CORPORATE SOCIAL RESPONSIBILTY

WHAT IS CORPORATE SOCIAL RESPONSIBILTY (CSR)?

Corporate social responsibility (CSR) refers to strategies that companies put into action as
part of corporate governance that are designed to ensure the company’s operations are
ethical and beneficial for society.

CATEGORIES OF CSR
Although corporate social responsibility is a very broad concept that is understood and
implemented differently by each firm, the underlying idea of CSR is to operate in an
economically, socially, and environmentally sustainable manner.

Generally, corporate social responsibility initiatives are categorized as follows:

1. ENVIRONMENTAL RESPONSIBILITY
Environmental responsibility initiatives aim at reducing pollution and greenhouse gas
emissions, and the sustainable use of natural resources.

2. HUMAN RIGHTS RESPONSIBILITY

Human rights responsibility initiatives involve providing fair labor practices (e.g., equal
pay for equal work) and fair trade practices, and disavowing child labor.

3. PHILANTHROPIC RESPONSIBILITY
Philanthropic responsibility can include things such as funding educational programs,
supporting health initiateves, donating to causes, and supporting community beautification
projects.

4. ECONOMIC RESPONSIBILITY
Economic responsibility initiatives involve improving the firm’s business operation while
participating in sustainable practices – for example, using a new manufacturing process to
minimize wastage.

BUSINESS BENEFITS OF CSR

In a way, corporate social responsibility can be seen as a public relations effort. However, it
goes beyond that, as corporate social responsibility can also boost a firm’s competitiveness.
The business benefits of corporate social responsibility include the following:

1. STRONGER BRAND IMAGE, RECOGNITION, AND REPUTATION

CSR adds value to firms by establishing and maintaining a good corporate reputation
and/or brand equity.

2. INCREASED CUSTOMER LOYALTY AND SALES

Customers of a firm that practices CSR feel that they are helping the firm support good
causes.

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3. OPERATIONAL COST SAVINGS
Investing in operational efficiencies results in operational cost savings as well as reduced
environmental impact.

4. RETAINING KEY AND TALENTED EMPLOYEES

Employees often stay longer and are more committed to their firm knowing that they are
working for a business that practices CSR.

5. EASIER ACCESS TO FUNDING

Many investors are more willing to support a business that practices CSR.

6. REDUCED REGULATORY BURDEN

Strong relationships with regulatory bodies can help to reduce a firm’s regulatory burden.

EXAMPLE - CSR OF STARBUCKS

Starbucks is a well-known firm that practices corporate social responsibility. As indicated

by the company: “Starbucks’ social corporate responsibility and sustainability is about
being responsible and doing things that are good for the planet and each other.”

Starbucks’ CSR initiatives include:

 Starbucks Youth Action Grants: Awarding grants to inspire and support youth
action.
 Ethos Water Fund: Raising clean water awareness and providing children with
access to clean water.
 Ethical Sourcing: Commitment to buying and serving ethically traded coffee.
 Green Building: Using the U.S. Green Building Council’s LEED certification
program to create energy and water-efficient store designs.

THE THREE MODELS OF CORPORATE SOCIAL RESPONSIBILITY

While some concept of corporate social responsibility has been around since the 1950s,
businesses have seen both an evolving conversation and a growing interest in this area of
management. Increasingly, corporations both large and small are using commitments to
social responsibility to promote their products. Examining the three dominant models of
social responsibility is one way managers and investors can make sure not to miss out on
this important conversation.

BASIC
Corporate social responsibility is the commitment a company has to the community outside
of its shareholders and employees. The subject isn't without controversy, with some
claiming corporations have no role in social responsibility and others asserting that they
can't escape it. Business researcher Elizabeth Redman proposed the three models of
corporate social responsibility as a way of understanding this often contentious
conversation. In her work on corporate social responsibility, published in the Roosevelt

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Review, Redman contends that the discussion often involves one of three conceptual models
for CSR: a conflict model, an added value model and a multiple goals model.

TRADITIONAL CONFLICT MODEL

In the traditional conflict model for corporate social responsibility, social values and
benefits are seen as in conflict with shareholder profits. Under this model, corporations
opting to practice forms of social responsibility are likely to see added costs for doing so.
Proponents of this conceptual model generally argue that the nature of business is one of
trade-offs between economic and moral values, and corporate managers will inevitably be
forced to decide between their social and fiduciary responsibilities or their commitment to
shareholder equity value.

ADDED VALUE MODEL

A second model for conceptualizing corporate social responsibility is to see social and
environmental commitments as a means to increase profit. While proponents of this model
tend to acknowledge that conflicts persist in business decisions, they also believe that CSR
investments are also capable of generating new revenues. This model tends to focus on
issues like the value of CSR in attracting socially conscious consumers, finding socially
conscious employees and managing the risks of negative press.

MULTIPLE GOALS MODEL

Finally, a third model for corporate social responsibility posits a role for social values in
corporate decisions that are untethered to economic values. Under this model, corporations
have goals beyond shareholder value, including the enhancement of their community
without respect to monetary gain. According to Redman, this model is thought to be
relatively radical, though some corporate officers have expressed support for it.
Proponents of this model emphasize quality of life as the basis of economic activity.

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