What is Corporate Social Responsibility?

Corporate social responsibility enables companies to create a positive impact in the community.

Corporate Social Responsibility (CSR) pertains to the corporation’s interaction with society and its responsibilities to society in general. It demands that commercial success be gained through positive practices that aim to promote general welfare. Success, after all, is not only measured in monetary terms but also the corporation’s impact on the community, on its customers and on the environment.
Why Corporate Social Responsibility is Necessary

Corporate social responsibility may come across as a highly idealistic endeavor but it actually produces highly favorable and observable results. Recent research studies reveal that companies that are perceived by the public to adopt more socially responsible business practices and ethics are more likely to perform financially better than those companies who don’t.

DePaul University conducted a study in 2002 to determine how the 2001 Business Ethics Best Citizen companies fare compared to other companies. The results showed that the former scored higher in financial standing than the latter. Studies also indicated that Corporate Social Responsibility allows companies to have lower operating expenses because they are able to make use of recycled materials. Consequently, waste-disposal costs are also effectively lowered.

Benefits of Corporate Social Responsiblity

Practitioners of Corporate Social Responsibility also gain better reputation and brand image in the process. A better reputation in business often translates into better sales and more investors. Customer loyalty also increases in the process. In 2001, Hill & Knowlton/Harris Interactive conducted a poll and the findings showed that 79% of Americans take into consideration corporate citizenship practices in their decision to buy a product.

Overall, 36% of the respondents believe that corporate citizenship is an essential factor in deciding to buy a product. As a matter of fact, 91% of those surveyed said they will switch loyalty to another company if the corporation has negative citizenship image. In another survey by The Aspen Institute Initiative for Social Innovation through Business, MBA students revealed that more than half of them would look for another job if the company did not support their values.

Another positive outcome of CSR is that companies who consistently demonstrate compliance to regulatory requirements are given greater freedom by both national and local government. Investors also look for companies that practice socially responsible investing (SRI). Social Investment Forum reported that social investing account for $2.34 trillion of total investments.

Corporate social responsibility should be made an essential part of the wealth creation process. It is the best way to make the environment sustainable and available for future generations. With responsible corporate citizenship, wealth begets more wealth in the process.