27 Jan Corporate Social Responsibilty (CSR)

Fridays for Future, reports on human rights violations, scandals about the cover-up of environmentally harmful activities – the importance of social and ecological issues is becoming increasingly relevant. 87.6% of consumers in Germany – and thus the clear majority – are interested in the social responsibility of large companies.^[1] Therefore, this week we would like to address the concept of Corporate Social Responsibilty and list its advantages for your company. Furthermore, we talk about the misuse of CSR – the so-called greenwashing.

What is Corporate Social Responsibility?

„Corporate social responsibility […] refers to the social responsibility of companies
in the sense of sustainable economic activity.“

– Federal Ministry of Labor and Social Affairs

In the context of corporate social responsibility (CSR), companies are responsible for the impact they have on society. In doing so, social as well as ecological and economic (business) aspects are taken into account. There is often talk of a three-pillar model or a triple bottom line.

Areas in which CSR applies include, for example, fair business practices, employee-oriented human resources policy, protection of the climate and the environment, economical use of natural resources, combating corruption, fair trade and responsibility in the supply chain.

The principle of sustainable business is becoming increasingly important due to two trend currents. First, globalization is creating intensified competition and more complex supply chains, processes are expanding, and a wide range of stakeholders are involved. The complexity makes it difficult to assess the impact of companies on society and the environment, but at the same time it makes it more serious. On the other hand, the expectations of the public are increasing and companies are thus being pushed to act. Nearly 90% of Germans, for example, want to know what companies are doing to live up to their social responsibility.^[2]

Corporate Social Responsibility vs. Corporate Citizenship

Again and again, the term CSR is used synonymously with other terms and consequently misunderstood. In particular, corporate social responsibility and corporate citizenship are often mistakenly confused or equated with each other and should therefore be clearly distinguished from each other in the following.

As already discussed, there is a clear link to business activity when the three-pillar model is observed in the context of CSR. This involves the company’s own employees, its own processes, the supply chain and other stakeholders involved. The CSR concept must be seen as part of the corporate strategy and be incorporated into all of a company’s activities.

Corporate citizenship, on the other hand, deals with engaging activities that go beyond business operations. There is no direct link to corporate processes. Companies can become involved in the local or international environment and thus support social or ecological projects. Activities that fall under corporate citizenship include any fundraising activities, the establishment of charitable foundations and sponsorship of cultural and sporting events.

Benefits for your company

Many companies see the application of CSR as merely a significant cost factor and therefore avoid implementing social and environmental aspects. However, CSR also offers considerable advantages and provides an important competitive advantage, especially in the long term. The individual advantages in the application of CSR will therefore be discussed in the following.

Better image

By following the CSR strategy and implementing and adapting appropriate activities and processes, companies can achieve a better image. An employee-oriented HR policy makes you an attractive employer and can give you important competitive advantages. 86% of Germans would prefer to work for a company that has a particularly good social commitment,^[3] and the increasing interest of society additionally ensures customer loyalty and new customer acquisition.

Minimizing costs

Although the initial conversion of processes may incur costs, this is not the case in the long term. This is because energy and resource efficiency helps companies cut costs, which means a significant competitive advantage in the long term.

Risk minimization

An employee-oriented HR policy and occupational health and safety management ensure satisfied employees. Overall, you can reduce lost work days and, for example, accident-related production downtime, which naturally also minimizes costs.

Innovation

By applying the CSR concept and integrating it into your strategy and processes, you can adapt to changing conditions at an early stage. An increasingly relevant topic in society will presumably also bring corresponding regulations with it over time. By implementing this in your company, you will be optimally prepared and will also have a clear advantage over your competitors.

Attractiveness for investors

With the so-called Socially Responsible Investment (SRI) or ethical investment, investors also include social and ecological factors when they decide to invest in a company. For listed companies in particular, CSR is therefore also of enormous relevance in this respect.

Greenwashing – the misuse of CSR

Environmental and climate protection are becoming increasingly important for consumers^[4] and are putting companies under more and more pressure. However, the advantages promised by CSR as well as the disadvantages in case of disregard also bring difficulties. Companies want to enhance their image and appear particularly sustainable and fair. Often, ideas of CSR are misused without really implementing the concept and integrating it into the corporate strategy.

In this case, one speaks of greenwashing. This involves marketing measures that are used specifically to present a company or a product as particularly „green“. Often, however, this only distracts from other problems and environmentally harmful aspects of a company. The consumer is presumably led to believe something false in order to persuade him or her to make a purchase.

Greenwashing can take many different forms. For example, there are a few products or collections that are manufactured with renewable raw materials, but these are produced under adverse conditions in third world countries. In the end, however, only the renewable raw materials are advertised. Furthermore, labels are used that do not officially exist (e.g. „certified organic“). Another activity that can be attributed to greenwashing is whitewashing. Through the design of packaging, products are presented as healthy, although they are full of sugar and fat. Consumers who are not knowledgeable enough are thus easily deceived and the CSR idea is fundamentally abused.

Conclusion

Contrary to the expectations of many companies, implementing a CSR strategy and incorporating social and environmental aspects into corporate processes can have significant benefits. In addition to customer loyalty and new customer acquisition, you can also position yourself as an attractive employer and have higher chances of attracting investors. In addition, resource efficiency and employee orientation ensure significant cost savings in the long term. With holistic attention to corporate social responsibility, both your company and society can reap benefits.

^[1] Splendid Research: Corporate Social Responsibility Monitor 2016

^[2] Particulate: CSR – Was bringt das eigentlich? (2018)

^[3] Particulate: siehe [2]

^[4] Umweltbundestamt: Umweltbewusstsein und Umweltverhalten (2020)