UNIDO (United Nations Industrial Development Organization) has defined Corporate Social Responsibility (CSR) as a management concept through which organisations can incorporate social and environmental concerns in their business operations and interactions with their stakeholders. Through this, a company can achieve a balance of economic, environmental, and social imperatives. Also known as the “Triple-Bottom-Line-Approach”.
This definition paints a clearer picture of CSR and outlines the actions a corporate should undertake to implement its rules and policies appropriately. However, only very few corporates follow corporate social responsibility correctly. This is a shame because there are many benefits for a company to adopt CSR such as:
- The brand gets better recognition
- Increased sales and economic return
- Increased trust among customers
- Increase in the retention rate of employees
- Better culture in the company
- Easy access to capital
Watch: Emergence of CSR
History of CSR
CSR has different names such as corporate philanthropy or corporate social investment. Regardless of what name it takes on, it has always been about businesses giving back to society. Initially, it was not something that was practised by businessmen. In the late 1800s, corporate social responsibility was predominantly a philanthropic activity. It was practised by ultra-rich businessmen such as John D. Rockefeller, who donated his wealth to the field of education and research. There is no clear evidence with regard to when CSR started as a business practice.
Corporate social responsibility as a term became famous when Howard Bower, also known as the “Father of CSR”, published his book titled Social Responsibilities of the Businessman (1953). This book focused on the ethical business and social responsibility of the corporate sector. This laid the foundation for considering such areas as part of strategic planning and managerial decision making. CSR became even more popular in the 1980s when R. Edward Freeman published his book “Strategic Management A Stakeholder Approach”. He stated in his book that firms should create value for their stakeholders.
However, turning words into actions was a time-consuming process for corporations. Initially, only very few businesses adopted CSR and took it seriously. However, when companies started seeing the benefits of CSR, many of them started adopting it as part of their overall beneficial business strategy.
Watch: History of CSR
Corporate Social Responsibility in the Global Context
CSR is practised almost everywhere in the world. However, its rules can differ from country to country. It is practised in countries like India, USA, France, Denmark, South Africa, and China. India is the only country in the world where CSR is a mandatory law. This means corporates must invest for social good, but these mandatory rules only apply for companies which have profits exceeding a certain threshold.
In France, Denmark, South Africa, and China CSR is a mandatory reporting obligation. In the USA, UK, and other European countries, it is considered as corporate governance, which means companies must disclose their CSR contribution via reports. Even with these rules and regulations in place, the development and sustainability sector still lack a lot of money. It is estimated that there is a gap of USD 2.5 trillion in the sustainability sector. This can be attributed to the private sector not being sufficiently involved in social responsibility activities. If this lack of corporate intervention continues, achieving sustainable development goals (SDGs) by 2030 will simply not feasible.
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