What is Corporate Social Responsibility and Why is It Important in SMB?
“Ethically sourced materials.” “Cruelty-free.” “Zero carbon product.” “Sustainable packaging.” With such phrases becoming increasingly common in business, there is a need to explore its root purpose – corporate social responsibility (CSR).
In short, corporate social responsibility refers to the efforts that a business invests to enrich, rather than degrade, the wider environment and society. Aside from boosting morale at work, CSR can help a company create a public-friendly image. CSR generates the idea that a company is self-reflective and willing to adapt its practices to the shifting values of society, thus also establishing trust with consumers.
CSR itself can be achieved in different ways, and common corporate social responsibility examples include the following:
1. Environmental sustainability
With climate change and its associated environmental issues being brought to the forefront, businesses are now more aware of their impact on the planet. Such investments not only slow down the path to irreversible climate change, but according to Deloitte, they also increase the average GDP going forward.
With regard to environmental sustainability, CSR can be reflected through awareness of carbon footprint (i.e., the amount of CO2 released due to a business’s operation), eco-friendly ways of sourcing goods, and the use of green packaging. A clear indication of steps a company is taking towards this goal would speak to the degree to which they care about CSR. ESG, also known as environmental, social, and governance, is an extension of this. Among global tech companies, Acer ranks highly in its ESG efforts, which can be seen, for instance, in its proven efforts to reduce energy and resource consumptions.
2. Ethical responsibility
CSR is not always environment-related, as other types of ethics are equally important when running businesses. Who are the workers involved in the production line? Are they of working age? Do they work under clean conditions, and are they doing paid work within a healthy number of hours? When it comes to CSR, it is important that a company considers the whole production line—if part of the production is outsourced—and to not merely consider the working conditions of employees within their business.
An additional aspect of ethical responsibility relates to animal rights. To what extent, if any, have animals been placed in uncomfortable conditions for a product to be created? This can come in the form of not using animal testing for product development or including vegan products (which, under the right circumstances, can be eco-friendly as well).
With awareness and demand for more ethical practices, a whopping 62% of American consumers want companies to take a stand on current and broadly relevant issues such as sustainability, ethical sourcing, and fair employment practices. As a result, companies in the US are starting to make an effort to include better practices.
3. Philanthropic activities
Philanthropic activities are also a good way for businesses to ‘give back’ to society, or to fight for a cause they believe in. Contrary to what one may instinctively believe, philanthropic activities, while a gesture of kindness and seemingly a one-way contribution, are actually not a ‘financial loss’. In fact, there exist what is called “corporate philanthropy strategies”, where corporations use philanthropy as a means to develop their name further in the long run. Actions taken in this realm can include:
- Corporate sponsorships: SMBs may choose to sponsor the projects of local communities or non-profit organizations or plan scholarship programs in given subjects.
- Cause marketing: SMBs can partner with a non-profit organization for a mutual benefit. A part of the proceeds from a specific product or service can go to this organization. This helps a good cause and can appeal to socially conscious customers. Gaming giant, Blizzard Entertainment, used this method to raise 1.27 million USD for the Breast Cancer Awareness Foundation by selling a limited-time in game skin called “Pink Mercy.”
- Purchase-triggered donations: In a similar vein, companies may sometimes make a small donation for every purchase, encouraging sales while contributing to a cause. Shoe seller TOMS’ buy-one-give-one model, where the company donates a pair of shoes whenever one pair is bought, is one such example.
Businesses are the backbone of society as they create the products and services that make up our everyday lives, so collectively, their policies are powerful enough to shape how a society operates. Whichever category may be involved, CSR can be a significant channel for pressing global issues to be slowly addressed. By promoting CSR, businesses also have the potential to influence consumers – either consciously or subconsciously—to make better decisions in the long run.
The Challenges of CSR
Although CSR is built on the foundation of creating positive change, it is not without its challenges. Here are some that may surface:
1) Eco-friendly products are more costly and may not always be enthusiastically received by consumers
Eco-friendly products take extra resources to plan, design, and produce. It is, therefore, not surprising that products labeled as “green” are often more expensive than the non-green option. While consumers may support sustainability at heart, they may not always go for the most eco-friendly option due to financial constraints.
2) There is not one “model” to follow and evaluation may be tricky
There is no single model to follow when it comes to CSR planning, unlike some other aspects of a business. Companies need insightful staff to not only develop CSR strategies that fit into the short and long-term vision, but also come up with methods to measure their impact.
How can SMBs practice CSR?
Many people tend to instinctively believe that CSR is mainly a matter for large corporations. This, however, is far from the truth. Research by Santos in 2011 suggests that SMBs can engage in meaningful CSR by adopting “simple, easily applicable and cheap measures”, often in the realms of “eco‐efficiency, a better social climate or a higher profile in the local community”.
So how can SMBs contribute to CSR? While there may be some limitations to what SMBs can realistically do for CSR, here are some CSR ideas for small businesses:
- Choosing ethical and sustainable technology: For SMBs, CSR can just be choosing technological devices produced by companies that follow strong ethical guidelines, or businesses that pay more attention to sustainability.
- Sourcing ethically and eco-friendly materials: Taking time to choose ethically sourced or environmentally friendly materials is another way to go for SMBs. As more than 99 percent of businesses in the US are classified as SMBs, we can imagine that if every SMB were more conscientious of the origins of their products, it would indeed leave a considerable impact on the wider society.
None of the above should be seen as huge, effort-draining projects, but rather small steps that SMBs can take to work towards CSR.
Moreover, beyond these direct actions, SMBs can engage in CSR in a broader context:
- Promoting fair employment practices: SMBs can demonstrate commitment to CSR by treating employees well, providing fair pay, and ensuring a safe work environment.
- Community engagement: SMBs, often rooted in local communities, can support local initiatives and charities, furthering their social impact.
- Transparent reporting: Small businesses can build trust with stakeholders by being transparent about their business practices and CSR initiatives.
It is essential for SMBs to consider the increasing importance of CSR when it comes to attracting investors, as in current times, investors are often willing to weigh in non-financial factors (such as social impact) in their choices. Therefore, SMBs' commitment to CSR not only contributes to societal good but can also serve as a compelling proposition for investment.
Concluding remarks: the future of CSR
As the global society becomes increasingly complex, more patience will be needed to understand the ever-changing ethics and sustainability models of the world. While it may take effort to plan and adapt, CSR is most surely a wise move for corporations in the long run.
Esme Lee is a science writer and editor in the UK, carrying a passion for tech copywriting. She has a background in educational neuroscience and holds a PhD from the University of Cambridge.