What is social responsibility in business?
Written by Michael Feder
Reviewed by Kathryn Uhles, MIS, MSP, Dean, College of Business and IT
Social responsibility, generally speaking, is the idea that businesses should contribute to society through their corporate activities. This includes reducing waste, using sustainable production methods and offering employee benefits.
Companies prioritizing social responsibility can build trust with customers, employees and stakeholders. It also helps them gain a competitive advantage over businesses that don’t practice corporate social responsibility (CSR). A recent survey showed that if companies engane in irresponsible business practices, 90% of shoppers would boycott them. Moreover, 55% of people surveyed have already boycotted at least one company in the past 12 months because of this issue.
Therefore, one of the best tips for successfully starting a business or improving one may be to ensure that CSR is a priority. It helps set the company apart from its competitors and shows customers that leadership and employees care about its environmental and social impacts.
Keep the following information in mind — especially if you’re working to become a business manager, pursuing a Bachelor of Science in Business or looking to make a mark on the world as an entrepreneur.
What is CSR?
CSR is the concept that corporations must act responsibly and ethically to ensure they are good stewards of their resources. CSR involves a company evaluating its impact on all stakeholders, including employees, customers, shareholders, suppliers and the local community. It also covers how companies handle their environmental responsibilities and look for ways to reduce their carbon footprint.
While social responsibility and CSR have some similarities, there are some distinct differences between the two.
- Social responsibility focuses on how companies treat their employees, customers and other stakeholders. CSR takes this concept further by examining how businesses interact with the environment, build relationships with suppliers and operate in the local community.
- Social responsibility is more about ethical behavior and doing the right thing, while CSR is about taking action to make a positive difference.
- Social responsibility can help businesses build trust with stakeholders, but it’s not enough to ensure a company’s long-term success.
By prioritizing social responsibility, businesses can potentially improve their reputation and bring tangible and lasting benefits to their stakeholders, the environment and society.
Types of CSR
There are four key types of CSR: environmental, ethical, philanthropic and economic.
- Environmental social responsibility: Companies prioritize environmental protection by reducing their carbon footprint, introducing sustainable practices into their operations and production processes, developing products with fewer toxins or pollutants, and more. Net-zero transition plans are becoming increasingly popular as well.
- Ethical social responsibility: This means business is conducted fairly and equitably; e.g., promoting diversity, paying fair wages, offering healthcare benefits and other benefits to employees, using ethical suppliers and more. Environmental, social and governance (ESG) strategies are also common practices in place to challenge leaders to create more sustainable growth.
- Philanthropic social responsibility: Companies invest in charitable activities that benefit their local community or those in need; e.g., donating money or resources to charities and nonprofits, volunteering or providing free services to those in need.
- Economic social responsibility: Companies prioritize economic responsibility by ensuring their operations are efficient, using renewable energy sources whenever possible and looking for ways to reduce costs while maintaining high-quality standards.
By investing in CSR and focusing on these four key areas, businesses can demonstrate their commitment to sustainability and ensure they do their part to create a better world.
How does social responsibility impact business?
While CSR’s goal is to impact society and the environment positively, it can also benefit businesses in both short-term and long-term ways. It’s not risk-free, however, so it’s crucial to understand the potential impacts that investing in CSR can have.
Pros of CSR
With great social responsibility comes great rewards. Key benefits that companies can reap from investing in CSR include the following:
- Improved brand reputation and customer loyalty: By demonstrating their commitment to sustainability, businesses can build trust with customers and establish themselves as ethical.
- Increased employee engagement: By showing their commitment to social responsibility, businesses can inspire employees and foster a sense of pride in the workplace.
- Increased access to capital: Many customers, investors and lenders are increasingly looking for businesses that prioritize social responsibility. By investing in CSR, companies demonstrate their commitment to sustainability and gain access to more financial opportunities.
- Enhanced operations: By focusing on sustainability and efficiency, businesses can reduce waste, improve their energy usage and, ultimately, operate more cost-effectively.
The benefits of CSR extend to all types of businesses, whether they’re remotely based or brick-and-mortar establishments.
Cons of CSR
The potential risks of investing in CSR include:
- Costly investments: Social responsibility activities often require significant investments of time and resources, which can be a challenge for small businesses that need more financial support or larger companies that have business goals beyond CSR initiatives.
- Reputational damage: Suppose a company cannot live up to customers’ expectations or fails to follow its social responsibility promises. In that case, diminished trust and negative PR can detrimentally impact the business.
How to become more socially responsible as a business
Businesses of all sizes can take steps to become more socially responsible, and it doesn’t have to be expensive or complicated.
Socially responsible considerations to implement in the workplace
- Ethical business practices: Make sure your company is following ethical practices and complying with legal requirements. For example, when it comes to employment, providing salary transparency and employee benefits, such as healthcare, education and flexible work schedules, shows employees that you value them as individuals and support their long-term development.
- Sustainable initiatives: Look for ways to reduce waste, improve energy efficiency and minimize the environmental impact of your operations. For example, a restaurant can serve locally sourced food or a retailer can use compostable packaging.
- Invest in the community: Consider dedicating time and resources to local causes or initiatives that are important to you and your employees.
- Diversity and inclusion: Take steps to create a more inclusive workplace by emphasizing diversity and understanding in terms of race, gender, age and sexual orientation.
What to avoid when creating a socially responsible workplace
Social responsibility should not be used to greenwash or compensate for past misdeeds. Companies should also avoid making empty promises and token gestures regarding social responsibility, as this can undermine your credibility and lead to reputational damage.
Additionally, businesses should avoid using CSR to boost sales or increase profits, as this can lead to customer mistrust and dissatisfaction. Finally, it’s critical to not forget the importance of transparency. Businesses should strive to be transparent about their CSR initiatives and make sure they are clearly communicating their goals and progress.
Effective examples of CSR
The following are examples of how companies can make their commitment to social responsibility part of their core business strategies:
- An outdoor apparel company could commit to using regenerative materials and creating closed-loop supply chains to reduce environmental impact.
- An ice cream company could be dedicated to sustainable sourcing and using fair-trade ingredients. They also could advocate for social justice issues, such as LGBTQIA+ rights and climate change awareness.
- A tech giant could commit to addressing economic inequality by investing in underserved communities and providing scholarships and internships for young people from disadvantaged backgrounds.
Explore online business programs
If you’re looking to learn more about online business programs that prepare students with skills for a variety of career paths, consider a program at University of Phoenix. Whether you’re looking to build the fundamentals or advance your skill set, there are plenty of degrees and certificates to consider.
- Associate of Arts with a concentration in Business Fundamentals — From management to accounting, skills learned in this program are essential for anyone looking to advance in their business education.
- Bachelor of Science in Business — Knowledge of the ins and outs of running a business can spell the difference between success and failure in a competitive business world.
- Master of Business Administration — Prepare for higher leadership roles in an organization. This degree program can prepare graduates for careers as business managers, operations directors and more.
- Master of Management — Take your understanding of business organization and management to an advanced level. This degree program is perfect for those with experience in the workforce who are looking to take on greater leadership roles.
- Doctor of Business Administration — Expand your understanding of organizations, work environments and industry. This program invites participants to delve into cutting-edge research in the field of business and develop skills for solving complex organizational problems.
ABOUT THE AUTHOR
A graduate of Johns Hopkins University and its Writing Seminars program and winner of the Stephen A. Dixon Literary Prize, Michael Feder brings an eye for detail and a passion for research to every article he writes. His academic and professional background includes experience in marketing, content development, script writing and SEO. Today, he works as a multimedia specialist at University of Phoenix where he covers a variety of topics ranging from healthcare to IT.
ABOUT THE REVIEWER
Currently Dean of the College of Business and Information Technology, Kathryn Uhles has served University of Phoenix in a variety of roles since 2006. Prior to joining University of Phoenix, Kathryn taught fifth grade to underprivileged youth in Phoenix.
This article has been vetted by University of Phoenix's editorial advisory committee.
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