One Deloitte study found that 93% of business leaders believe companies are more than employers—they’re also stewards of society. And according to Havas Media, 73% of consumers say brands must act now to make a social and environmental impact. Yet at the same time, only 71% of people have faith that brands will deliver on their promises.
This gap emphasizes the need for more strategic socially responsible practices. By aligning your corporate social responsibility (CSR) efforts with your company’s mission, values, and business model, you can build an organization that better serves your organizational objectives, and society.
Here’s what corporate social responsibility is, the practices that fall under it, and how CSR can benefit your business’s bottom line.
What is corporate social responsibility?
Corporate social responsibility is the practice of pursuing social and environmental impact goals alongside operational business goals such as growth and profit. Rather than focusing on earnings alone, socially responsible organizations pursue a “triple bottom line” and measure their success based on their commitment to profit, people, and the planet.
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Companies can engage in CSR practices in a variety of ways, from building an entire department dedicated to corporate responsibility to launching a single campaign. Corporate responsibility is also sometimes referred to as corporate citizenship, which frames for-profit organizations as important members of their local communities and society at large.
5 types of corporate social responsibility and examples
There’s no one “right” way to practice CSR, but there are certain key components to consider when designing your corporate social responsibility initiatives. According to the “pyramid of corporate social responsibility,” a concept first introduced by business professor Archie B. Carroll three decades ago, a CSR program is composed of four types of social responsibilities: economic, legal, ethical, and philanthropic. Environmental responsibility is now recognized as a core type of CSR, too.
Here are the five types of corporate responsibility and how socially responsible companies integrate these CSR strategies into their business operations.
Economic responsibility
Carroll believed businesses couldn’t fulfill any other responsibilities if they didn’t earn money first. The foundation of his original pyramid is the responsibility to maximize earnings and maintain operating efficiency. The concept of economic responsibility has since evolved to include financial decisions that benefit both a company’s margin and society.
For natural skin care company Satya, economic responsibility meant hiring stay-at-home moms during a period of rapid growth, rather than relying on fulfillment centers. Founder Patrice Mousseau spoke about the benefit to customers. “We ship them products, then they ship out to their own regions, which drops our shipping costs, employs them, and gets the products faster to customers. It’s our hope that if we can get them enough product before holiday orders start coming in, it’ll be easier for people to get their parcels, because they’ll actually be getting it locally instead of one fulfillment center."
Legal responsibility
Carroll proposed that the next layer of the pyramid is the legal responsibility to operate within federal, state, and local regulations. This responsibility also includes advocating for laws to evolve and change.
For example, in 1993, Microsoft became the first Fortune 500 company to offer benefits to employees’ same-sex domestic partners and include sexual orientation in its corporate non-discrimination policy. Since then, the company has created an internal team focused on advancing policies that protect LGBTQ+ rights around the world.
Ethical responsibility
Carroll’s pyramid proposed that companies also have an ethical responsibility to act with integrity beyond legal requirements. He pointed to the environmental and civil rights movements as examples of emerging societal values businesses should uphold, even if those values reflect higher standards than legally required.
Coffee and chocolate brand ChocoSol fulfills this ethical responsibility by investing in fair labor practices. It works directly with small farmers who use organic or fair trade practices, but who don’t have access to official certifications. Its business model both increases economic opportunities for these farmers, while also paying them a higher minimum wage than fair trade requires.
Philanthropic responsibility
The top of Carroll’s pyramid is philanthropic responsibility: the obligation to contribute resources, such as time and money, to local communities and to improve their overall quality of life.
For coffee and tea brand BLK & Bold, this means donating 5% of profits to youth and education programs; and for moccasin brand TPMOCS, it means addressing poverty in Indigenous populations and providing necessities for children living on reservations.
Environmental responsibility
In the face of global warming and climate change, environmental stewardship has become an important component of corporate responsibility. Companies are striving to reduce greenhouse gas emissions, invest in renewable energy sources, use sustainable resources, lower their carbon footprint, and engage in a wide swath of environmental efforts.
Activist and entrepreneur Lauren Singer founded two companies with environmental impact in mind: Package Free is a retail and online shop that sells sustainable household and personal goods, and The Simply Co. is a laundry detergent that’s safe for the planet.
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Benefits of corporate social responsibility for businesses
Investing in corporate responsibility is not just good for people and the planet, it’s actually good for your business, too. CSR efforts have been shown to help with the following:
- Improve reputation and brand image. Consumers, investors, and other stakeholders pay attention to how companies engage with social and environmental issues. Multiple research studies show corporate responsibility programs positively impact a brand’s reputation by associating the company with honesty, ethical commitment, and sustainability.
- Enhance employee engagement and retention. It feels good to do good. Studies show employees feel more engaged when they’re working for a socially responsible company—in fact, engaging in CSR programs can reduce staff turnover by up to 50%.
- Increase customer loyalty. Consumers, especially younger generations, prioritize purchasing from businesses with corporate social responsibility practices. A recent study found that even with inflation driving up costs across industries, 66% of Americans and 80% of young adults would pay more for products from a company with clear sustainable practices than from a non-sustainable competitor.
- Improve financial outcomes.CSR initiatives can both increase profits and help your organization achieve operational cost savings in the long run. In addition, corporate responsibility can improve investor relations, too: More than 70% of investors report that efforts to enhance the environment and society affect their portfolio and financial decisions.
Challenges of corporate social responsibility for businesses
Understanding the challenges of engaging in corporate responsibility initiatives can help your business avoid common missteps, such as:
- Failing to implement CSR strategies. Many businesses come up with bold corporate responsibility plans, but fail to follow through. Some studies show that 71% of consumers do not trust brands to fulfill their CSR promises. It’s beneficial for businesses to create CSR programs that are achievable, knowing you can evolve them over time.
- Greenwashing. Greenwashing is when companies deceptively market a product as sustainable or ethical. It’s OK if you’re still working toward your goals, just be honest about your progress.
- Not finding the right partners. You don’t have to go it alone. There are experienced advisers and/or partner organizations in local communities and relevant fields that can help build out your CSR strategies.
- Ineffectively managing costs. While CSR initiatives may improve profits in the long term, these programs often require an upfront investment. Similar to waiting on a return for any other new business initiative or product, patience is a virtue.
Corporate social responsibility FAQ
What is meant by corporate social responsibility?
What are some examples of CSR?
How can CSR benefit small businesses?
How can businesses integrate CSR into their processes?
What are the 5 key elements of CSR?
1. Economic responsibility, or making sustainable financial decisions.
2. Legal responsibility, adhering to the law.
3. Ethical responsibility, upholding societal ethics and values.
4. Philanthropic responsibility, contributing resources to improve quality of life.
5. Environmental responsibility, engaging in sustainable practices.
