What is Corporate Social Responsibility?
And more importantly, why is it an important part of our conversation in discussing our relationship with corporate partners in philanthropy?
The reality is that Corporate Social Responsibility is an emerging field. It is a very broad and evolving area of development for corporations and not for profits alike, a new terrain for which maps are much needed, but often are imprecise.
It has a complexity that is only seen in the emergence of new ideas and systems , a nucleus of thoughts, practices and evidenced based studies that are lending to the defining structure that it is becoming, following along the lines of chaos theory. To a corporation, Corporate Social Responsibility (CSR) has a multitude of components, too many to review in this one small post. Its concept and its practice is complex, often disjointed and, currently, most often reactive. Divergent views and information overload is nowhere more apparent than in the field of corporate social responsibility. Each company is different, each with its own challenges, corporate culture, unique set of stakeholders and management systems. Each with its own view and opinion and strategy.
But amid this swirling pool of CSR anti-matter, certain agreed upon norms and standards are being established. The World Business Council on Sustainable Development makes this statement on defining Corporate Social Responsibility:
Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large
And this from an MBA textbook on defining corporate social responsibility:
Corporate Social Responsibility is the decision-making and implementation process that guides all company activities in the protection and promotion of international human rights, labor and environmental standards and compliance with legal requirements within its operations and in its relations to the societies and communities where it operates. (Lehigh University, College of Business and Economics)
Two very nearly similar definitions. We are getting close to a commonality of expected beliefs and outcomes, among everyone involved in defining CSR.
Despite its complexity most corporations practicing a CSR culture, administer and measure their CSR programs along these three areas:
External Business Practices: How the corporation does business. Who they compete with, who they partner with, their supply chain, their products, their distribution lines and the impact their business has on society.
Internal Business Practices: Their corporate governance, their corporate policies, investments, ethical balance structure and the impact their business has on their employees
Impact Partnerships: How they respond to societal issues that specifically impact their business practices, both internal and external and who they partner with in doing so.
Secondly, most corporations will agree that the measurement of these are based on three bottom lines: Financial bottom line outcomes, Environmental bottom line outcomes and Social bottom line outcomes. This is called the triple bottom line.
For our role, as nonprofits seeking to shift our approach in securing corporate funding, it is essential to know and understand the core concept, terms and definitions on CSR as outlined here. Our ability to engage in an educated dialogue about our partners corporate social responsibility is critical to our successfully defining a partnership that meets both our and their needs.
Let me take you through a quick history on corporate social responsibility. Some may think it’s a new idea, a fad or a recent breakthrough in thinking. But it goes as far back as the late 1800’s. Evidence of corporate socially responsible practices among industrialized corporations can be found in some of our most familiar company names. For instance, take the Sears Roebuck Company, a company that was near bankruptcy when Julius Rosenwald, joined the company in 1895.
During his tenure as vice president, treasurer and then president, Rosenwald grew the company from a failing $750,000 a year corporation to over $50 million. As part of his growth plan, Rosenwald invested a lot of Sears’ money into society, specifically agriculture. Rosenwald understood that the growth of Sears Roebuck was wholey dependent on the growth and wellbeing of the company’s customer- the American Farmer and its field hands. And so he invested in his company by investing in his customer, through their societal, educational and family needs.
Why Rosenwald did this was not ‘termed’ corporate social responsibility until 1953 with the publication of the book ‘Social Responsibility of Businessmen’ by economist and college president Howard R. Bowen.
But still the term languished, without much fanfare for about a decade, until the phrase was reinvigorated in the 60’s and 70’s around the time when big international companies faced anti-corporate sentiments because of environmental and human rights issues. In fact, companies faced large scale boycotts of their goods and services to force change among corporate practices affecting society and the environment.
Through the 80’s discussion of the concept of CSR grew. During that time, most socially responsible behavior was positioned as a philanthropic activity based on a company’s fixed budget that was allocated to support nonprofit organizations – mostly doing so to “look good”. These funds were sometimes allocated to many organizations with the idea that to satisfy as many interest groups and to gain as much visibility as possible was a beneficial goal. The commitment was usually short term and restricted to making donations that were heavily influenced by the wishes of the senior management of the organization, and mostly to bring about a marketing position through brand awareness at nonprofit events.
Then in 1989, Ben and Jerry’s distributed the first ever Social Responsibility Annual Report. People took notice, because it authentically calculated Ben and Jerry’s business practices and policies that lead to meaningful outcomes for society and the environment and to bottom line financial benefits to the company and the communities it supported.
Academic exploration, corporate research and charitable interest in CSR began to escalate at a rapid rate. In 1992 the Earth Summit in Rio was a key moment in the evolution of CSR. At this Summit, it was reported that “the level of corporate involvement in the summit was unprecedented, unlike anything ever seen before, with a coalition of 48 companies coming together to establish a new coalition, the Business Council for Sustainable Development (BCSD)”. This coalition placed the academic and financial exploration of CSR culture on the map in a way now other group or company had been able to do before. The BCSD would later become the World Business Council on Sustainable Development (WBCSD) which continues to be an authority in CSR and have tremendous influence on the corporate social responsibility stage.
Since that time, corporate social responsibility as an essential and important business practice has moved from discussion in the cubicles of most corporations, to a presence in the board room and a position on the balance sheet of almost all company’s large and small.