Why You Need Corporate Social Responsibility and Corporate Governance
Corporate social responsibility (CSR) ties businesses to communities and helps them stay relevant to their customers and society. While larger businesses will cover CSR and Corporate Governance (CG), startups and smaller players may not. Therefore, this article examines how SME owners and managers can capitalize on good corporate social responsibility in 2023.
What is Corporate Social Responsibility?
Corporate social responsibility (CSR) is a company’s responsibility to its stakeholders outside of shareholders. It includes an organization’s ethical and moral responsibilities towards the community in which it operates. With the increased focus on sustainability, companies must demonstrate that they positively impact society. This is commonly referred to as Corporate Social Responsibility (CSR).
The idea behind CSR is that businesses have a responsibility not just to their shareholders but also to the communities in which they operate and the world at large. Its mission statement and strategic plan show an organization’s commitment to Corporate Social Responsibility. In order for a company to achieve this, it must align its values, vision, strategy and activities with principles of social responsibility. This article explores these concepts and explains how they can be implemented inside an organization.
What Is Corporate Governance (CG)?
Corporate governance is the framework that stakeholders use to manage the business at a high level. In a business environment, all stakeholders must have a good working relationship for the company to succeed. To make that happen, corporate governance is a set of processes for overseeing how decisions are settled, executed, and communicated between key shareholders, including investors, management, staff, and clients.
Without corporate governance, rogue decisions and activities can go unnoticed and illegal activities like fraud and embezzlement. Good corporate governance can also be the leading force in settling investor and management disagreements, plus scandals, liabilities, and what to do when a company’s performance is dire.
Why Practice Corporate Social Responsibility?
The greatest benefit of practicing Corporate Social Responsibility is that it makes sense for a business to seek ways to help society and the environment. After all, these are the environments where businesses operate and flourish.
Higher Brand Equity
There are also financial benefits to companies that practice social responsibility. For example, socially responsible brands will often have higher brand equity than those that are not. Customers are likelier to purchase products from companies contributing to the greater good. They may be more willing to pay a higher price because they appreciate the company’s social impact.
Attract Top Talent
Companies that practice social responsibility are likely to attract top talent because young generations expect their employers to contribute to the greater good. It also helps to create a positive brand image that may lead customers to purchase products from these brands.
Lastly, it is important to note that many governments have started to make social responsibility a business requirement. This means that companies that do not contribute to the greater good are disadvantaged. Customers are choosing to purchase from socially responsible brands.
CSR Strategy Planning
The first step to practicing Corporate Social Responsibility is to develop a strategy. A strategy outlines the company’s long-term goals and objectives. This can include the desired levels of investment in the community and how the company hopes to positively impact society. It is important to use a structured approach to developing your CSR strategy and this can be done by answering questions such as
- Where is the organization currently?
- Where does it want to be?
- What is the strategy to get there?
The answers help to ensure that the strategy is both effective and meaningful. Once the strategy has been developed, it must be implemented throughout every department and level of the company. It will help ensure that every decision the company makes is socially responsible.
Employee Engagement and Care
Companies that practice social responsibility often offer benefits to their employees. Many of these benefits are based on social responsibility. For example, some companies offer benefits such as paid maternity leave, paid family leave and health insurance.
Some companies even offer benefits to employees’ dependents, such as coverage for therapy services or childcare costs. This can go a long way in helping employees feel appreciated and valued. It can also help recruit talent committed to making a difference.
A company can also support its employees by offering flexible work hours and work-from-home options. These benefits can promote family-friendly practices and make employees’ lives easier. It can also help to recruit employees who may need special accommodations.
Responsible Supply Chain Management
A company can demonstrate social responsibility by managing its supply chain responsibly, and this can include:
- Ensuring employees are treated fairly and paid a living wage
- Making efforts to source products ethically and sustainably
Companies that produce their own products can take additional steps to promote social responsibility. For example, brands that create shoes can take steps to make them ethically and sustainably. This can include using sustainable materials and paying employees living wages. It can also include making efforts to improve working conditions in overseas factories.
A company can also use its purchasing power to promote social responsibility. This can be a great way to impact the supply chain without having direct control over all aspects of production. For example, a company can make efforts to source its products from socially responsible and sustainable sources.
A company can promote social responsibility by making efforts to protect the environment. It can do this by reducing its carbon footprint and investing in environmentally friendly practices. One way to reduce your carbon footprint is to reduce your energy consumption, and this can be achieved by:
- Installing LED lights
- Upgrading to more efficient appliances
- Making other small changes to your work environment, e.g. operating hot desks and remote working
A company can also reduce its waste footprint by investing in reusable products and shopping bags. It can also make efforts to reduce water pollution by making sure wastewater is treated and recycled. A company can also work with community partners to make efforts to promote environmental sustainability and protect local ecosystems.
How Do CSR and CG Work Together?
Corporate governance and corporate social responsibility are two sides of the same coin. Businesses with weak internal systems are unlikely to have an excellent external conscience. To become an outstanding corporate citizen, it has to have stable corporate governance.
The role of corporate governance in business is to lay down the proper channels for the industry to run smoothly. Companies under fire for environmental pollution or employee abuse have poor corporate governance. It results in poor corporate social responsibility.
A business must have the proper integration of the two, so it can lead to solving wider issues in the community and further afield—for example, solutions for generating economic stimulus which can save and create jobs. During the pandemic, corporates with good governance and CSR could quickly switch their offering to meet the community’s needs. General Motors switched from vehicles to ventilators and other corporates also stepped up with relevant products to address real-time community needs.
Businesses need to respond to rapid social change, including remote staff and business activity moving online. Laggard companies slow to adopt new technologies; where pulled online by the pandemic. Today, customers can get answers via chatbots and purchase online via eCommerce gateways. Teams use Zoom for video conferencing, and social media platforms are now the front window of retail stores.
Use Social Media for Social Causes
Social media provides a relatable channel for businesses to communicate with communities and consumers. Use Facebook or Twitter to draw attention to social causes works well for all stakeholder. It is easy to promote events, inspire, get volunteers, drive meaningful objectives, and encourage philanthropic donations, and this action strengthens the business’s brand and creates a good relationship with consumers.
Corporate social responsibility is the concept that businesses are responsible for being good corporate citizens and positively impacting society. It is important for businesses to understand that this is not just a nice thing to do but also a strategic business decision.
When a business fails to demonstrate social responsibility, it is at a disadvantage as governments increasingly require businesses to be socially responsible.
There are many ways to push forward, and the timing is right for all companies to bring together their corporate governance and corporate social responsibility processes. Doing so can play a real role in their business’s future success and the wider community when it most needs it.