Definition and Examples of Corporate Social Responsibility
Corporate social responsibility is a way of doing business that aims to increase a company's social impact while meeting business objectives such as growth and revenue goals. It can also refer to any effort to improve a company's eco-friendliness or carbon footprint. Companies can deploy CSR efforts as a standalone program or as part of a broader campaign.
- Acronym: CSR
- Alternate name: Corporate citizenship
An example of a company's corporate social responsibility is Starbucks' commitment to global human rights. This commitment is spelled out in official corporate policy and includes compliance requirements across the firm's business units. From hiring to supply chain to the way the company works with its business partners, adhering to this social mission affects all levels of Starbucks' operations.
How Corporate Social Responsibility Works
Companies may create CSR programs that involve every part of their business and often have dedicated staff members and resources for CSR.
CSR programs vary in scope, but a few examples might include:
- Giving to nonprofit groups, such as local food banks, by supplying volunteers or through monetary donations
- Offering job-training programs for those in need
- Pledging to ensure diversity in the workforce
- Focusing on shrinking the company’s carbon footprint through improved supply chain efficiency
One report found that 92% of S&P 500 and Russell 1000 companies published reports charting their efforts related to CSR and sustainability in 2020. In 2011, that figure was less than 20%.
Many large companies have shown their commitment to CSR amid natural disasters. For example, in 2017, Walmart and its foundation gave close to $20 million toward relief efforts for Hurricane Harvey in Texas. In 2020, T-Mobile provided $1.3 million in in-kind donations in the wake of Hurricane Zeta and California's forest fires, part of its overall giving of $100 million in cash and donations of goods and services.
There's little doubt that CSR programs should exist in every business. Companies with robust CSR programs can benefit from better public relations and have happier customers. Improved company profits usually result, in turn satisfying stakeholders.
In some cases, the positive financial impact of CSR is clear. For example, a shift toward renewable energy sources, like solar panels at corporate campuses, might result in lower electricity costs over time.
A report by Babson College reviewed hundreds of CSR program studies. The reviewers found that the programs can have a strong impact on a company's market value and brand and lower risk. The report's findings found that CSR programs have the potential to do the following:
- Increase market value by up to 6%
- Reduce systemic risk by up to 4%
- Reduce the cost of debt by 40% or more
- Raise price premium by up to 20%
- Reduce staff turnover rate by up to 50%
CSR vs. ESG
|CSR vs. ESG|
|Success of programs measured from within||Success of programs measured from the outside|
|Used by a business to improve its impact on society||Used by investment groups to guide decisions|
CSR is similar to environmental, social, and corporate governance (ESG) principles. The leading difference is that CSR is an internal function, while ESG is an external one.
With CSR programs, it's up to those inside the company to measure the success of their actions. They decide which programs to continue, and rework those that aren't performing as well.
ESG, on the other hand, is a metric that outside analysts can use to compare the effect of different corporate efforts to address environmental and social issues.
Many investment groups gauge companies based on their pledge to integrate ESG criteria. Institutional investors and mutual fund companies may outline how ESG guidelines are incorporated into their philosophies in their annual reports.
The framework for ESG reporting stems from the Global Reporting Initiative (GRI), which is a private standards body that seeks to standardize corporate sustainability reporting. It has been working toward this goal since the late 1990s.
In 2006, the United Nations launched the Principles for Responsible Investment (PRI), a program that institutional investors can use to merge ESG values into their decision-making process.
More than 3,000 investors and groups have signed on to the PRI, pledging to stand by these six principles:
- We will incorporate ESG issues into investment analysis and decision-making processes.
- We will be active owners and incorporate ESG issues into our ownership policies and practices.
- We will seek appropriate disclosure on ESG issues by the entities in which we invest.
- We will promote acceptance and implementation of the Principles within the investment industry.
- We will work together to enhance our effectiveness in implementing the Principles.
- We will each report on our activities and progress toward implementing the Principles.
Individual investors may want their investments to reflect their values. They can buy into mutual funds and exchange traded funds (ETFs), grouped by their commitment to CSR. Examples of this include the iShares MSCI KLD 400 Social ETF (DSI) and the SPDR SSGA Gender Diversity Index Fund (SHE).
- Corporate social responsibility (CSR) involves actions taken when a company seeks to improve its environmental and societal impact.
- There is evidence that a commitment to CSR can positively affect a company’s finances.
- CSR is similar to ESG, a process by which investors make decisions based on CSR programs and a company's impact.
Harvard Business School. "5 Examples of Corporate Social Responsibility That Were Successful." Accessed Jan. 3, 2022.
Starbucks.com. "Global Human Rights Statement." Accessed Jan. 3, 2022.
Porter Novelli. "PN Purpose Tracker: Employee Perspectives on Responsible Leadership During Crisis," Page 3. Accessed Jan. 3, 2022.
Governance & Accountability Institute. "92% of S&P 500® Companies and 70% of Russell 1000® Companies Published Sustainability Reports in 2020, G&A Institute Research Shows." Accessed Jan. 3, 2022.
Walmart. "Walmart and the Walmart Foundation Announce up to $20 Million Toward Hurricane Harvey Relief and Recovery." Accessed July 7, 2020.
T-Mobile.com. "T-Mobile 2020 Corporate Responsibility Report," Page 15. Accessed Jan. 3, 2022.
Babson College. "Project ROI: Defining the Competitive and Financial Advantages of Corporate Responsibility and Sustainability," Page 3. Accessed Jan. 3, 2022.
Global Reporting Initiative. "About GRI." Accessed Jan. 3, 2022.
Principles for Responsible Investment. "About the PRI." Accessed Jan. 3, 2022.
Principles for Responsible Investment. "What are the Principles for Responsible Investment?" Accessed Jan. 3, 2022.