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What is corporate social responsibility (CSR)?

January 17, 2023

Corporate social responsibility is a way for companies to hold themselves accountable for their bigger role in society. CSR takes place when for-profit companies support or engage in activities that benefit the community or the environment. This is often called ‘giving back’ or ‘doing their part’ as an active member of society. CSR contributions can take the form of a donation, an organised activity, or a campaign. 

In this article, we break down what constitutes CSR, look at the differences between CSR and corporate sustainability, and why CSR is still important today.

What is CSR?

At its heart, CSR is corporate philanthropy. Giving without expecting something in return. This is done at the company’s expense, unlike a usual business transaction where an exchange takes place. Extends a company’s purpose beyond pure profit making. 

Some examples of CSR:

  • Monetary donations to charity
  • In-kind sponsorships for festive celebrations
  • Volunteering activities with employees such as beach clean-ups
  • Participation in tree-planting workshops
  • Awareness campaigns on select causes such as employee mental health day
  • Procurement of green or fair trade products

Since the concept was coined in the 1950s, CSR has been used as a measure of a company’s social or environmental impact footprint. Although CSR and sustainability are sometimes conflated, there is a significant difference between both in corporate parlance today. Simply put, CSR has little effect on a company’s business model and its operations and vice versa, whereas sustainability concerns the business’ operational impact. In the latter case, the business model may undergo transformation to achieve sustainable targets and goals. 

Along with the rise of corporate sustainability, CSR has become only one facet of a multidimensional approach to managing an organisation’s impacts under the wider umbrella of sustainability or ESG. Business leaders and sustainability practitioners draw a distinct line between CSR and sustainability, the key difference being the extent to which environmental and social impact is integrated into business priorities.

Why is CSR important and relevant?

CSR is a way for companies to build goodwill with the communities where they operate, strengthening their social and relationship capital as well as generating positive publicity. From a brand perspective, strong CSR can be invaluable to a company’s public image, which can enhance talent attraction and investor interest. For example, a sports equipment manufacturer with a focus in product innovation may sponsor equipment for a Paralympic tournament, leveraging its expertise in product design to support the development of sports in marginalised communities. 

In fact, this was what Nike did with the Go FlyEase sneakers, a hands-free shoe for ably-challenged sportspeople. Upon its launch, the sneakers created waves among the disabled community for their inclusive design. Although this was not a CSR drive, it is easy to connect the dots with a CSR campaign with some forethought.

Regulators, investors, and civil society are interested to see how a company is contributing to community development and environmental preservation, and CSR can be an easy way to establish this relationship.

What is the best approach to CSR?

When it comes to allocating a CSR budget, it can feel like you’re spoiled for choice. How do you make the most meaningful contribution? The best approach is one that aligns a cause with the company’s purpose. Many companies take the easy route and donate or volunteer a day at charity, but this approach yields little long-term impact for beneficiaries and for the company doing the CSR. Sustained value can be maximised when a CSR strategy is put into place that plays into the company’s story and builds a relationship with the beneficiary that goes beyond one-off contributions.

Here is an example of a CSR programme that is strategic and impact-driven.

Company A, a manufacturer of waterproof diving headlamps, uses a shark as its corporate mascot. The CSR team selects a shark conservation NGO to partner with. Together with the NGO, they identify the areas of support most needed, which focuses on the bigger challenge of increasing the local shark population. The CSR team allocates funding support over the campaign’s three-year period with key goals and targets to protect the reef ecosystem and increase breeding activity. The support includes sponsorship of headlamps to the conservation team for field use. The CSR team works with the NGO to measure the success of the programme and publishes annual progress updates to ensure accountability.

To determine an approach to your company’s CSR programme, try asking these questions:

  • What is your organisation’s purpose? What causes can it align to?
  • What is the allocation for your CSR spending on an annual basis or a longer time horizon?
  • What are your CSR objectives: To engage employees? To meet external expectations? Or is it to enhance branding? All of the above?
  • How much time can or do you want to spend on CSR activities?
  • Who will be accountable for the CSR programme?

While you’re planning your CSR programme, avoid the following practices to ensure your focus remains on driving impact and getting the best value for your spending:

  • Non-targeted donations
  • Unconditional donations
  • Once-off contributions
  • Contributions to unregistered charities
  • Spreading your allocation too thin
  • Dictating KPIs for CSR campaigns without consulting NGO partners
  • Vague language or campaign objectives such as ‘Save Mother Nature’
  • Overpromising targets

How to report CSR activities?

CSR reports were quite common before sustainability reports overrode them as the preferred disclosure format. They still serve an important purpose in communicating the relationship between a business and its stakeholders, especially if your company is not ready for sustainability reporting yet. 

A CSR report should convey your CSR strategy, objectives, plans, initiatives, and outcomes in a way that demonstrates the value created for stakeholders. An honest, transparent account of your CSR programme should include the challenges faced during planning or implementation, as well as data to substantiate impact. Looking forward to future plans and targets can demonstrate continuity in your CSR plans. Why and how you designed your CSR programme is also relevant information to include in a CSR report. 

CSR can be an excellent stepping stone to the adoption of broader sustainability strategies, and the same goes for CSR reporting. It’s worth taking the time to ground your CSR programme by having strategic objectives and measurable impact.

How we help you

  • We provide a centralized platform to manage all your CSR data, integrating with your existing enterprise software such as ERP, HRM, EMS, etc.
  • We guide you on the CSR data and metrics to collect that are most material to your business.
  • We offer insights powered by data analytics, enhancing your understanding of the strength of governance.
  • We help you complete the requests from investors on CSR matters and guarantee the protection of business-critical information, for example about sensitive business strategies.
  • We bridge the divide between CSR and sustainability reporting, helping you make the transition from one to the other.

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