While the challenges facing society are complex and multifaceted, companies have their own part to play in that. It is therefore crucial that companies adopt CSR strategies.
By adopting a strong Corporate social responsibility (CSR) strategy and reporting externally on their CSR performance, companies are able to ensure that all stakeholders are satisfied (consumers, employees, suppliers, shareholders) so the business can thrive for years to come.
CSR is becoming a more embraced practice across all industries, as companies are shifting their focus from being just profit-oriented to becoming socially- and environmentally-conscious ones.
Consumer demand presents one compelling reason for integrating CSR into company practice.
People are inundated every day with news on heavy topics such as climate change, social justice, and the state of the economy, and many have deep-seated values on these topics. Consumers increasingly want their purchases to reflect these values.
According to a survey of 420 American consumers, 75% were likely to start shopping at a company that supports an issue they agree with, and 71% wanted businesses to take a stance on social movements.
The survey participants also valued elements like environmentally-friendly business practices, social responsibility, and support of the local community above product price. Thus, the ‘conscious customer’ is increasingly well-informed (due in part to social media as organizing platforms and the availability of information through the internet) and assertive about their desire for evidence of corporate impact.
Not only do consumers choose to support companies that reflect their values, they also increasingly fact-check corporations’ claims of sustainable practices. They look not just at the product, but dig into a holistic evaluation of the brand and its commitment to positive societal and environmental impact.
The term ‘greenwashing’ refers to companies intentionally misleading consumers into thinking that a product or service is sustainable when it is not; the use of this term helps to describe and raise consumer awareness of fraudulent environmental claims.
Conscious consumers will actively vet companies to determine whether the company’s practices align with their goals. The benefit of this increased scrutiny is a different sort of brand loyalty.
Whereas before, brand loyalty was an outcome of marketing psychology, modern consumers are invested in the success of sustainable companies because they believe that those companies create positive impact.
The implementation of CSR reports and activities can also create value from within the company, by motivating employees and cultivating a sense of purpose.
CSR programs have the potential to encourage cooperative behavior and closer relationships among employees, as well as increase employee engagement and identification with the corporation.
Other data suggests that sustainable practices that come from top down have the potential to attract talent, enhance job satisfaction, and improve employee retention, among other benefits. People want to feel like their work aligns with their values, and that their labor is meaningful.
Employee opinion can also swing in the opposite direction.
Employee activism is a rising movement, as employees, like consumers, maintain that companies have a responsibility to proactively address CSR issues.
Every company, no matter its size or the industry it is in, has a responsibility to its investors. One of those responsibilities is making sure that the company is doing everything it can to be responsible and ethical in its operations.
CSR activities may help a company attract investors by showcasing good risk management practices and awareness of impact.
By implementing a CSR policy, companies can show investors that they are doing their best to operate ethically and responsibly. Investors will be more likely to invest in companies who demonstrate good corporate social responsibility.
A good CSR report proves to investors that the company has considered all aspects of its business and has thought through how each contributes to its overall impact on society and the environment.
A commitment to CSR denotes accountability and transparency in company processes, which in turn helps prevent costly missteps (such as fraud) and therefore reduce investment risk.
Regulation and Standards
Finally, regulations pertaining to CSR and sustainability efforts are continually evolving.
Standards such as the UN Global Compact, UN Sustainable Development Goals, and even the creation of the ISSB to align extra-financial concerns with financial reporting provide data on best practices for voluntary CSR activities.
However, there is a recent push for governments to formally require and more closely regulate such activities.
For instance, the European Commission passed a Corporate Sustainability Reporting Directive in 2021 (more information in the ‘Recent Developments’ section), and the United States’ Securities and Exchange Commission (SEC) is currently in the process of producing a new climate disclosure rule.
No company can prosper nowadays if it is not involved in the community and the people around.
Companies need to take an active role in the community, beyond just making a profit. The positive benefits of this attempt include the company’s expansion and durability of its success.
So, what are you waiting for? Start implementing your CSR strategy today!
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