Corporate Social Responsibility: What Is It & Who Cares About It?

Corporate Social Responsibility: What Is It & Who Cares About It?

The primary focus of business has always been to make a profit. Yet, a new school of thought has recently emerged: What if corporations could also play a role in making positive changes to society and the environment? This question has increasingly gained the attention of investors – so much so, in fact, that a radical new idea has been born. Not only do companies have the ability to enact positive change, but they actually have a corporate social responsibility (CSR) to do so.

CSR is a frequently-used umbrella term, but there are many variations you may hear. ESG (economic, social, and governance) is a popular one, but here are some other words or phrases you may encounter when the subject is approached:

  • Sustainability
  • Corporate responsibility
  • Triple bottom line
  • Creating shared value
  • Corporate accountability
  • Responsible investment
  • Responsible business
  • Corporate sustainability
  • Corporate citizenship

Your company could even have its own name for its CSR report, but more importantly, its contents should reflect all of the beneficial ways it impacts society. In some companies, the report may be just a few pages, while in others it could be 100 pages or more. Yet, having something in place to showcase the company’s societal contributions is becoming increasingly important, as a number of groups are developing an interest in it.

Who Cares About CSR?

Shareholders are beginning to put CSR-related proposals on the ballot in an attempt to link sustainability to executive pay. Nonetheless, most of these proposals currently get voted down and receive 20% approval on average. CSR therefore has yet to be considered mainstream when it comes to shareholder resolutions, and we continue to see boards recommending to vote against these proposals.

While it’s true that the percentage of companies integrating CSR into their pay practices may still be in the single digits, the trajectory we see suggests that this could change dramatically in the coming years.

In fact, while there has been a growing emphasis on talking about conscious capitalism – including the book by that title written by Whole Foods CEO John Mackey – there has been little focus on how CSR affects compensation. If you’re going to incorporate CSR into your organization, will you pay people consistently with these principles? As we move into the future, it will likely become increasingly important to answer this and similar questions in your company’s compensation plan.

 

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