Corporate Social Responsibility (CSR) (DP IB Business Management): Revision Note

An introduction to corporate social responsibility

• Corporate Social Responsibility (CSR) refers to the concept that businesses have a responsibility to consider and positively impact society beyond their economic interests

• It is a framework through which companies voluntarily integrate social and environmental concerns into their business operations and interactions with stakeholders

Social responsibility goals

• CSR involves taking into account the impact of business activities on various stakeholders, including employees, customers, communities, the environment, and society at large

• CSR goes beyond legal compliance and strives for companies to actively contribute to sustainable development and societal well-being

Examples of socially responsible activities 

Ethics and CSR

• Ethics relates to the rights or wrongs of making a strategic decision that are beyond legal requirements

• Some ethical businesses adopt an ethical code of practice which informs decision-making and may set out how they:

  • Behave responsibly with regards to the environment (for example, using recycled materials in packaging)

  • Avoid negative impacts on animals (e.g animal testing)

  • Adopt fair working practices (e.g. paying a real living wage)

  • Implement robust and equitable supply chains (e.g. using sustainably-sourced raw materials in production)

  • Takes steps to eliminate corruption (e.g. ensuring appropriate tax is paid in the countries in which the business operates)

  • Avoids controversial products or take steps to minimise their impact or access to them (e.g. having strict verification procedures in place prior to cosmetic surgery procedures being carried out)

  • Ceases trading with questionable suppliers or customers (e.g. cancelling a supply contract with a supplier that uses child labour)

• It is now common practice for large companies to publish annual Corporate Responsibility Reports which provide an audit of the steps being taken to meet their commitments to a range of stakeholders alongside annual financial reports

• Extra costs are involved in operating in a socially responsible way and these costs are usually passed on to consumers

Reasons for implementing CSR

• Business set ethical or socially responsible objectives for a range of sound commercial reasons

Business reasons for implementing CSR

Improved reputation

• Corporate social responsibility (CSR) can enhance a business’s image and reputation, making it more appealing to a wide range of stakeholders

• Being socially responsible is attractive to both existing and potential customers

• It can lead to positive media coverage that further strengthens the brand

• A strong CSR record may help attract and retain high-quality employees

• Investors, particularly those focused on ethical investment, may view the business more favourably

Added value

• CSR can be profitable as it adds value to the product or brand

• In competitive markets, CSR can provide a unique selling point (USP), enabling the business to justify premium pricing

• For example, Tony’s Chocolonely is committed to using only slavery-free cocoa and promotes ethical sourcing, which supports its ability to charge around 200% more than mass-market chocolate brands

Employee morale and motivation

• CSR initiatives may improve employee motivation, engagement and productivity

• Workers are more likely to feel proud of and connected to a business that behaves ethically and responsibly

• This sense of purpose can encourage employees to work harder and contribute to the company’s success

• Employees may also be less likely to take sick leave or leave the company, reducing absenteeism and staff turnover

Solve social problems

• CSR can help businesses contribute to solving wider social and environmental problems

• Responsible businesses recognise their role in tackling issues such as climate change, inequality and resource depletion

• For instance, companies that actively reduce their reliance on fossil fuels are making a meaningful contribution to global sustainability efforts

The impact of implementing CSR

• Businesses experience a range of impacts as a result of implementing CSR

  • They usually attract long-term loyalty from employees and customers and may find that their approach provides a useful competitive advantage

  • They are also likely to receive the support of the local community and local government especially if they share their aims

  • Suppliers and competitors of ethical businesses often change their approach to ensure that they do not lose sales to more ethical rivals

  • Taking an ethical approach costs more and may reduce the overall level of profits if the business is not able to raise their prices to compensate