An explanation of what is the concept of corporate social responsibility (CSR) and why it matters regardless of what you hear about it from multinationals, gurus and critics alike
CSR is a funny animal: praised as the solution for the environment in a stateless world. Promoted by MNEs as their plaything to show off with. Criticised by the left and the green for not doing enough. Attacked by the neoliberal as suffocating the free market. Mocked by some corrupt entities who dare to state in their sustainability reports they are doing CSR because they (most of the time) comply with the laws of the host states. So what is the concept of corporate social responsibility?
To begin with, we should agree it is about going the extra mile. Compliance is not and should not be CSR. In fact, I find it offensive that companies in emerging markets where it is already difficult enough to enforce regulations due to corruption and limited capacity take pride in being compliant with labour and environmental laws. This is not CSR, just call it compliance. CSR is when you are doing something good beyond the requirements of the law, no matter how idle the law enforcement is.
In addition, the CSR should be linked to your company’s activities, ideally in relation to the people and the natural habitats these affect. This makes CSR different from simple charity. And why does this matter? Well because you should not be saving the dolphins whilst profiting from child or slave labour. If you decide to do CSR, you should be consistent, or it can backfire. People are easier to remember the bad than the good about you, and ruining your reputation is much easier than regaining it.
Why does CSR matter?
CSR matters ethically and commercially. We would all easily agree on the ethical part. But there is also consumer willingness to pay for environmentally and ethically sustainable products, and businesses should try to capture this willingness to pay in order to make money. Aphaia’s research has found that, in case of chocolate and coffee, London consumers are willing to pay about 30% premium if they can be persuaded their chocolate bar or cup of coffee are environmentally and ethically sourced.
Do you ever wonder what companies are doing with all those Fairtrade, FSC, Rainforest Alliance and UTZ logos? Apart from showing us that they care, they are also trying to capture the extra money that we as consumers are willing to pay for doing good. Certification is there to persuade the consumer that someone has verified the sustainability of the company’s goods or services.
Why should SMEs care about CSR?
If you noticed, large businesses are much better at CSR. Perhaps not always better at actually doing it but definitely better at showing to the consumers that they do. On the other hand, many small- and medium-sized businesses (SMEs) get involved in amazing initiatives without much CSR agenda. They simply see such initiatives as the life blood of their business models and ways of differentiating their products.
SMEs should therefore take time and effort to put their corporate social responsibility efforts into a framework they can consistently show to the world. So going back to the question what is the concept of corporate social responsibility, the SMEs should be able to answer it when it comes to their business activities.
You do not know where to start? Aphaia provides an effective and affordable CSR strategy and reporting service for SMEs.
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