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12.10.2008

Corporate social responsibility and citizenship

Corporate social responsibility (CSR) can be defined as the concern of a business for society as a whole that goes beyond contractual or legal obligations. Many firms today are taking on CSR initiatives because, although they may not appear to help the company’s bottom line in the short term, they often coincide with long-term sustainability and profitability.

Areas for Corporate Social Responsibility

CSR covers a wide range of issues, including, but not limited to the following areas:

Unfair Business Practices. Firms will adhere to fair selling tactics, produce quality products, and price their products fairly. They will obey laws regarding business practices.

Workplace and Employee Issues. This includes upholding the rights of employees’ individual freedoms, equal opportunity employment, and protecting employees from sexual harassment. It also involves paying employees fair wages, adhering to legal employment statutes, and ensuring employee safety. Firms may also try to promote a balance of family life and work for employees by offering family leave, flexible hours, or day care services.

Organizational Governance. As outlined earlier, it is necessary that the firm be governed ethically. Leadership must be ethical and spread the message of ethics from the top down.

Environmental Impact. Firms must ensure that their impact on the environment is at a minimum. This includes using environmentally sound manufacturing processes and producing products that do not damage the environment. Many companies have found that they can be successful financially while also being ecologically sound.

Marketplace and Consumer Issues. This involves ensuring consumer safety with the products that are produced and may involve monitoring and responding to consumer complaints. It may also involve ensuring fairness in the marketplace, giving consumers a choice, and pricing products fairly.

Social Development. Companies can aid the social development of communities by creating jobs and contributing resources.

Community Involvement

Corporate social responsibility also involves becoming active in the communities where the company operates. Activities may include funding local charitable organizations, sponsoring cultural events, or having volunteer days for employees to go into the community and participate in community service projects. An organization may also choose to create its own philanthropic arm, such as the Gap Corporation’s Gap Foundation, which matches employee giving to philanthropic organizations.

Another term used frequently is corporate citizenship, the concept of companies holding to high ethical standards, demonstrating environmental responsibility, providing safe and reliable products, and working to improve conditions in the community. Corporate citizenship encompasses business ethics, but also has an element that goes above and beyond the legal and contractual obligations, similar to CSR.

A theory that has been cropping up recently is called the “triple bottom line.” The basis of this theory is that companies should be working just as hard at increasing their social and environmental worth as they do with their financial results. The three bottom lines are society, economy, and environment, and the lines are interdependent. But how can working hard at social and environmental worth benefit a company’s bottom line financially?

Benefits of Corporate Citizenship

According to the World Economic Forum white paper The Business Case for Corporate Citizenship, there are eight areas where corporations can benefit from good governance and corporate citizenship:

1. Reputation management. Companies can avoid a damaged reputation by adhering to ethical practices.
2. Risk profile and risk management. Companies that adhere to more stringent policies (environmental, for example) are less likely to pose as much risk for investors because they are not taking chances with their reputations.
3. Employee recruitment, motivation, and retention. Companies that are better corporate citizens are more attractive to potential employees; companies whose reputations are tarnished may have much difficulty recruiting new employees.
4. Investor relations and access to capital. Recent studies have shown that companies with sound environmental policies and environmentally safe products have been able to increase their earnings per share and are more likely to win contracts.
5. Learning and innovation. Adopting corporate citizenship principles can lead to creativity and employee innovation because it requires finding solutions to problems while enhancing the company’s bottom line.
6. Competitiveness and market positioning. Today, consumers are very concerned about trusting companies and their products. Being a good corporate citizen will make a company more competitive and will help its position in the market.
7. Operational efficiency. Becoming more environmentally efficient often means reducingmaterial use and waste, which enhances a company’s bottom line.
8. License to operate. Companies that are good citizens are more likely to be given a second chance in case of a slipup than companies that have a negative image in the minds of citizens.

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