Terminology around corporate social responsibility (CSR) varies and can make the subject a bit complicated. Our goal here is to set common definitions and identify key terms.
Our Definition
Corporate social responsibility is the obligation of an organization to minimize negative impacts and maximize positive impacts on its stakeholders, including its environment, resulting in long-term acquisition of resources (materials and people) for future financial success.
CSR is demonstrated by businesses through three channels of interactions that affects each of its resources:
CSR is demonstrated by businesses through three channels of interactions that affects each of its resources:
- Environmental sustainability – This is your business’s impact on its natural surroundings and materials it uses. The goal of sustainability practices is to limit your business’s imprint on the earth by creating more efficient processes to limit resources needed or finding ways to replenish.
- Community engagement – This is your business’s impact on the community. Think of your interactions with the community such as paying taxes, fulfilling a demand and donating to charity. These could also be negative impacts like using child labor or over-serving alcohol to customers. The goal of community engagement is to operate legally, be ethical, and interact positively with you community. Examples of community engagement practices are education, services, corporate giving, corporate philanthropy and volunteering.
- Employee engagement – This is your business's impact on the people in the organization. Typically these are human resource issues like turnover, low engagement and difficulty in hiring quality talent. The goal of employee engagement is to motivate and retain your team by connecting them to the positive impact your business makes in the community. Examples are volunteer programs, employee donation matching programs, or joining a board of directors for a charity.
Defense of the Definition
The main goal of a business is to make money by fulfilling a need. Fiduciary duty requires that executives act to maximize profits for shareholders at all times. Thus, CSR has to be linked to financial performance of the organization, why businesses are motivated to do any CSR, and why it is included at the end of our definition.
CSR activities are typically seen as a long-term investment. This makes it more complicated for organization leaders as they must act on maximizing profits for shareholders. In order to make these decisions, minimizing future risks becomes important. Acting ethically and responsibly helps an organization avoid legal trouble and/or major losses. For example, the 2010 BP oil spill in the Gulf of Mexico has cost the business roughly $44 billion in fines, lawsuits, and legal fees. By acting more responsibly with their decisions, they could have avoided the disaster and saved billions. Investing in equipment, people, and practices can save businesses over time. Maximizing positive impacts can give the businesses community the support it needs to succeed and give the business itself several monetary benefits.
Finally, some organizations define CSR as a concept, a sense, or style of management. However, the word "responsible," according to Merriam-Webster:
CSR activities are typically seen as a long-term investment. This makes it more complicated for organization leaders as they must act on maximizing profits for shareholders. In order to make these decisions, minimizing future risks becomes important. Acting ethically and responsibly helps an organization avoid legal trouble and/or major losses. For example, the 2010 BP oil spill in the Gulf of Mexico has cost the business roughly $44 billion in fines, lawsuits, and legal fees. By acting more responsibly with their decisions, they could have avoided the disaster and saved billions. Investing in equipment, people, and practices can save businesses over time. Maximizing positive impacts can give the businesses community the support it needs to succeed and give the business itself several monetary benefits.
Finally, some organizations define CSR as a concept, a sense, or style of management. However, the word "responsible," according to Merriam-Webster:
- having the job or duty of dealing with or taking care of something or someone
- able to be trusted to do what is right or to do the things that are expected or required
- involving important duties, decisions, etc., that you are trusted to do
Related CSR Terms Defined
Corporate Citizenship
"The business strategy that shapes the values underpinning a company’s mission and the choices made each day by its executives, managers and employees as they engage with society." - Boston College Center for Corporate Citizenship "The extent to which businesses are socially responsible for meeting legal, ethical and economic responsibilities placed on them by shareholders." Investopedia Difference between Corporate Citizenship and Corporate Social Responsibility According to Confluence Although most CSR professionals would use Corporate Citizenship and Corporate Social Responsibility interchangeably, we believe Corporate Citizenship to be the status of where a corporation is legally amongst society's norms. CSR is the duty to act at or above society's norms. Shared Value - "reating economic value in a way that also creates value for society by addressing its needs and challenges." - Michael Porter, Harvard Business School Professor |
Other Definitions of Corporate Social Responsibility
"Corporate Social Responsibility is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large."
- World Business Council for Sustainable Development "Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders." - United Nations Industrial Development Organization "A company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies express this citizenship (1) through their waste and pollution reduction processes, (2) by contributing educational and social programs, and (3) by earning adequate returns on the employed resources." - Business Dictionary |
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