Frequently Asked Question: What is corporate social responsibility?
An organization that exhibits corporate social responsibility performs so that it is both “directly and indirectly sensitive to the reasonable needs of various sectors in society” (The Corporate Ethics Monitor, Volume 1, Issue 1, page 1). In other words, it is – and is seen to be – responsive to various stakeholders’ needs. Companies that are socially responsible consider the needs of employees, customers, suppliers, host communities, the environment, and society in general. As an example, socially responsible corporations are responsive to their employees’ rights in the workplace and vice versa. For instance, such corporations protect whistle blowers and address employee complaints privately through an ombudsman program and confidential counselling. As well, they protect the rights of their customers through codes of ethics, which cover various topics such as privacy of client information, fair business practices, and transparency of corporate policies and actions. However, many socially responsible corporations go beyond ensuring these negative rights to promote and protect the positive rights of all of their stakeholders. This means, for example, providing a variety of services for the corporation’s employees such as on-site daycare programs or daycare referral services, employee wellness or employee assistance programs, just to name a few.
Many people believe corporations are responsible only to their shareholders and not to other sectors of society. These people often posit that corporations that act socially responsible will never survive in a competitive market where profits are the “be all and end all.” However, “several researchers have studied whether straying from the short-term, profit-only objective has proven to be harmful to a corporation’s health” (The Corporate Ethics Monitor, Volume 1, Issue 2, page 1). The consensus results are that “companies that display good social performance appear to be more profitable than those that don’t” (The Corporate Ethics Monitor, Volume 1, Issue 2, page 1). These results may seem unlikely since it is generally believed that a company that spends more cannot make more in the end; however, the costs of these programs are greatly outweighed by the benefits they provide. First, any program a corporation implements that benefits employees should benefit the corporation in the long run since a happy, healthy employee will be more efficient, committed, and innovative. Second, programs that benefit the host community, such as environmental-friendly practices and donations to local charities, will lead to better relations between the corporation and the host community, which can only lead to future gains for the company in terms of credibility, reputation and public support as well as ease of dealing with issues like corporate expansion, community consultation, taxation, and environmental cleanups. Third, many business people now believe that it is economically beneficial to present an ethically-sound company to a more informed, ethically-conscious public. Many corporate executives also perceive that it is their responsibility to “take the lead in the coming reforms” of corporate social responsibility, “an indication of the widespread interest businesspeople, consumers, investors, potential partners, regulators, and others have for the emerging field of CSR” (The Corporate Ethics Monitor, Volume 1, Issue 5, page 75).
Corporate social responsibility is often difficult to measure due to the differences between industry sectors and between behaviour of corporations within a sector as well as the qualitative, less easily measured nature of corporate social responsibility. However, generally “analysts studying corporate social responsibility (CSR) look for:
- a process for establishing ethical goals,
- a statement of normative business conduct or code of ethics,
- a mechanism for inculcating those goals,
- a feedback process for policy re-evaluation and potential adjustment, and finally,
- a reward system and reinforcement mechanisms for achieving ethical performance goals” (The Corporate Ethics Monitor, Volume 1, Issue 4, page 58).
These five characteristics can also be applied by anyone who is interested in determining the ethical performance level of a corporation and “whether a company’s activities are consistent with or in conflict with multi-stakeholder standards in such areas as environmental protection, pay equity, ethical sourcing and trading, and charitable funding of not-for-profit social and cultural agencies” (The Corporate Ethics Monitor, Volume 1, Issue 1, page 12).
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ethicscan
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Thank you for this ping. As your activist network appreciates, the specific definition of corporate responsibility changes over time. A modified Delphi panel process is one way to track this; stakeholder engagement is another. EthicScan recommends both, depending upon the community and the corporation or institution.
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