What are the CSR activities
Corporate social responsibility
Table of Contents
- Business relevance
- Corporate social responsibility drivers
- New information and communication conditions
- Loss of confidence in entrepreneurial activities / more critical public
- Capital markets
- CSR reporting
- Content dimensions
- Corporate social responsibility as a voluntary commitment
- Corporate social responsibility as avoidance of misconduct
- Strategic management of corporate social responsibility
- Future prospects
Abbreviation CSR, is a key concept in corporate ethics that raises the question of corporate social responsibility. CSR is interpreted very differently in science and practice, so that it is not a clear management concept, but a central idea that has to be concretized in a company-specific manner. In particular, the concept of sustainability and the Sustainable Development Goals act as basic points of orientation. In addition, it is widely recognized that CSR not only includes making positive social contributions, but also reducing negative effects. The discussion about corporate social responsibility also goes under the terms corporate citizenship, stakeholder management (stakeholder approach) and corporate sustainability.
The topic of CSR has continuously gained in importance in recent years. Today companies are not only expected to admit their social responsibility, but also to prove that they live up to it. This creates the challenge for corporate management to deal with this expectation appropriately, since otherwise there is a risk of loss of entrepreneurial acceptance in society (license to operate) and a deterioration in entrepreneurial ability to cooperate. By assuming social responsibility, companies position themselves as good partners in society and thus create the conditions for long-term success.
The value-creating effects of CSR are supported by numerous studies which show, for example, that assuming social responsibility can have a positive effect on employer attractiveness, credibility, customer loyalty, employee satisfaction, reputation and trustworthiness. However, there is no deterministic link between CSR and positive consequences. In order for companies to benefit from CSR, a sound strategy and professional management are required.
The increasing social demand for CSR as well as the increasing relevance for companies can be attributed to various changes in the framework conditions for entrepreneurial value creation. These changes can be described as the drivers of CSR.
Corporate social responsibility drivers
New information and communication conditions
Information and communication options have increased dramatically in recent years, while costs have fallen at the same time. In addition, there is social media, which have created new forms of communication. In principle, it is now possible to receive and distribute information regardless of location. Global corporate activities are therefore subject to a potential transparency and critical information can quickly and easily diffuse worldwide. Accordingly, the probability that irresponsible behavior will be detected increases, as a result of which the risk of sanctions has increased significantly.
Global added value opens up new potential for cooperation through the associated opportunities to expand the division of labor and specialization. This goes hand in hand with an intensification of competition, which, in conjunction with the increasing complexity and dynamism of global business activities, brings with it new challenges for company management. These challenges are exacerbated by incomplete legal framework conditions (institutions), as a result of which the ability to control global value creation processes and mutual reliability are made more difficult. Nonetheless, companies today are expected to be able to ensure basic labor, environmental and social standards also in their supply chains. As a consequence, companies have to expect that insufficient standards are negatively attributed to their suppliers.
Loss of confidence in entrepreneurial activities / more critical public
The past financial crisis and various business scandals have substantially damaged public trust in companies. In particular, the profit orientation of companies is viewed increasingly critically and is often seen as the cause of socially undesirable effects of entrepreneurial value creation. Associated with this is an intensified discussion about the social role of companies and the conditions under which entrepreneurial activities serve social interests. As a result, questions about ecological and social standards of value creation and the limits of profit orientation are also developing. The discussion is intensified by activities of interest groups (pressure groups) such as environmental or consumer movements, which address demands on companies in a bundled form and are able to mobilize critical masses in society.
Capital markets play an ambivalent role as a driving force for CSR. On the one hand they are pushing short-term profit strategies, on the other hand it can be observed that the market for sustainable investments has been growing for years. The latter means that companies are increasingly making efforts to be represented in sustainably oriented indices and funds, as a result of which capital markets also offer incentives for responsible behavior.
Since 2017, capital market-oriented companies and financial companies with more than 500 employees each have had to report on the ecological and social effects of their activities in Germany. Although only large companies are subject to CSR reporting, it also affects other companies. This is due to the fact that risks in supply chains must also be recorded as part of the reporting, as a result of which the reporting companies need and request information about the CSR performance of their business partners.
In general, a large number of aspects and subject areas are associated with the term CSR. The concretization often takes place along actor-specific interests; For example, environmental organizations focus primarily on ecological aspects, customers focus on product or service quality, residents on the local effects of entrepreneurial activity, etc. In addition, the term CSR is also used to discuss the scope of corporate social responsibility, for example in relation to entrepreneurial contributions to the solution of social problems such as poverty, human rights violations or global warming. Beyond specific issues, there are two central dimensions of CSR at a higher level.
Corporate social responsibility as a voluntary commitment
The interpretation of CSR in terms of voluntary engagement is widespread. This is also reflected in the fact that many CSR definitions are based on voluntariness as a characteristic of social responsibility. In this sense, CSR is concretized in measures and activities that go beyond legal requirements. The voluntary assumption of social responsibility can take place both within and outside of one's own business activities. Examples of voluntary CSR activities within business activities include promoting the work-life balance, health prevention offers for employees, diversity programs, the use of regenerative resources or the avoidance of approved but problematic ingredients. Classic examples of CSR outside of one's own business activities include donation and sponsorship measures, community engagement and corporate volunteering.
CSR in the sense of voluntary assumption of responsibility is particularly popular in practice due to its prosocial character. Companies can use this to show in a visible way that they voluntarily support socially desirable goals. Associated with this is a good communicability of such engagements, so that they can also be used for marketing purposes. In the case of voluntary assumption of responsibility outside of one's own business activity, there is an additional advantage that it is relatively easy to implement and typically does not require any specific know-how.
Corporate social responsibility as avoidance of misconduct
Although it is widely accepted that the social responsibility of companies also includes the avoidance of misconduct, this CSR dimension is clearly underrepresented in the discussion. One reason for this is that aspects such as the prevention of corruption, human rights violations, environmental pollution or price fixing are much more difficult to use for marketing and communication purposes than voluntary CSR engagement due to their natural nature. In addition, the effective avoidance of misconduct requires a high level of management competence and the design of complex organizational structures.
CSR in the sense of avoiding misconduct is concretized in the establishment of corporate governance structures and accompanying measures so that governance structures also have a factual effect in everyday business life. Typical CSR governance structures include audits and compliance mechanisms, mission statements, risk management systems, codes of conduct and whistleblowing systems. In order for governance structures to be relevant for the actions of employees, a corresponding corporate culture is required, which is to be managed through management development, employee training, value management, etc. It should be emphasized that the (exemplary) behavior of the executives plays a decisive role, as this has a considerable influence on how formal governance structures are perceived internally.
Strategic management of corporate social responsibility
For companies, a fundamental objective in managing CSR is to promote long-term business success. Accordingly, the question arises of how the expenses associated with CSR can be converted into profitable investments. In this context, it has proven itself to focus on the mediating factors between CSR and corporate success and thus to take into account the so-called broad business case. An important factor here is the improvement of the behavior-relevant attitudes of stakeholders, which in turn have an impact on social acceptance, employer attractiveness and customer satisfaction, for example.
The positive effects of CSR for stakeholder relationships are particularly linked to the fact that companies are perceived as responsible. The perceived responsibility of companies is also known as perceived CSR (pCSR). This is a subjective construct that is formed in the course of perception and interpretation processes. The importance of perceived responsibility can already be seen against the background that CSR activities are neither perceived by stakeholders per se nor seen as an expression of responsibility. In practice, it does happen that a company on the one hand engages in a large amount of CSR effort and can also demonstrate corresponding activities, but at the same time only has a low level of perceived responsibility.
Perceived responsibility is a holistic construct that is assigned to a company as a whole and not for individual activities. It is important that the perceived responsibility is not only influenced by CSR activities, but also by misconduct. Misconduct regularly leads to damage to the perceived responsibility. Due to distortions of perception such as negativity bias, the negative effects of misconduct are typically stronger than the positive effects of CSR activities. For example, a company that does an exemplary job of helping the community but is also charged with tax evasion is usually not seen as particularly responsible. In addition, such a company must fear that its CSR commitment will be perceived as greenwashing. Overall, it shows that the effective avoidance of misconduct is of overriding relevance for value-creating CSR strategies.
The relevance of CSR in practice has been increasing continuously for years. In the meantime, most of the large companies have acknowledged their social responsibility in words and deeds, so that CSR is a de-facto standard here today. Not least because of the introduction of the CSR reporting obligation and the associated effects, it can be assumed that CSR will increasingly find its way into medium-sized businesses in a professionalized form.
Another driver of CSR is the observable changes in the relationship between employer and employee. Employees are increasingly asking for meaningful work and want to work for a company they can be proud of. This is particularly true of Generation Y, who will be making up the majority of the workforce in a few years. CSR offers companies the opportunity to meet changing employee needs and thus create positive employee attitudes. In view of the emerging shortage of skilled workers, positive employee attitudes are increasingly becoming a key competitive factor due to their consequences for the ability of a company in the areas of employee retention and recruitment.
A central challenge for value-creating CSR management is the ability to effectively avoid misconduct. However, the large number of misconduct in practice shows that, despite all CSR commitments, companies have difficulties in ensuring behavior that complies with the law and standards. The challenges to be overcome lie both at the individual company level and at the regulatory level; the latter is caused by deficient institutions in the local and global environment. Accordingly, the effective management of CSR also includes the creation of (global) framework conditions.
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