Corporate Social Responsibility (CSR) focuses on the “people” and “planet” aspects of the Triple Bottom Line. This is a corporation’s initiatives to take a proactive approach to managing its impacts on the environment and society. Proactive being the keyword, meaning that the business implements programs to lessen harmful impacts and amplify positive impacts before it is forced to by regulation, industry, or its constituents.
CSR programs are voluntary and are not enforceable by regulating agencies. In fact, a strong CSR program goes above and beyond what regulation requires. A simple example of this would be an organization that uses the Clean Water Act as a benchmark and sets goals to reduce contaminating releases to a set standard below what the act allows. A more robust program would also implement a program that educates employees on the effects of pollution and partners with organizations that work to protect local bodies of water.
Beyond Risk Management
While Corporate Social Responsibility could be looked at as a form of risk management in that it keeps an organization ahead of the curve in terms of changing regulation and customer demands, CSR goes beyond risk management in the traditional sense. Generally speaking, risk management looks at the likelihood that an event will take place and the expected outcomes, and employs strategies to minimize unfortunate events or effects and maximize on opportunities. This typically involves prioritizing actions based on the level of impact and the probability of the event taking place. When a company truly embraces the concept of CSR, it does the right thing even if the odds of a dire negative impact or highly profitable direct positive impact are slim. Continuing with the example above, educating employees on the effects of pollution may not be as effective at reducing the chances of a contamination as a highly sophisticated testing and monitoring program, but it does arm the employee with the knowledge to protect himself and the community from harmful exposures.
Corporate philanthropy is certainly a piece of the CSR puzzle. The thing to understand here is that it is just that: a piece. CSR and corporate philanthropy are often viewed as interchangeable terms because many of the most basic CSR efforts are philanthropic in nature. However, CSR encompasses more than corporate giving. As discussed previously, CSR programs take a proactive approach to reduce negative impacts and increase positive impacts on the people and environment the corporation touches. Again using the previous example, a partnership with a non-profit organization can mean more than giving a hefty annual donation, joining as a corporate member, or sponsoring events. In a CSR program, a true partnership might mean encouraging employees to volunteer their time, hosting public awareness and educational events, or contributing services that are useful to the organization.
Corporate Social Responsibility looks beyond the interests of traditional stakeholders and considers impacts on employees, customers, vendors, suppliers, communities, and the natural environment. This approach to business strategy takes the minimum expected efforts, such as compliance with regulations and managing obvious risks, and goes a step further all within a thoughtfully developed and well organized program that aligns with the company’s strategic plan.