Corporate social responsibility (CSR) is the idea that a business has a responsibility to the

society that exists around it.

Firms that embrace corporate social responsibility are typically organized in a manner that
empowers them to be and act in a socially responsible way. It’s a form of self-regulation that
can be expressed in initiatives or strategies, depending on an organization’s goals.

Exactly what “socially responsible” means varies from organization to organization. Firms are
often guided by a concept known as the triple bottom line, which dictates that a business
should be committed to measuring its social and environmental impact, along with its profits.
The adage “profit, people, planet” is often used to summarize the driving force behind the
triple bottom line.

TYPES OF CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility is traditionally broken into four categories: environmental,
philanthropic, ethical, and economic responsibility.

1. Environmental Responsibility
Environmental responsibility refers to the belief that organizations should behave in as
environmentally friendly a way as possible. It’s one of the most common forms of corporate
social responsibility. Some companies use the term “environmental stewardship” to refer to
such initiatives.

Companies that seek to embrace environmental responsibility can do so in several ways:

• Reducing pollution, greenhouse gas emissions, the use of single-use plastics, water
consumption, and general waste
• Increasing reliance on renewable energy, sustainable resources, and recycled or
partially recycled materials
• Offsetting negative environmental impact; for example, by planting trees, funding
research, and donating to related causes

2. Ethical Responsibility
Ethical responsibility is concerned with ensuring an organization is operating in a fair and
ethical manner. Organizations that embrace ethical responsibility aim to achieve fair treatment
of all stakeholders, including leadership, investors, employees, suppliers, and customers.

Firms can embrace ethical responsibility in different ways. For example, a business might set its
own, higher minimum wage if the one mandated by the state or federal government doesn’t
constitute a “livable wage.” Likewise, a business might require that products, ingredients,
materials, or components be sourced according to free trade standards. In this regard, many
firms have processes to ensure they’re not purchasing products resulting from slavery or child
labor.

3. Philanthropic Responsibility
Philanthropic responsibility refers to a business’s aim to actively make the world and society a
better place.

In addition to acting as ethically and environmentally friendly as possible, organizations driven

by philanthropic responsibility often dedicate a portion of their earnings. While many firms
donate to charities and nonprofits that align with their guiding missions, others donate to
worthy causes that don’t directly relate to their business. Others go so far as to create their
own charitable trust or organization to give back.

4. Economic Responsibility
Economic responsibility is the practice of a firm backing all of its financial decisions in its
commitment to do good in the areas listed above. The end goal is not to simply maximize
profits, but positively impact the environment, people, and society.

WHAT IS THE TRIPLE BOTTOM LINE?

The triple bottom line is a business concept that posits firms should commit to measuring their
social and environmental impact—in addition to their financial performance—rather than solely
focusing on generating profit, or the standard “bottom line.” It can be broken down into “three
Ps”: profit, people, and the planet.

Profit
In a capitalist economy, a firm’s success most heavily depends on its financial performance, or
the profit it generates for shareholders. Strategic planning initiatives and key business decisions
are generally carefully designed to maximize profits while reducing costs and mitigating risk.

In the past, many firms’ goals have ended there. Now, purpose-driven leaders are discovering
they have the power to use their businesses to effect positive change in the world without
hampering financial performance. In many cases, adopting sustainability initiatives has proven
to drive business success.

People
The second component of the triple bottom line highlights a business’s societal impact, or its
commitment to people.
It’s important to make the distinction between a firm’s shareholders and stakeholders.
Traditionally, businesses have favored shareholder value as an indicator of success, meaning
they strive to generate value for those who own shares of the company. As firms have
increasingly embraced sustainability, they’ve shifted their focus toward creating value for all
stakeholders impacted by business decisions, including customers, employees, and community
members.

Some simple ways companies can serve society include ensuring fair hiring practices and
encouraging volunteerism in the workplace. They can also look externally to effect change on a
larger scale. For instance, many organizations have formed successful strategic partnerships
with nonprofit organizations that share a common purpose-driven goal.

Planet
The final component of the triple bottom line is concerned with making a positive impact on
the planet.

Since the birth of the Industrial Revolution, large corporations have contributed a staggering
amount of pollution to the environment, which has been a key driver of climate change.

While businesses have historically been the greatest contributors to climate change, they also
hold the keys to driving positive change. Many business leaders are now recognizing their
responsibility to do so. This effort isn’t solely on the shoulders of the world’s largest
corporations—virtually all businesses have opportunities to make changes that reduce their
carbon footprint. Adjustments like using ethically sourced materials, cutting down on energy
consumption, and streamlining shipping practices are steps in the right direction.

WHY IS THE TRIPLE BOTTOM LINE IMPORTANT?

To some, adopting a triple bottom line approach may seem idealistic in a world that emphasizes
profit over purpose. Innovative companies, however, have shown time and again that it’s
possible to do well by doing good.

The triple bottom line doesn’t inherently value societal and environmental impact at the
expense of financial profitability. Instead, many firms have reaped financial benefits by
committing to sustainable business practices.

“In many situations, it's possible to do the right thing and make money at the same time,”
Harvard Business School Professor Rebecca Henderson says in Sustainable Business Strategy.
“Indeed, there's good reason to believe that solving the world's problems presents trillions of
dollars worth of economic opportunity.”
Case in point: Research by Nielsen found that 48 percent of US consumers would change their
consumption habits to lessen their impact on the environment. In 2018 alone, this sentiment
translated to roughly $128.5 billion in sales of sustainable, fast-moving consumer goods.

Beyond helping companies capitalize on a growing market for sustainable goods, embracing
sustainable business strategies can be highly attractive to investors. According to Sustainable
Business Strategy, evidence has increasingly shown that firms with promising environmental,
social, and governance (ESG) metrics tend to produce superior financial returns. As a result,
more investors have begun focusing on ESG metrics when making investment decisions.

Reference:
https://online.hbs.edu/blog/post/types-of-corporate-social-responsibility
https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line

WHY CORPORATE SOCIAL RESPONSIBILITY INITIATIVES FAIL

In a time when social impact is demanded, many companies are shifting their strategies to
incorporate activities for the greater good. However, this doesn’t necessarily mean they’re
doing it well. For many businesses, corporate social responsibility becomes a way of changing
perceptions and reputations, rather than creating and measuring any substantial positive
impact. For others, what they say to the public can be misleading. We explore some examples
of misleading or disingenuous CSR below.
1. H&M GREENWASHING
Swedish fast-fashion chain H&M has been called out recently for supplying insufficient
information about the sustainability of their “sustainable style” collection. This is known as
greenwashing – the act of giving a false impression that a company and its products are more
environmentally friendly than they truly are.
The internationally renowned fashion company has marked some of its products as ethical and
environmentally friendly, yet they still produce materials at a non-environmentally friendly
rate. The Norwegian Consumer Authority called out the chain for failing to produce sufficient
information on how their products have “environmental benefits”. As a result, H&M have
received criticism in the media.
2. VIRGIN AUSTRALIA’S OPPORTUNISTIC CAMPAIGN
Virgin Australia found themselves in hot water for an attempt at CSR gone wrong when they
announced a plan to give Australian veterans a public acknowledgement on flights and priority
when boarding. Unfortunately, the company failed to consult the veterans first.
The move was considered “tokenistic” by many, with the company accused of causing
discomfort to veterans. The airline was critiqued for seeking an opportunistic moment on
Remembrance Day and failing to engage with the community first. Virgin Australia’s attempt to
participate in CSR backfired, which shows the importance of considering a strategy driven by
engagement, rather than opportunism.
3. UNILEVER’S SUPERFICIAL CSR POLICIES
Since CEO Paul Polman began leading Unilever – a giant multinational corporation selling
consumer goods across the globe –he has regularly highlighted his eagerness to combat climate
change and address social issues. However, recently the company has faced ridicule.
Unilever made headlines when nearly 600 workers in India suffered life-threatening mercury
exposure. They made headlines again when a newspaper exposed claims of sexual harassment,
stating that African workers were forced to bribe their supervisors to prevent advances. These
controversies had a damaging impact on the company, with growth slowing and their positive
reputation declining.

As people become advocates, they increasingly expect transparency and authenticity from a
business that declares to do good. The reasons why CSR initiatives fail include:

• Companies choose to promote the “socially responsible” behavior with insufficient

evidence to support it.
• There is no attempt at getting stakeholder, customer or employee buy-in on the CSR
strategy
• There is no measurement of the CSR strategy value
• The advocacy campaign doesn’t align with a brand’s operations, services or message

DISADVANTAGES OF CORPORATE SOCIAL RESPONSIBILITY

While the goal of CSR is to push businesses to act responsibly and ethically toward the
environment and community, there are some disadvantages. Engaging in CSR is not always
cheap. It can rely on expensive structures and strategies to plan, execute and measure.
A poorly planned CSR strategy that doesn’t deliver what it says it can quickly become a failure
and business liability. The impact on a business’s reputation can be detrimental, and the
community will be quick to scrutinize its actions.

KEY ELEMENTS OF SUCCESSFUL CORPORATE SOCIAL RESPONSIBILITY

• TRANSPARENCY
Exaggerating or hiding business practices can cause distrust in a business. Companies should
make their socially responsible motives clear.
 • MEASUREMENTS
If a company chooses to engage in CSR, the impact should be assessed. Examples of ways to
assess impact could be measuring key indicators over time, such as calculating emissions or
volunteer hours. Listening to stakeholders and customers opinions will determine impact as
well.

• ACCOUNTABILITY
When engaging in CSR, businesses should be accountable to their employees, their
stakeholders and their customers. While CSR isn’t regulated by government bodies, being
responsible of their own accord is vital to a successful CSR strategy.

• CONSISTENCY AND DEDICATION TO EXCELLENCE

Responsible companies will ensure that a CSR strategy is consistent. Truly responsible
businesses won’t just utilize social responsibility as a publicity stunt but will actively prioritize
sustainability and environmentally conscious actions that benefit their employees, stakeholders
and customers.

THE BENEFITS OF CORPORATE SOCIAL RESPONSIBILITY

• BRAND RECOGNITION
Engaging in CSR has a great impact on a company’s public image. Customers and shareholders
often feel more emotionally connected and loyal to a brand that aligns with their values.

• INCREASED PROFITS
Many companies with a well-thought-out CSR strategy experience higher profit margins. By
proving they can be socially responsible, businesses motivate customers to purchase from
them. As people become more aware of local, national and international issues, a company’s
CSR policies can have a big impact on their customers’ buying decisions.

• INCREASED EMPLOYEE RETENTION AND RECRUITMENT

Many employees feel a greater sense of purpose and connection to a business that engages in
CSR. Knowing their actions will help the world in a positive way motivates employees and
provides an incentive to continue working with a company.

Reference:
https://online.vu.edu.au/blog/what-is-corporate-social-responsibility