Jeff Bartel is chairman and managing director of Hamptons Group, a private investment and strategic advisory firm headquartered in Miami.
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The pyramid of corporate social responsibility (CSR) is evolving, and organizations must evolve with it. Popular theories of business ethics that once maintained profitability as the sole foundational base are giving way to new constructs that place social and environmental concerns on the same level, creating a triple bottom line proposition for corporate entities. Understanding that foundation and how business ethics plays a role in support is critical to developing processes, messaging and company cultures that support growth.
The Triple Bottom Line Has Upended The Pyramid Of Corporate Social Responsibility
Defined by Archie B. Carroll in the latter part of the 20th century, the pyramid of corporate social responsibility contended that companies had obligations in four key areas: profitability, legality, ethics and philanthropy. In Carroll’s model, these obligations were not all equal. Economic drivers were first and foremost, making profitability the pyramid’s base.
Built upon it (in decreasing importance) was the need to obey the law, engage in good business ethics and become a moral member of the community making local contributions.
That model does not work for businesses today. Consumers, governments and cultures are looking for more from corporate entities. It is still essential to maintain a profit. Profitable companies can be better contributors to the community than those that don’t earn a profit. It is equally necessary for businesses to shepherd social and environmental resources.
Thus, the triple bottom line is upending the pyramid, replacing it with a triune obligation toward profits, people and the planet.
The Difference Between Business Ethics And CSR
Doing the right thing, which means engaging in good business ethics, is not the same as corporate social responsibility. CSR is the onus on a business to act in the interest and for the benefit of the community whenever possible—sometimes even at the detriment of a profitable opportunity that may have adverse outcomes for the environment or people.
Business ethics is a broader concept that should govern everything a business and its people do. A company that operates ethically often makes decisions that support strong corporate social responsibility.
In short, if you were trying to re-create a pyramid of CSR with the understanding that profitability cannot be the base, business ethics might be a suitable replacement. When ethics inform everything else up the pyramid, businesses create more consistent approaches to modern CSR, from profits to corporate environmentalism.
Prioritizing Corporate Responsibility And Driving Strong Profits
It is clear to anyone involved in the corporate world that doing the right thing and making the most significant profit do not always align. However, that does not mean you cannot focus on corporate responsibility and ethical business practices while driving and delivering excellent financial profits.
First, modern customers and business partners care about corporate responsibility and ethics and increasingly choose to deal with companies that demonstrate them. While price remains a driver for purchasing decisions, customers also want to work with or buy from brands that align with their personal values. The advent of ethical consumerism is becoming a permanent and important factor in how and where people decide to buy, sell, consume and transact.
A firm’s focus solely on financial profitability may not support business responsibility and ethics. Doing what is suitable for the financial bottom line can sometimes take you off the path of doing what is right for people or the planet. Eventually, customers, clients and other stakeholders may take note of this and stop supporting your business, creating a slippery slope that drives profits down, even if you are focused on them exclusively.
Responsible, ethical businesses can also engage in cost savings when focused on sustainability. While these approaches may require short-term investments that impact profitability, they safeguard profits for the future.
Finally, value-based leaders are more likely to be dedicated to their workforce’s needs, investing in health and wellness initiatives, flexible scheduling and other programs that support work-life balance. That servant leadership approach creates more productive workers and more engaged employees, increasing cost savings and maximizing production. This leads to more significant returns.
Businesses Cannot Afford To Ignore Ethics And CSR
Ethics, values and corporate social responsibility are no longer elements of the pyramid built upon a base that solely prioritizes financial profitability. They are as important as economic stability for the future of businesses, particularly in light of ethical consumerism and corporate accountability in the public square. Corporations and other organizations cannot afford to ignore them.
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If you’re a business owner, the days of operating solely for profit are gone. Whilst this is obviously still important, many companies now focus largely on corporate social responsibility.
Corporate Social Responsibility (CSR) is when a company operates in an ethical and sustainable way and deals with its environmental and social impacts. This means a careful consideration of human rights, the community, environment, and society in which it operates.
This article outlines the importance of corporate social responsibility, and the benefits that sustainable and ethical practices can bring to your business.
Importance of Corporate Social Responsibility
It’s incredibly important that your company operates in a way that demonstrates social responsibility. Although it’s not a legal requirement, it’s seen as good practice for you to take into account social and environmental issues.
Social responsibility and ethical practices are vital to your success. The 2015 Cone Communications/Ebiquity Global CSR study found that a staggering 91% of global consumers expect businesses to operate responsibly to address social and environmental issues. Furthermore, 84% say they seek out responsible products wherever possible.
As the above statistics show, consumers are increasingly aware of the importance of social responsibility, and actively seek products from businesses that operate ethically. CSR demonstrates that you’re a business that takes an interest in wider social issues, rather than just those that impact your profit margins, which will attract customers who share the same values. Therefore, it makes good business sense to operate sustainably.
Our Corporate Social Responsibility Training Course aims to help learners understand how they can create a strategy that promotes environmental, societal and economic issues and how they can work in ways that are resourceful, ethical and sustainable.
Benefits of Corporate Social Responsibility
The benefits of CSR speak volumes about how important it is and why you should make an effort to adopt it in your business.
Some clear benefits of corporate social responsibility are:
- Improved public image. This is crucial, as consumers assess your public image when deciding whether to buy from you. Something simple, like staff members volunteering an hour a week at a charity, shows that you’re a brand committed to helping others. As a result, you’ll appear much more favourable to consumers.
- Increased brand awareness and recognition. If you’re committed to ethical practices, this news will spread. More people will therefore hear about your brand, which creates an increased brand awareness.
- Cost savings. Many simple changes in favour of sustainability, such as using less packaging, will help to decrease your production costs.
- An advantage over competitors. By embracing CSR, you stand out from competitors in your industry. You establish yourself as a company committed to going one step further by considering social and environmental factors.
- Increased customer engagement. If you’re using sustainable systems, you should shout it from the rooftops. Post it on your social media channels and create a story out of your efforts. Furthermore, you should show your efforts to local media outlets in the hope they’ll give it some coverage. Customers will follow this and engage with your brand and operations.
- Greater employee engagement. Similar to customer engagement, you also need to ensure that your employees know your CSR strategies. It’s proven that employees enjoy working more for a company that has a good public image than one that doesn’t. Furthermore, by showing that you’re committed to things like human rights, you’re much more likely to attract and retain the top candidates.
- More benefits for employees. There are also a range of benefits for your employees when you embrace CSR. Your workplace will be a more positive and productive place to work, and by promoting things like volunteering, you encourage personal and professional growth.
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Ellie Collier is the Content Production Manager for Health & Social Care sector at High Speed Training. Ellie has always been passionate about mental health, for both adults and for children, and ensuring that everyone has the opportunity to talk about their problems. She has produced a range of materials to help teachers initiate positive conversations about mental health and has featured in publications like Education Today for her work. Ellie’s Mental Health Resource Pack for Schools, which features a School Mental Health Policy template, was shortlisted for the Teach Secondary Awards 2019.