Corporate Social Responsibility (CSR)

REVIEWED BY JAMES CHEN Updated Feb 11, 2019

What is Corporate Social Responsibility (CSR)
Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially
accountable — to itself, its stakeholders, and the public. By practicing corporate social responsibility,
also called corporate citizenship, companies can be conscious of the kind of impact they are having on
all aspects of society including economic, social, and environmental. To engage in CSR means that, in the
normal course of business, a company is operating in ways that enhance society and the environment,
instead of contributing negatively to them.
Breaking Down Corporate Social Responsibility (CSR)
Corporate social responsibility is a broad concept that can take many forms depending on the company
and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society
while boosting their own brands. As important as CSR is for the community, it is equally valuable for a
company. CSR activities can help forge a stronger bond between employee and corporation; they can
boost morale and can help both employees and employers feel more connected with the world around
them.
In order for a company to be socially responsible, it first needs to be responsible to itself and its
shareholders. Often, companies that adopt CSR programs have grown their business to the point where
they can give back to society. Thus, CSR is primarily a strategy of large corporations. Also, the more
visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior
for its peers, competition, and industry.
Movement aimed at encouraging companies to be more aware of the impact of their business on the
rest of society, including their own stakeholders and the environment. [1]

Corporate social responsibility (CSR) is a business approach that contributes to sustainable development
by delivering economic, social and environmental benefits for all stakeholders.

CSR is a concept with many definitions and practices. The way it is understood and implemented differs
greatly for each company and country. Moreover, CSR is a very broad concept that addresses many and
various topics such as human rights, corporate governance, health and safety, environmental effects,
working conditions and contribution to economic development. Whatever the definition is, the purpose
of CSR is to drive change towards sustainability.

Although some companies may achieve remarkable efforts with unique CSR initiatives, it is difficult to be
on the forefront on all aspects of CSR. Considering this, the example below provides good practices on
one aspect of CSR – environmental sustainability.

Example

Unilever is a multinational corporation, in the food and beverage sector, with a comprehensive CSR
strategy. The company has been ranked ‘Food Industry leader’ in the Dow Jones Sustainability World
Indexes for the 11 consecutive years and ranked 7th in the ‘Global 100 Most Sustainable Corporations in
the World’.

One of the major and unique initiatives is the ‘sustainable tea’ programme. On a partnership-based
model with the Rainforest Alliance (an NGO), Unilever aims to source all of its Lipton and PG Tips tea
bags from Rainforest Alliance Certified™ farms by 2015. The Rainforest Alliance Certification offers
farms a way to differentiate their products as being socially, economically and environmentally
sustainable. [2]
What is Corporate Social Responsibility?
Consumers consider more than quality goods and services when choosing a brand. Many are
prioritizing corporate social responsibility (CSR), and holding corporations accountable for effecting
social change with their business beliefs, practices and profits. In fact, some will even turn their
back on their favorite companies if they believe they're not taking a stand for societal and
environmental issues.
"Corporate responsibility is simply a way for companies to take responsibility for the social and
environmental impacts of their business operations," said Jen Boynton, vice president of
member engagement at 3BL Media. "A robust CSR program is an opportunity for companies to
demonstrate their good corporate citizenship … and protect the company from outsized risk by
looking at the whole social and environmental sphere that surrounds the company."
To illustrate how critical CSR has become, a 2017 study by Cone Communications found that more
than 60 percent of Americans hope businesses will drive social and environmental change in
the absence of government regulation. Most consumers surveyed (87 percent) said they would
purchase a product because a company supported an issue they care about. More importantly,
a whopping 76 percent will refuse to buy from a company if they learn it supports an issue
contrary to their own beliefs.
"CSR creates a filter for the actions of a company," said Wendy Burk, CEO of Cadence Travel. "It
keeps organizations accountable and ethical."
But consumers aren't the only ones who are drawn to businesses that give back. Susan
Cooney, head of global diversity, equity and inclusion at Symantec, said that a company's CSR
strategy is a big factor in where today's top talent chooses to work.
"The next generation of employees is seeking out employers that are focused on the triple
bottom line: people, planet and revenue," said Cooney. "Coming out of the recession, corporate
revenue has been getting stronger. Companies are encouraged to put that increased profit into
programs that give back.

Triple Bottom Line (TBL)

REVIEWED BY WILL KENTON

Updated Feb 8, 2019

What is the Triple Bottom Line (TBL)
The triple bottom line (TBL) is a concept which broadens a business' focus on the financial
bottom line to include social and environmental considerations. A TBL measures a company's
degree of social responsibility, its economic value and its environmental impact.
The phrase was introduced in 1994 by John Elkington and later used in his 1997 book
"Cannibals with Forks: The Triple Bottom Line of 21st Century Business." A key challenge with
the TBL, according to Elkington, is the difficulty of measuring the social and environmental
bottom lines, which necessitates the three separate accounts being evaluated on their own
merits.
BREAKING DOWN Triple Bottom Line (TBL)
Normally, a company's bottom line on its income statement is its net income, i.e., its
profits. Elkington's TBL is intended to advance the goal of sustainability in business practices, in
which the focus of companies is extended beyond profits to include social and environmental
issues to measure the total cost of doing business. An investment manager, individual
investor or CEO that wants to pursue the TBL must consciously consider, in addition to the
economic bottom line, the social and environmental areas in making investing and business
decisions. Deploying money and other resources, such as human labor, to a project or an
investment can either contribute to these three goals or focus on profit at the expense of one or
both of the other two. Some of the repercussions that have come about from ignoring the TBL in
the name of profits include destruction of the rainforest, exploitation of labor, and damage to the
ozone layer.
In effect, TBL is the idea that it is possible to run an organization in a way that not only earns
financial profits but also betters people’s lives and helps the planet. The elements of the TBL
are referred to as "people, profits and planet."
People + Planet = Social + Environmental Responsibility
It can be challenging to maximize financial returns while also doing the greatest good for the
people and the environment. Consider a clothing manufacturer whose best way to maximize
profits might be to hire the least expensive labor possible and to dispose of manufacturing
waste in the cheapest way possible. The result might be the highest possible profits for the
company but miserable working and living conditions for laborers, and damage to the natural
environment and the people who live in that environment. In the past, such practices were more
socially acceptable, but today, many consumers are willing to pay more for clothing and other
products if it means that workers are paid a living wage and the environment is being respected
in the production process. Many consumers want companies to be transparent about their
practices and to be considerate of all their stakeholders, hence the popularity of the TBL
concept that accounts for the full cost of doing business.
Adding the "people" element of social responsibility to corporate bottom lines shifts the focus to
the fair treatment of employees and off-site labor, as well as enacting favorable practices in the
communities where companies conduct business. For example, Mars, Incorporated's Cocoa for
Generations is a sustainable cocoa initiative that requires its cocoa farmers to be certified by fair
trade organizations to ensure they follow a code of conduct that includes fair treatment to those
providing labor. In exchange for certification, Mars provides productivity technology and buys
cocoa at premium prices.
The bottom line referred to as the "planet" represents the implementation of sustainable
practices and the reduction of environmental impact. These measures range in scope from
green initiatives such as recycling programs within corporations to companies dedicated to
manufacturing products using only sustainable materials. For example, Axion Structural
Innovations builds railroad ties and pilings using recycled plastic bottles and industrial waste
instead of using standard materials such as wood, steel and cement.
Profits: The Financial Bottom Line
The addition of social and environmental responsibilities can have a positive effect on a
company's financial bottom line. A Nielsen report released in October 2015 found that 73
percent of millennials, which represent the largest consumer demographic in U.S. history, were
willing to pay more for sustainable goods, up from 55 percent in 2014.
In addition to growing revenues, companies are integrating social and environmental standards
with corporate governance policies, which can reduce the chances of brand-damaging events
and missteps. In addition to governance benefits, the transformation to a TBL is increasingly
seen as a vital factor in building corporate brands and goodwill, which represent 30 percent of
the value of public companies, on average.
Measuring the TBL
The TBL can be difficult to measure because while the issue of profitability is black and white,
what constitutes social and environmental responsibility is somewhat subjective. How do you
put a dollar value on an oil spill — or on the prevention of one? Is it good enough to pay workers
in Bangladesh three times the average local wage if that wage still sounds horrifyingly low to
consumers in the United States? How do you measure the cost of child labor? Does it benefit
children and their families by allowing them to rise out of poverty, or does it perpetuate poverty
by denying children sufficient time to get educated and deprive them of a carefree childhood?
The upside of this lack of standardized measurement is that metrics can be adopted that make
the most sense for each organization, project or location. A restaurant could measure and report
on how much it reduces its waste by switching to environmentally friendly packaging and
serving leftover food to a local homeless shelter that would otherwise be thrown out. A car
manufacturer could measure its progress toward producing less-polluting vehicles. A
government project to expand public transit could measure how much it reduces highway and
surface road congestion.
Other key factors to report on, depending on the organization, might include job
creation, employee turnover, fossil fuel consumption, hazardous waste management,
percentage of women and minorities employed overall and in management
positions, contributions to charity, how employee income and benefits compare with a living
wage, and number of employees taking advantage of workplace benefits for pursuing higher
education.
Federal, state and local governments as well as nonprofit organizations have also implemented
the TBL approach. For example, Grand Rapids, MI, has applied the TBL concept to creating a
sustainable local economy through focused efforts related to environmental quality, economic
prosperity, and social capital and equity. Indicators used by the city to measure its TBL include
alternative fuel usage, traditional fuel consumption, number of air pollution ozone action days,
personal income per capita, unemployment rate, public transportation ridership, crime statistics,
educational attainment and voter participation.
What Is the Triple Bottom Line?
Traditionally, business leaders concerned themselves with their bottom lines—or, the
monetary profits their businesses made. Today, more leaders have begun to
think sustainably. The triple bottom line theory expands the traditional accounting
framework to include two other performance areas: the social and environmental
impacts of their company. These three bottom lines are often referred to as the three
P’s: people, planet, and profit.

Here is each “P” in more detail.

People

“People” considers employees, the labor involved in a corporation’s work, and the wider
community where a corporation does business. Another way to look at “people” is, how
much does a company benefit society? A triple bottom line company pays fair wages
and takes steps to ensure humane working conditions at supplier factories.

Triple bottom line companies make an effort to “give back” to the community. For
example, 3M partners with United Way to fund STEM education across the world. This
initiative is an example of “enlightened self-interest”—acting to further the interests of
others, ultimately, to serve one’s own self-interest. The community benefits, and 3M
provides itself a well-educated source of scientists and innovators for generations to
come.

Planet

A 2016 Gallup poll revealed that 64 percent of Americans are worried about global
warming. Public opinion has dictated that enterprises that harm the environment should
also bear the cost, and you can bet businesses are taking notice. The “planet” piece of
the triple bottom line indicates that an organization tries to reduce its ecological footprint
as much as possible. These efforts can include reducing waste, investing in renewable
energy, managing natural resources more efficiently, and improving logistics.

For example, Apple has invested heavily in environmental sustainability. Its massive
U.S. data centers are LEED certified. In 2016, the company announced that 93 percent
of its energy comes from renewables. These actions have nudged other tech giants like
Facebook and Google toward using more renewable energy sources to power facilities.
Profit

While every business pursues financial profitability, triple bottom line businesses see it
as one part of a business plan. Sustainable organizations also recognize that “profit”
isn’t diametrically opposed to “people” or “planet.” Swedish furniture giant IKEA reported
sales of $37.6 billion in 2016. The same year, the company turned a profit by recycling
waste into some of its best-selling products. Before, this waste had cost the company
more than $1 million per year. And the company is well on its way to “zero waste to
landfill” worldwide. According to Joanna Yarrow, IKEA’s head of sustainability for the
UK, “We don’t do this because we’re tree huggers, we do this because it’s very cost
effective.”

Benefits of the Triple Bottom Line

Though the triple bottom line has been around for decades, events such as the 2008
financial crisis, the BP oil spill, and climate change cast an almost constant spotlight on
corporate ethics and corporate social responsibility. “Business as usual” now has a very
different meaning.

For global companies, changing operations to minimize risk and fight climate change,
for example, requires a lot of time and money. But an upfront investment in corporate
sustainability can pay off. An MIT study found that companies that treated sustainability
seriously—by making a business case for it and setting concrete goals—were the ones
that profited from sustainable activities.

The success and profitability of corporate sustainability initiatives really depend on one
thing: a talented employee who knows how to take the triple bottom line from theory to
reality. This employee must have specialized knowledge of environmental science,
accounting, and economics as well as leadership skills and the ability to use systems
thinking to make strategic business decisions.

Sustainability is the future. And with this unique mix of experience and
skills, sustainable managementprofessionals can build some of the most prosperous
triple bottom line companies in the world.
By using the Triple Bottom Line method, your business can expand how it understands its position in the
current economy and its ability to survive in the future. Corporate sustainability measures your ability
to be in business indefinitely, based on your impact on the environment, your relationship to your
community, and contribution to your economy. In reality, all three factors play a major role in
determining if your business can stay in business and generate a profit - no single bottom line can sustain
a business alone.

Expectations of Corporate Social Responsibility

Consumers today expect a lot out of companies. According to a study by Cone

Communications, 9 out of 10 consumers expect companies to operate responsibly and
address social and environmental issues rather than simply make a profit. In addition,
84 percent of consumers seek out responsible products.[1]

To please consumers, many companies now practice corporate social

responsibility. Corporate social responsibility (CSR), also known as corporate
citizenship, is a business concept in which social and environmental concerns are
integrated into a company’s operations. Whole Foods Market CEO John Mackey refers
to CSR as conscious capitalism, in which businesses “serve the interests of all major
stakeholders—customers, employees, investors, communities, suppliers, and the
environment.”[2] Mackey witnessed the benefits of conscious capitalism when a Whole
Foods Market store was terribly affected by a flood. Unexpectedly, customers and
neighbors helped, employees worked for free, suppliers resupplied products on credit,
and its bank loaned it money to restock. The Whole Foods store was able to reopen 28
days after the flood.

Although there are multiple versions of CSR, the general main categories of CSR
include environmental efforts, philanthropy, ethical labor practices, and volunteerism.
Let’s take a closer look at each of these.
Environmental Efforts

The primary focus of many companies in their commitment to CSR is through

environmental efforts. For example, companies can have a large carbon footprint on the
environment, which is the amount of greenhouse gases, especially carbon dioxide,
emitted by an individual, organization, process, event, structure, or product. The
majority of scientists believe that greenhouse gases are causing changes in the global
climate, sea level, ecosystems, and thus, agricultural patterns. The carbon footprints of
companies vary greatly depending on business operations, their size, and their location.

Any action taken to reduce a carbon footprint is considered beneficial for the
environment. These efforts have included minimizing the amount of land occupied or
used, constructing/occupying energy-efficient buildings, planting trees in the rainforest,
and using locally sourced products. For example, the Bingham Hotel outside of London
sources as much food as possible from suppliers within a 10-mile radius and the rest of
its food from the British Isles.[3] Purchasing locally sourced products supports local
employment and reduces pollution by limiting the distances products must be
transported.

Philanthropy

Many companies practice CSR by donating to various charities, starting charitable

programs, and offering scholarships to underprivileged students wanting to attend
college. Nu Skin, a personal-care company, developed a charity called Nourish the
Children, which allows leaders, employees, and customers to donate nutrient-rich meals
to children around the world. From 2002, when the program began, to 2017, people had
donated more than 500 million meals through the program.[4]

Ethical Labor Practices

Labor practices are often controversial from an ethical perspective. For example,
Apple’s iPhones contain parts from companies in other countries. Specifically, the tin,
which is used for a part, comes from mines in Indonesia. With labor laws that vary from
one country to another, the company exercised due diligence in ensuring that its
sourcing companies follow all applicable labor laws in their country of operation. But it
was revealed to consumers in the United States that the tin was mined from companies
in Indonesia that use child labor. Moreover, during the mining process, laborers as
young as 12 years old were subject to the hazards of unstable soil. US consumers were
appalled.

To address the issue, Apple instituted more robust labor practices, which were
communicated to consumers. In a statement, Apple said, “the simplest course of action
would be for Apple to unilaterally refuse any tin from Indonesian mines. That would be
easy for us to do and would certainly shield us from criticism. But that would also be the
lazy and cowardly path, since it would do nothing to improve the situation. We have
chosen to stay engaged and attempt to drive changes on the ground.” [5] For improved
transparency, Apple has released annual reports that include details of its work with
suppliers and their labor practices. Recent investigations have shown some
improvements to the working conditions of the employees of Apple’s suppliers.
However, the company still faces some criticism.

Volunteerism

Many companies are encouraging volunteerism by incorporating it into their policies and
establishing employee volunteer programs. For example, some companies make a
donation to the charities their employees volunteer at, in the amount equivalent to the
employees’ regular pay for the same number of hours volunteered. Other companies
offer gift cards to employees who volunteer. Companies are finding creative ways to
encourage and reward the volunteerism of employees not only to help society and the
environment but also so that consumers and stakeholders will perceive them as socially
responsible.