All companies have a tangible effect on the society they operate in. There are countless ways in which companies can do harm or good for their community- whether they know it or not. Whether a company is a small local business or a Fortune 500 corporation, company practices have an impact on real people’s lives everyday: from the treatment of workers, to consumer protection, to environmental sustainability and beyond.
If companies aim to operate ethically, they must continually evaluate their practices and take action to improve them. There’s a term for this: Corporate Social Responsibility.
What is Corporate Social Responsibility?
Corporate Social Responsibility is exactly what it sounds like: companies taking responsibility for their impact on society.
According to the Corporate Finance Institute, Corporate Social Responsibility, or CSR, is formally defined as “strategies that companies put into action as part of corporate governance that are designed to ensure the company’s operations are ethical and beneficial for society.” These practices can involve environmental sustainability, ethical labor practices, supporting socially positive causes, making charitable donations, and any other practices that companies put into place in order to avoid causing harm and increase their positive impact on society.
However, some industry leaders, such as John David of Rathbone Greenbank Investments, have pointed out that the term CSR has “grown beyond its strict dictionary definition,” and that CSR is “now an umbrella term for all the ways in which a company should have regard for its impact on the world beyond its profit and loss.”
Examples of CSR practices include, but are not limited to: partnerships with nonprofits, corporate giving, ethical supply chains, ensuring a living wage for full-time employees, local community engagement programs, and environmental sustainability efforts.
Many companies use a model called the “Triple Bottom Line” to guide their CSR initiatives. Harvard Business School defines the Triple Bottom Line as “a business concept that posits firms should commit to measuring their social and environmental impact—in addition to their financial performance—rather than solely focusing on generating profit, or the standard ‘bottom line.’ It can be broken down into “three Ps”: profit, people, and the planet. Third-party standards like the B Corporation certification can help companies evaluate their Triple Bottom Line. Click here to learn about Prodigium’s B Corporation certification journey.
Keeping Your “Stakeholders” In Mind
Another important term to keep in mind when talking about Corporate Social Responsibility is “stakeholders.” In the context of CSR, “stakeholders'' does not refer to people or entities with a financial interest in a company (ex. shareholders, board members), rather, “stakeholders” refer to “individuals, groups or organizations directly involved with, or indirectly affected by, a project, product, service or enterprise” (Source: Alva Group). A company's stakeholders may include, but are not limited to: employees, contractors, customers, local community members, governmental institutions, and even viewers of marketing materials like commercials.
Stakeholders are the key to what separates effective CSR from using social issues as a marketing stunt: effective CSR centers the impact of corporate actions on stakeholders, rather than profits alone.
Reasons Why CSR is Important for Business
While the core motivations behind CSR should always be about company ethics and positive social change, CSR programs and practices are often actually good for business.
Many companies make the mistake of valuing short-term profits over creating a financially, socially, and environmentally sustainable business model- a strategy that simply does not work in an increasingly informed society and ever-changing marketplace.
Below are three key reasons that businesses need to incorporate CSR practices to survive and thrive in today’s economic and cultural landscape:
Younger Generations Value CSR More Than Ever
A 2019 Cone Communications study found that 90% of Gen Zers in the U.S. believe companies must act to help social and environmental causes, and 75% said they actually did research to see if a company is being honest and authentic when it takes a stand on issues.
It’s not just teens and young adults who have this impact-oriented mindset. Millennials (meaning adults between about 27 and 40) feel like they have an obligation to society and the wider world. The 2017 Deloitte Millennial Survey, “Millennials feel accountable for many issues in both the workplace and the wider world.”
Since those studies were done, Gen Z and Millennials have spent a good chunk of their formative and/or younger professional years living through a pandemic, and paid attention to how companies and political leaders alike responded in times of unprecedented crisis. Younger folks have grown up in a world where information is a click away, and they are not afraid to use that information access to hold companies accountable.
CSR Impacts Brand Trust and Customer Loyalty
The Zeno Group’s 2020 consumer attitudes survey found that customers are 400% more likely to purchase goods from a company when they believe that a company has a strong social or environmental purpose. Moreover, according to an Emerald Insight study on customer loyalty, CSR can actually be more effective than traditional advertising when communicating to new customers.
A benchmark case study of the positive effect of CSR on customer loyalty is Chobani, America’s #1 yogurt brand, valued at $10 billion. Chobani’s founder Hamdi Ulukaya famously decided to take on the U.S. refugee crisis with a simple yet bold solution: hire them. As of 2018, 30% of Chobani’s employees were recent immigrants or refugees. Ulukaya also founded the Tent Partnership for Refugees, which helps refugees in the U.S. find economic opportunity and mentorship.
CSR Massively Improves Employee Retention
According to the aforementioned Deloitte Millennial survey, most Millennials felt that “the workplace was the primary place to make an impact. In fact, 62% of millennials born between 1981 and 1996 want to work for a company that offers a positive impact, and 50% would prefer to work a meaningful job than a high paid job.
While businesses doing social good in the outside world is clearly a factor in employee satisfaction and morale, it is also important to note that is CSR practices also extend to the way employees and their peers are treated. Practices like living wages, paid family leave, and taking initiative to create an inclusive workplace culture are all important factors in both good CSR and employee loyalty.
For example, in 2015, Seattle company Gravity Payments made headlines when CEO Dan Price announced that the company would be introducing a minimum wage of $70,000/year for all employees, in part to help employees cope with increasing rents and home prices in the Seattle area. The CEO himself even took a personal pay cut to contribute to employee wages. The move did lead to a good amount of positive publicity (including one of the most shared NBC news videos of all time).
More importantly, since adopting the new payment structure, Gravity Payments’ has achieved employee retention rate of over 90 percent (as of 2021) and remains a profitable company. In the wake of the pandemic, Gravity Payments’ incredible levels of employee loyalty make headlines when a whopping 98% of their employees voluntarily took a temporary pay cut to help the company cope with pandemic-related losses of revenue (check out this ABC News report on the subject). While Gravity Payments may have sacrificed some short-term profits following their initial minimum wage increase, their unparalleled commitment to their employees ultimately helped save the company during times of unprecedented crisis.
If you want to learn more about how businesses of all sizes can implement CSR, check out our blog on 11 steps to start making a difference as a company.
Get in Touch
A CSR program is vital to the success of a company in the modern era, and communicating your CSR efforts with the outside world is a vital part of an effective business strategy. At Prodigium Pictures, we’ve helped companies like Ava and organizations like the NAACP form a connection with their audience and inspire action with the power of video storytelling. Arrange a call with Prodigium’s team to begin your CSR journey.