The Strategic Importance of CSR

Corporate Social Responsibility (CSR) is an organization’s obligation to consider the interests of their customers, employees, shareholders, communities, and the ecology and to consider the social and environmental consequences of their business activities. By integrating CSR into core business processes and stakeholder management, organizations can achieve the ultimate goal of creating both social value and corporate value.

As of late, CSR has gained notoriety as businesses have responded to two major changes in the last 5-10 years: the increase of public concern over the environment and the free flow of information afforded by the internet.

In the last several years, movies like An Inconvenient Truth and events such as Live Aid and Earth Day have brought climate change and protection of the Earth’s environment into the forefront of people’s minds. As stakeholders in any organization’s strategic plan, the public represents shareholders, customers, employees, suppliers- everyone. Whatever issues that the public sees as important, organizations should take notice of. An organization seen as harmful to the environment is very likely to be seen as socially irresponsible, and therefore risks the relationship with all of its stakeholders.

Another trend increasing the importance of CSR is the increased use of the internet to access and trade information. Whereas in the past, the details of a company’s actions may have been restricted to newspaper clippings from the business section or academic discussions in the classrooms of business schools, these days any company seen being socially irresponsible may show up in mass emails, Facebook postings or even on Twitter- seen by millions of people in a day. Today, more than ever, companies are under the watchful eye of their stakeholders.

So what is Strategic Corporate Social Responsibility? By taking a strategic approach, companies can determine what activities they have the resources to devote to being socially responsible and can choose that which will strengthen their competitive advantage. By planning out CSR as part of a company’s overall plan, organizations can ensure that profits and increasing shareholder value don’t overshadow the need to behave ethically to their stakeholders.

Ideally, a company’s CSR activities and core operations should be aligned. In case they are not, consumers may perceive the CSR activities as merely a marketing gimmick. For example, the oil company BP went for a major rebranding exercise- sustainability. BP now stands for ‘Beyond Petroleum’ rather than British Petroleum. The company undertook a slew of green initiatives. However, the oil spills that BP was involved in particularly the 2010 New Mexico oil spill undid all the good work. People started criticizing BP for being irresponsible and using its sustainability initiatives as only a facade for its environmentally unsafe practices. This resulted in a major loss of face foe BP. Thus any company that engages in CSR should embrace the concept fully. Otherwise consumers may identify any disparity between core operations and CSR activities as a marketing gimmick and the purpose of CSR from a strategic perspective would be defeated.