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Why You Need Corporate Social Responsibility and Corporate Governance

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No one could have predicted the events of 2020 and that it would be a year of global uncertainty and upheaval. Even now, there’s a lot more at stake than just the survival of a business. Whole communities are wondering how they can recover post-pandemic.

Enterprises are rightfully reviewing their corporate governance (CG) structure, including their rights and responsibilities to stakeholders and the rules and regulations for making decisions at an organizational level.

When there is a lot at stake, particularly with larger organizations, due process is followed to the letter for significant decisions and actions. However, corporate governance is not the only mechanism required in times of need – and this is why large enterprises will also have a corporate social responsibility mandate.

Corporate social responsibility (CSR) ties businesses to communities and helps them stay relevant to their customers and society. While larger businesses will have CSR and CG covered, startups and smaller players may not. Therefore, this article looks at how SME owners and managers can capitalize on good corporate social responsibility.

Let’s start off with a summary of the role of corporate governance.

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 its stakeholders must have a good working relationship for the company to succeed. To make that happen, there’s corporate governance, a set of processes for overseeing how decisions are settled, executed and communicated between key shareholders, including investors, management, and sometimes also 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 to settling investor and management disagreements, plus scandals, liabilities, and what to do when a company’s performance is dire.

Corporate Social Responsibility (CSR) Explained

Corporate social responsibility is a self-regulating business system that makes a business accountable to society. A company should work well with its stakeholders and the community around it. CSR is a conscious decision from the store to positively impact its environs. This applies both economically and socially. Depending on the industry, CSR can take many forms. CSR can be acts of philanthropy, environment-saving, and volunteer programs. Morale-boosting programs for employees and stakeholders also fall under CSR.

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.

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A business must have the proper integration of the two, so it can have a lead role in 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 realtime community needs.

Business Adaptability

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.

Summary

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. By doing so, they can play a real role in their business’s future success and the wider community when it most needs it.

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