric lawnmower.

Ethical Responsibility
Ethical responsibility is the pillar of corporate social responsibility rooted in acting in a fair, ethical
manner. Companies often set their own standards, although external forces or demands by clients may
shape ethical goals. Instances of ethical responsibility include:

 Fair treatment across all types of customers regardless of age, race, culture, or sexual
orientation.
 Positive treatment of all employees including favorable pay and benefits in excess of
mandated minimums. This includes fair employment consideration for all individuals
regardless of personal differences.
 Expansion of vendor use to utilize different suppliers of different races, genders, veteran
statuses, or economic statuses.
 Honest disclosure of operating concerns to investors in a timely and respectful manner.
Though not always mandated, a company may choose to manage its relationship with external
stakeholders beyond what is legally required.

Philanthropic Responsibility
Philanthropic responsibility is the pillar of corporate social responsibility that challenges how a
company acts and how it contributes to society. In its simplest form, philanthropic responsibility refers
to how a company spends its resources to make the world a better place. This includes:

 Whether a company donates profit to charities or causes it believes in.

 Whether a company enters into transactions only with suppliers or vendors that align with the
company philanthropically.
 Whether a company supports employee philanthropic endeavors through time off or matching
contributions.
 Whether a company sponsors fundraising events or has a presence in the community.

Financial Responsibility
Financial responsibility is the pillar of corporate social responsibility that ties together the three areas
above. A company might make plans to be more environmentally, ethically, and philanthropically
focused; however, it must back these plans through financial investments of programs, donations, or
product research. This includes spending on:

 Research and development for new products that encourage sustainability.

 Recruiting different types of talent to ensure a diverse workforce.
 Initiatives that train employees on DEI, social awareness, or environmental concerns.
 Processes that might be more expensive but yield greater CSR results.
 Ensuring transparent and timely financial reporting including external audits.

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.

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Benefits of Corporate Social Responsibility

As important as CSR is for the community, it is equally valuable for a company. CSR activities can
help forge a stronger bond between employees and corporations, boost morale, and aid both
employees and employers in feeling more connected to the world around them. Aside from the
positive impacts to the planet, here are some additional reasons businesses pursue corporate social
responsibility.

Brand Recognition
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 opposed to companies that
have demonstrated an ability to delivery quality products.3 Customers are increasingly becoming
more aware of the impacts companies can have on their community, and many now base purchasing
decisions on the CSR aspect of a business. As a company engages more in CSR, it is more likely to
receive favorable brand recognition.

Investor Relations
In a study by Boston Consulting Group, companies that are considered leaders in environmental,
social, or governance matters had an 11% valuation premium over their competitors.4 For companies
looking to get an edge and outperform the market, enacting CSR strategies tends to improve how
investors feel about an organization and how they view the worth of the company.

Employee Engagement
Another study by professionals from Texas A&M, Temple, and the University of Minnesota found
that CSR-related aligning firms and employees serve as non-financial job benefits that strengthen
employee retention.5 Workers are more likely to stick around a company that they believe in. This in
turn reduces employee turnover, disgruntled workers, and the total cost of a new employee.

Risk Mitigation
By adhering to CSR practices, companies can mitigate risk by avoiding troubling situations. This
includes preventing adverse activities such as discrimination against employee groups, disregard for
natural resources, or unethical use of company funds. This type of activity is likely to lead to
lawsuits, litigation, or legal proceedings that may harm the company financially or expose it to
negative news headlines.

CSR strategies may be difficult to assess strategically because not all benefits may be financially
translatable back to the company. For example, it might be very difficult to assess the positive impact
to a company's brand image that planting 1 million trees may have.

ISO 26000

In 2010, the International Organization for Standardization (ISO) released ISO 26000, a set of
voluntary standards meant 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.6

ISO 26000 clarifies what social responsibility is and helps organizations translate CSR principles into
practical actions. The standard is aimed at all types of organizations, regardless of their activity, size,
or location. And because many key stakeholders from around the world contributed to developing ISO
26000, this standard represents an international consensus.6

Examples of Corporate Social Responsibility

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Starbucks
Starbucks (SBUX) has long been known for its keen sense of corporate social responsibility and
commitment to sustainability and community welfare. In its 2022 Environmental and Social Impact
Report, the coffee giant highlights taking care of its workforce and the planet among its CSR
priorities. Starbucks points to its investments in its employees through stock grants and providing
additional medical, family, and educational benefits. In terms of environmental sustainability, the
company's goals include achieving 50% reductions in greenhouse gas emission, water consumption,
and waste by 2030.7

Home Depot
As part of its annual reporting on ESG, Home Depot (HD) highlighted its achievements in focusing on
its employees, operating sustainably, and strengthening its communities. The company 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 2025.8

General Motors
General Motors won the Sustainability Leadership Award from Business Intelligence Group in 2022
and was among Diversity Inc.'s top 50 companies for diversity for a seventh consecutive year in 2021.
According to its latest Sustainability Report, 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 2025.9

Why Should a Company Implement CSR Strategies?

Many companies view CSR as an integral part of their brand image, believing that customers will be
more likely to do business with brands that 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.

Why Is CSR Important?

The movement toward CSR has had an impact in several domains. For example, many companies
have taken steps to improve the environmental sustainability of their operations, through measures
such as installing renewable energy sources or purchasing carbon offsets. In managing supply chains,
efforts have also been taken to eliminate reliance on unethical labor practices, such as child labor and
slavery.

Although CSR programs have generally been most common among large corporations, small
businesses also participate in CSR through smaller-scale programs, such as donating to local charities
and sponsoring local events.

What Are the Benefits of CSR?

CRS 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 Are the 4 Types of CSR?

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CSR initiatives are often broken down into four categories: environmental, philanthropic, ethical, and
economic responsibility. Environmental initiatives focus on preservation of natural resources, while
philanthropic initiatives focus on donating to worthy causes that may not relate to a business. Ethical
responsibility ensures fair and honest business operations, while economic responsibility promotes the
fiscal support of the goals above.

What Companies Have the Best CSR?

There is no single defining rubric for evaluating the CSR of all companies. Various sources will
review and compile rankings differently. 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 determined based on employee relations, environment impact, human rights,
governance, and financial decisions.

In 2022, the top five ranked companies on the list were Owens Corning (OC), PepsiCo (PEP), Apple
(AAPL), H.P. (HPQ), and Cisco (CSCO).

The Bottom Line

Companies striving to measure success beyond bottom-line financial results may adopt corporate
social responsibility strategies. These strategies may target environmental, ethical, philanthropic, and
fiscal responsibility that extend beyond the products they sell. CSR aims to make the world a better
place beyond transacting with customers and may result in company-specific benefits as well.