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What Is Corporate Social Responsibility (CSR)?
Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public.
By practicing CSR, also called corporate citizenship, companies are aware of how they impact different aspects of society, including economic, social, and environmental ones. Engaging in CSR also means a company operates in ways that enhance society and the environment instead of contributing negatively to them.
Key Takeaways
- Corporate social responsibility (CSR) is a business model by which companies make a concerted effort to operate in ways that enhance (rather than degrade) society and the environment.
- CSR can help improve society and promote a positive brand image for companies.
- CSR includes four categories: environmental impacts, ethical responsibility, philanthropic endeavors, and financial responsibilities.
Investopedia / Zoe Hansen
How Corporate Social Responsibility (CSR) Works
Through corporate social responsibility (CSR) programs, philanthropy, and volunteer efforts, businesses can benefit society while also boosting their brands. A socially responsible company is accountable to itself and its shareholders. CSR is commonly a strategy employed by large corporations. The more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry.
Fast Fact
Small and midsize businesses also create social responsibility programs, although their initiatives are rarely as well-publicized as those of larger corporations.
Types of CSR
- Environmental responsibility: CSR is rooted in preserving the environment. A company can pursue environmental stewardship by recycling materials, reducing pollution and emissions in manufacturing, replenishing natural resources like trees, or creating product lines consistent with CSR.
- Ethical responsibility: CSR includes acting fairly and ethically. Instances of ethical responsibility include fair treatment of all customers regardless of age, race, culture, or sexual orientation; favorable pay and benefits for employees; partnerships with diverse vendors; full disclosures; and transparency for investors.
- Philanthropic responsibility: CSR requires a company to contribute to society, whether it donates profit to charities, enters into transactions only with suppliers or vendors that align with it philanthropically, supports employee philanthropic endeavors, or sponsors fundraising events.
- Financial responsibility: A company might make plans to be more environmentally, ethically, and philanthropically focused; however, it must back these plans through financial investments in programs, donations, or product research—including research and development for products that encourage sustainability, creating a diverse workforce, or implementing diversity, equity, and inclusion (DEI); social awareness; or environmental initiatives.
Volunteering
Some CSR models replace financial responsibility with a sense of volunteerism. Otherwise, most models still include environmental, ethical, and philanthropic as types of CSR.
Benefits of CSR
According to a study published in the Journal of Consumer Psychology, consumers were more likely to act favorably toward a company that acted to benefit its customers. As a company engages in CSR, it’s more likely to receive favorable brand recognition. Additionally, workers are more likely to stay with a company they believe in. This reduces employee turnover, improves workplace morale, and means avoiding the cost of hiring a new employee.
For companies looking to outperform the market, enacting CSR strategies may improve how investors view the company’s value. The Boston Consulting Group found that companies considered leaders in environmental, social, and governance (ESG) matters had an 11% valuation premium over their competitors.
CSR practices help companies mitigate risk by avoiding troubling situations. This includes preventing adverse activities like discrimination against employee groups, disregard for natural resources, unethical use of company funds, and activity that leads to lawsuits and litigation.
Company Examples
In its 2024 Global Impact Report, Starbucks (SBUX) highlighted taking care of its workforce and the planet among its CSR priorities through stock grants and additional medical, family, and educational benefits. The company’s goals include achieving 50% reductions in greenhouse gas emissions, water consumption, and food waste by 2030.
Home Depot (HD) has invested over 1 million hours per year in training to help frontline employees advance in their careers, aims to produce or procure 100% renewable energy to operate its facilities by 2030, and plans to help customers reduce water use by 100 billion gallons by 2026.
General Motors (GM) won the Sustainability Leadership Award from the Business Intelligence Group in 2022. The automaker provided $64 million in grants to nearly 400 U.S. nonprofits focusing on social issues in 2023, and it has agreements in place to use 100% renewable electricity across its global sites by 2035.
Why Should a Company Implement Corporate Social Responsibility (CSR) Strategies?
Many companies view corporate social responsibility (CSR) as an integral part of their brand image, believing customers will be more likely to do business with businesses they perceive to be more ethical. In this sense, CSR activities can be an important component of corporate public relations. At the same time, some company founders are also motivated to engage in CSR due to their personal convictions.
What Is ISO 26000?
In 2010, the International Organization for Standardization (ISO) released ISO 26000, a set of voluntary standards to help companies implement corporate social responsibility. Unlike other ISO standards, ISO 26000 provides guidance rather than requirements because the nature of CSR is more qualitative than quantitative, and its standards cannot be certified. ISO 26000 clarifies social responsibility and helps organizations translate CSR principles into practical actions.
What Are the Benefits of CSR?
CSR initiatives strive to have a positive impact on the world through direct benefits to society, nature, and the community in which a business operates. In addition, a company may experience internal benefits through these initiatives. With the knowledge that their company is promoting good causes, employee satisfaction may increase and staff retention may improve. In addition, members of society may be more likely to choose to transact with companies that are attempting to make a more conscious positive impact beyond the scope of its business.
What Companies Have the Best CSR?
Since 1999, Corporate Responsibility Magazine has ranked the top 100 Best Corporate Citizens each year among the largest U.S. public companies. In 2024, the top-ranked companies include HP, Johnson & Johnson, and PepsiCo.
The Bottom Line
Companies striving to measure success beyond bottom-line financial results may adopt corporate social responsibility (CSR) strategies that target environmental, ethical, philanthropic, and fiscal responsibilities extending beyond the products they sell.
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