No man is an island; Entire of itself – John Donne. This famous quote by the metaphysical poet John Donne emphasizes the interconnectedness of all humanity. Extending this metaphor to the business world gives us an important insight: businesses are not isolated entities but exist and operate within societies and, as such, carry some responsibilities towards them. Corporate social responsibility highlights this concept.
As a business owner, you recognise that your business impacts society. Under corporate social responsibility, you decide to operate your business in such a manner that it positively impacts society, the environment, and your shareholders.
Wondering why and how to achieve the goals of corporate social responsibility? Here’s a complete guide on the what, why and how of social responsibility of business.
What is corporate social responsibility?
Before asking what is corporate social responsibility in business, we should understand the meaning of social responsibility.
Social responsibility is our obligation as individuals and businesses to improve society as a whole. Corporate social responsibility is a business model that increases companies’ accountability to society, the environment and the shareholders. Corporate social responsibility is self-regulating in the sense that the need to be socially accountable generates and is regulated from within the business.
Some types of corporate social responsibility include:
1. Environmental responsibility:
Your company can undertake environmental responsibility by reducing pollution and emissions from manufacturing, fostering tree growth, and making products compatible with environmental guidelines.
2. Ethical responsibility:
The ethical responsibility of businesses becomes essential in their treatment of customers, employees, vendors and investors. To fulfil ethical responsibility, your company should ensure equal and fair treatment of customers, favourable pay and good employee benefits, fair treatment of vendors and complete transparency with investors.
3. Philanthropic responsibility:
Your company can undertake philanthropic responsibility by contributing to charities, encouraging employee philanthropic initiatives and only associating with suppliers and vendors that align with the philanthropic vision of your business.
4. Financial responsibility:
To achieve environmental, ethical, and philanthropic responsibilities, your business should walk the talk and invest money to fulfil these objectives. It includes investing in environmentally sustainable practices and initiatives, supporting charities, investing in research and development of sustainable products, etc. This is called financial responsibility.
What is the need for corporate social responsibility?
You might be wondering why your business needs corporate social responsibility. Here’s why CSR is essential for your business:
1. Society expectations
As social convenience has evolved, so have society’s expectations of businesses. Society provides land, labour, and an environment for businesses to operate and expects some benefits in return.
2. Business reputation
As a business owner, you understand the power of a good public image in business growth. Fulfilling social responsibility will boost your company image, increase sales and profitability, and attract top talent.
3. Long-term self interest
If your business develops a reputation for being socially and environmentally responsible, it will benefit your company in the long term. The long-term returns on solidifying the brand in this way are immense. Your business is no longer perceived as a self-serving, profit-making entity but as a socially conscious institution.
4. Consumer growth
In the age of social media, consumers are more aware of their rights. Any business engaging in unethical practices or trying to shun social responsibility immediately gets noticed and develops a bad reputation. Consumers want to associate with companies that do good beyond their profits. Hence, being socially responsible will increase your consumer base.
5. Optimum resource utilisation
With the increasing world population, essential resources are already scarce. If businesses ride roughshod over the existing resources without the responsibility to maximise profits, soon there will be nothing left from which to produce value. Engaging in CSR helps companies adopt sustainable practices that ensure optimum resource utilisation, ensuring that the resources are available for longer.
6. Better business environment
As emphasised at the start of the article, businesses are a part of society. Acting responsibly towards the environment serves the business as well. A clean environment fosters a healthy workplace. Your business will automatically suffer if your employees keep falling sick regularly due to an overly polluted environment.
7. Employee satisfaction
Knowing that the company they work for benefits humanity at large will make your employees feel proud. This will boost productivity and increase loyalty, further building a good reputation for your company.
Corporate social responsibility: Famous examples
Here are some successful corporate social responsibility examples:
1. Johnson and Johnson
The famous big pharma company is known for its responsibility towards the environment by consciously attempting to reduce its carbon footprint for three decades. Johnson and Johnson also provide safe water to communities worldwide and has pledged to stop relying on coal and oil for their power needs from 2025.
2. Coca Cola
Coca-Cola works to create a world without waste. The company has invested in increasing recycling and water conservation and has pledged to reduce its carbon footprint by 25% by 2030. Coca-Cola has already developed a bottle made of 100% plant plastic.
3. Netflix
Netflix has been recognised for its magnificent employee benefits, which include 52 weeks of parental leave for both birth and non-birth parents. The leave is also applicable in the case of adoption. This is an excellent example of ethical responsibility.
4. General Electric
General Electric has invested significantly in green and clean energy technology to make clean energy profitable. GE has named this business strategy ‘Ecomagination’, which also includes rewarding talented individuals to develop unique, clean energy solutions.
Concluding thoughts
We hope this answers your question about what is CSR in business. Understanding the social responsibility of business meaning is essential for companies to coexist sustainably with the environment and society.
If you, as a business owner, require funds for expansion or are looking for a financial institution with an excellent CSR background, consider Tata Capital. The Tata Group is known for being one of the first companies to embrace CSR.
With Tata Capital, you can avail of online business loan with minimum documentation, leading to significant time savings. For better financial planning, don’t forget to use Tata Capital’s business loan EMI calculator and GST calculator before applying for a business loan.
22 November 2024
6 mins read
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