The term ‘Corporate Social Responsibility’ is not new to the world. Although CSR activities are popular in business, only a few know their origins.
The need for wealthy people to be socially responsible was first felt by wealthy businessman and philanthropist Andrew Carnegie. He challenged the wealthy to support social causes. John D. Rockefeller took the first step in the late 1800s and donated more than a half billion dollars to social causes.
CSR began to emerge during the 1950s and 1960s following the rise of social and environmental movements. The concept has evolved over the years and is one of the most important activities for all companies.
This blog aims to answer many questions about corporate social responsibility advantages and disadvantages, types, and more.
Let’s get started!
What is Corporate Social Responsibility?
Corporate social responsibility activities aim to highlight a company’s positive role in a community. The concept has been linked closely with creating sustainability of economic, social, and environmental value. The focus is on non-financial factors that companies must consider while making business decisions.
CSR activities are mandatory for all companies operating at regional, national, or international levels. How do CSR activities help companies, and what are the various types of CSR? We will explore and answer all these questions in the following few sections.
Types of Corporate Social Responsibility
Here are the four types of corporate social responsibility you must know about:
Environmental responsibility
Companies are expected to choose the right ways to create an impact. Environmental responsibility is one of the best types to highlight a company’s responsibility towards society.
Organisations work on reducing carbon emissions, conserving natural resources, reducing waste, using renewable energy sources, etc as part of environmental responsibility. It is one of the popular types, all due to the demand for sustainable business practices.
Economic responsibility
Big companies take up the responsibility to support small and medium businesses. It helps create a sustainable economy. Organisations invest in local communities and donate to charitable organisations as well.
Economic responsibility can have a great impact on the society. It can also boost the overall economic condition of a nation.
Philanthropic responsibility
A common misconception is that companies doing CSR activities do that for their benefit. If you feel the same, then how do you define Kraft Heinz’s ‘Huddle to Fight Hunger’ campaign? The company took the initiative to donate money for a meal to food banks whenever they got a like on their Facebook page.
Philanthropic responsibilities are defined as a company’s way of giving back to communities. The money donated addresses various causes such as education, health, and social welfare.
Ethical responsibility
Work ethics have always been a major point of discussion for ages. Employees have complained of an unhealthy work culture often. Organisations are always in search of ways to mend things. Ethical responsibilities suggest that companies follow the right rules and regulations and correct ethical standards.
These initiatives can be great in helping companies attract and retain their employees. Further, it creates a good image of an organisation for the common people.
Companies can choose any of the above types and move ahead with their campaigns. Despite CSR being one of the best things for companies, there are a few pros and cons of CSR you must know about.
Advantages of Corporate Social Responsibility
CSR adoption has become increasingly popular in the world. On that note, let’s explore the advantages of corporate social responsibility:
Improving brand image
Doing something for society adds value to the company and builds a positive image. You will be inclined to buy products from brands that have contributed to society and are willing to do more. The activities help in building a clean image of a company.
Many companies have reaped benefits from CSR activities and have been able to attract more customers. Many companies succeeded, all due to their contribution to society and the environment.
Attracting and retaining employees
How can doing things for society help attract and retain potential employees? Let’s take an example. You have graduated last year and are looking for a job. What will attract you to a company? The package or the reputation? That’s debatable, but students might choose reputation over salary.
This reputation can be attributed to continuous CSR activities. It sheds light on their responsibility towards society. Further, it gives out a strong message to the aspirants. They feel they can make an impact on society if they join the company.
Being in the good books of regulatory authorities
The regulatory authorities are always investigating companies’ operations. A company will never want to be under the radar. They will adopt ways to avoid anything that ruins their image. CSR is a great way to retain a good place in the books of regulatory authorities.
Companies doing regular CSR activities are always one step ahead of their competitors. It helps in smooth functioning and helps them increase their profits as they move forward.
Attracting new investors
Investments are essential for companies, both big and small. But how to attract more investors? Many feel a good presentation is enough to attract investors, but it is not the only thing. You might not believe it, but CSR activities can attract more investors for your company. CSR adds value to the company’s reputation and helps them attract more investors.
An excellent way to advertise the brand
CSR has some business elements as well. Companies use this as a medium to promote their brand and earn more customers. However, do not make the mistake of thinking companies to be selfish. Major companies care about society. So, when they do some CSR activities, it automatically helps promote their brand.
Does these make you feel CSR is the best thing to do? Well, you must know a few things before taking a stand.
Disadvantages of Corporate Social Responsibility
Undeniably, CSR has a lot of advantages. However, there are a few points of concern as well. Apparently, things can look good, but there are a few disadvantages of CSR as well. Here’s a look:
Shift in profit-making objective
A company should focus on making more profits. CSR often takes away a company’s focus from profit-making and makes social responsibilities a priority. Compromising with profits is never an option. However, the focus on CSR campaigns results in a shift from the main objective. As a consequence, it might make the shareholders unhappy.
Harming the company’s reputation
Building a reputation and gaining customers is a long process. There are many who fail to keep up with the pace. Effective advertising has helped many companies reach out to potential customers. On the other hand, a few of them came into the limelight with their CSR activities. One might think it is good to showcase social responsibilities, but it also brings the company under the radar. So, if the company fails to live up to expectations, it will ruin its reputation.
Increased accountability
CSR activities highlight a company’s responsibilities towards society and the environment. Now, if a company’s activities are harming the environment in any way, they will automatically be held responsible. Let’s say you come across an advertisement where Marlboro is promoting awareness against cancer. Would that be acceptable? Marlboro, a cigarette brand, will be held accountable for their actions. People will question their business ethics if they promote awareness against cancer.
These summarise the pros and cons of CSR. However, you need to know a few more things about CSR before taking a side. Let’s take a look at the main objective of CSR.
What is the Objective Behind Corporate Social Responsibility?
A common perception among all is that CSR is a way companies promote themselves. It is not completely wrong, but there’s a lot more to it.
CSR activities make companies give back to society. These activities are generally undertaken by businesses to create a positive impact on society. It is used to address serious issues like human rights, education, health, and safety. An automated business model, CSR, helps companies gain customers and stay in the limelight.
One needs to understand what lies beyond simple profit-making techniques to comprehend the concept of CSR. On that note, let’s explore the reasons CSR is important.
Why is Corporate Social Responsibility So Important?
Giving back to the society where you are doing business has always been important. Yet, the only thing that has bothered companies for ages is the correct ways of doing so. Corporate Social Responsibility, a concept that emerged in the 1950s and 1960s, has helped companies do their part for society.
But why is it so important? Companies can let go of these activities and still continue doing business, right? While that’s true, you need to understand how it helps companies grow. CSR adds value and helps companies build a positive image in the market.
Adding on, these activities can boost employee morale and enhance their productivity. These have a great influence on the profitability of a company. Also, CSR activities can greatly influence customer retention and loyalty.
All these make CSR an important part of all businesses. Students come across many corporate social responsibility topics as part of their curriculum. They need to know how the activities add value and work on them accordingly.
Final thoughts,
CSR activities have been popular in the business world for ages. However, the ways of implementation vary from one company to another. It is crucial to understand the benefits of CSR and its types. There are instances where companies were able to build a positive image and earn more customers, all due to CSR activities. The blog has covered all the aspects of CSR with the hope of clearing the air about the concept and implementing it correctly.
Most Popular Frequently Asked Questions
What is the definition of corporate social responsibility?
Ans: Corporate social responsibility (CSR) is defined as a company’s responsibility towards society and the environment. You will come across various CSR activities around you almost every day. Companies take the initiative to invest some money for the betterment of society and the environment. It is a great way to show their responsibility towards their stakeholders and the common public as well.
What are the 4 types of CSR?
Ans: CSR is one of the main components of businesses. Companies must implement the best ways to show their responsibilities towards society and the environment. Here are the 4 types of CSR you need to know:
- Environmental responsibility
- Economic responsibility
- Philanthropic responsibility
- Ethical responsibility
You will come across various methods companies use to work on CSR activities and choose one of the types mentioned above to work on the same.
Why is CSR important?
Ans: Brand perception is a crucial thing for companies. They need to work on building the perception and build trust among customers. CSR plays a pivotal role in building a company’s perception, attractiveness to customers, employees, and investors, retaining talent, and business success. How a company gives back to society says a lot about them and helps create loyalty among customers.
What is the purpose of corporate social responsibility?
Ans: Corporate social responsibility aims to help companies give back to society. The CSR activities also help establish a positive social value. Companies focus on CSR activities to establish their brand image and build a positive one. Companies use CSR activities to promote brand awareness and connect with customers.
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