Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Corporate Social Responsibility (CSR)

What is CSR?

Corporate Social Responsibility, or CSR, is a system of self-regulation for a business to become and remain socially accountable to its customers, employees, peers, and community. 

Under CSR, a company tracks its effect on the whole community -- economically, environmentally, legally, and culturally -- during its normal course of business. Beyond the community benefits from social responsibility, the business hopes to improve its brand image and thus profitability.

Corporate Social Responsibility Examples

Some of the most popular CSR activities are philanthropy and community volunteer efforts. For example, a large manufacturer may donate money to land and wildlife preservation and organize and sponsor volunteer, environmental clean up efforts.

Another example might be a logging company planting hundreds of trees to regrow a forest. Or an oil company helping local fisherman and shoreline communities clean up and regrow their local businesses after an oil spill. 

To help corporations with ideas on being more socially responsible, the International Organization for Standardization (ISO) published a guide to voluntary standards for CSR in 2010 known as ISO 26000. These standards were meant to serve as a set of suggestions rather than requirements as CSR is mostly an exercise in quality rather than quantity. The guidelines attempt to define what CSR is and are designed to help companies, regardless of their industrial sector, create actionable and effective execution.

What is the Purpose of Corporate Social Responsibility?

Corporate behavior is coming under increased scrutiny by shareholders and stakeholders, as well as regulatory agencies. Not only that, but consumers take corporate behavior more seriously than ever and are ready to avoid buying from a company for life if the business makes a political or social decision that's unpopular, or otherwise looks disingenuine with their audience.  

By being a better corporate citizen, businesses can generate good will among the community of stakeholders, which can pay off in terms of brand recognition, an increasingly loyal customer base, and ultimately higher earnings.

There is also some evidence that share prices of socially responsible corporations perform better overall than the benchmark market indexes.

[Read on to learn more about socially responsible investments (SRI)]