Until relatively recently, most large companies had the almost exclusive objective of increasing their market share and thus maximising their profits.
In recent decades, however, more and more corporate and organisational boards have recognised that they have a social duty to do more than simply maximising profits for shareholders and increasing executive pay. In other words, they have a social responsibility to do what is best not only for their companies, but for humanity, the planet and society as a whole.
This has led to the emergence of companies that identify themselves as socially responsible. Some even bear names or seals such as B Corporations (B Corps), Social Purpose Companies (SPCs) and Low Profit Limited Companies (L3Cs).
But what is corporate social responsibility and what are the different forms it can take?
WHAT IS CORPORATE SOCIAL RESPONSIBILITY?
Corporate social responsibility is the idea that a company has a responsibility towards the society in which it operates and to which it is addressed.
Companies that adopt practices compatible and friendly with corporate social responsibility are usually organised in a way that enables them to act in a socially responsible manner. It is a form of self-regulation that can be expressed in a variety of initiatives or strategies, depending on an organisation's objectives. Many organisations communicate these efforts to external and internal stakeholders through corporate social responsibility reports.
There are various examples of what "socially responsible" means depending on the organisation and the sector of economic activity in which it operates. Businesses are often guided by a concept known as the triple bottom line, which defines how a business must commit to measuring its social and environmental impact, its actions for sustainable development and its profits.
CORPORATE SOCIAL RESPONSIBILITY ITEMS
Corporate social responsibility is traditionally divided into four categories: environmental, philanthropic, ethical and financial responsibility.
- Environmental Responsibility
Environmental responsibility is the belief that organisations should behave in the most environmentally friendly way possible. It is one of the most common forms of corporate social responsibility. Some companies use the term "environmental management" to refer to such initiatives.
Companies seeking to implement environmental responsibility can do so in a number of ways:
- Reducing polluting practices: Reducing pollution, greenhouse gas emissions, reducing the use of single-use plastics, rational water and waste management
- Saving energy resources: Increased use of renewable energy, sustainable resources and recycled or partially recycled materials
- Compensation for negative environmental impacts: Planting trees, funding environmental research and donating to related causes.
- Ethical Responsibility
Ethical responsibility is about ensuring that an organisation operates in a fair and ethical manner. Organisations that implement ethical responsibility policies aim to practice ethical behaviour through the fair treatment of all stakeholders, including leadership, investors, employees, suppliers and customers.
Companies can implement ethical responsibility methods in alternative ways. For example, a company can set its own, higher minimum wage if the one set by Greek law does not constitute a "sustainable wage". Similarly, a business may require that products, components, materials or parts be sourced in accordance with free and fair trade standards.
In this respect, many companies have procedures in place to ensure that they do not buy products derived from slavery or child labour.
- Charitable Responsibility
Charitable responsibility refers to the goal of a company, through its own means and actions, to shape the world and society in a better way.
In addition to acting ethically and environmentally friendly, organisations and companies driven by philanthropic responsibility often dedicate a portion of their profits to such activities. While many companies make donations to charities and nonprofits that align with their missions, others donate to charitable causes not directly related to their business. Others go so far as to create their own charity to give back with a positive impact on society.
- Financial Responsibility
Financial responsibility is the practice of a company basing all its financial decisions on its commitment to contribute to society. The ultimate goal is not only to maximise profits, but also to ensure that business activities have a positive impact on the environment, people and society.
WHAT ARE THE BENEFITS OF CORPORATE SOCIAL RESPONSIBILITY?
Most companies embrace corporate social responsibility because of ethical convictions, which can lead to many benefits and important social changes.
Corporate social responsibility initiatives can, for example, be a powerful marketing tool, helping a company to promote itself in a positive way in the eyes of consumers, investors and regulators. These initiatives can also improve employee engagement and satisfaction - key measures that drive consumer loyalty. They can even attract potential employees who have strong personal beliefs that align with those of the organization.
Finally, corporate social initiatives inherently force company managements to examine their recruitment and human resource management practices, where and how they source products or components and the steps they take to deliver value to their customers.
These principles can often lead to innovative and pioneering solutions that help a company to act in a socially responsible way while increasing profitability and achieving its goals. For example, restructuring the production process so that a company uses less energy and produces less waste allows it to become more environmentally friendly while reducing energy and material costs - value that can be recovered and shared with both suppliers and customers.
Elina Karamanou
CEO / Business Consultant
