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A Guide to Corporate Social Responsibility

Zina Kumok writes about financial planning for Wealthsimple. She has eight years investing experience and five years experience as a personal finance writer. Her work has been featured in Investopedia, DailyWorth, MoneyUnder30 and DollarSprout. Zina runs a personal finance blog called ConsciousCoins.com and she has been a two-time finalist for ‘Best Personal Finance Contributor’ at the Plutus Awards. She has a Bachelor's degree in Journalism from Indiana University.

It used to be that public companies had to focus almost exclusively on profits and how much their shares rose each quarter. But the business world has become a more complex place, and corporations are held to an ethical standard they’ve never had to worry about before.

Today, many investors have an interest in corporate social responsibility: how companies treat their workers, minimize their carbon footprint, and respond to today’s politics.

Learn how these important issues are being handled in the American workplace.

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What Is Corporate Social Responsibility (CSR)?

Corporate Social Responsibility (CSR) involves how a company chooses to address environmental, economic, and social issues. More specific subtopics may include diversity, sustainability, and workers’ human rights.

A corporation may demonstrate CSR by promoting more women and minorities, instituting more eco-friendly policies within its production facilities, or sourcing production materials from fair trade suppliers.

Note that there’s a major difference between a company’s philanthropic efforts and CSR. A company may have a charitable wing that donates money to worthy causes, but that remains separate from their CSR strategy. For example, a paper company may give money to a local nonprofit, but a paper firm with a dedicated CSR system will ensure that its raw material sourcing is ethical, sustainable, and fair to the local population.

Corporate Social Responsibility Examples

Here are some examples of how three of the biggest companies in the world are tackling CSR:

Google

In a poll that surveyed more than 200,000 people around the world, Google was found to have the best reputation for corporate responsibility. This includes factors like a company’s commitment to fair employment practices, its ability to meet financial goals for shareholders, and its role in society.

One of Google’s major environmental programs advocates for a circular economy, where broken parts and machines are recycled instead of thrown away. When a server breaks down, for instance, Google tries to use refurbished parts before buying new.

If they can’t find refurbished parts, they try to resell them instead of discarding them. In 2016, Google’s data centers had an 86% rate for landfill diversion.

Another major part of Google’s CSR strategy is its renewable energy program in the Democratic Republic of the Congo, where important minerals used in Google products are mined. Google has set up four pilot projects in Congolese communities that will bring renewable energy to people who previously lived without power.

Google has developed several solar-based products for this purpose, including lanterns for women to use while walking at night and scales for miners who are trading for other minerals. The company has also implemented several clean water initiatives in the area.

Apple

As one of the most recognizable brands in the world, Apple says it’s made major strides in creating an eco-friendly supply chain. They’ve also prioritized enforcement of human rights standards for all laborers who work in Apple or Apple-adjacent facilities.

Apple claims that factories producing Apple products must allow anonymous complaints from workers, provide normal working hours and improve worker safety.

It also claims its products more sustainable. According to its Supplier Responsibility 2019 Progress Report, 100 percent of Apple’s final assembly sites adopted safer, greener cleaners in their manufacturing processes.

The Thomson Reuters Foundation and philanthropist Anish Kapoor awarded Apple the 2018 Stop Slavery Award, given to a business that halts forced labor in its supply chains.

Apple has also created a coding education program, where employees can learn new skills in order to eventually apply for better jobs. According to their internal report, more than 3.6 million people have taken these classes. The Supplier Employee Education and Development program has helped 1,500 workers earn a college degree.

As of 2018, Apple says its global facilities in more than 43 countries now run on 100% renewable energy. These include retail locations, offices, data centers and more. This has been part of a long-term push into making all of Apple’s locations powered by solar and wind energy sources.

Nike

The biggest athletic brand in the world, Nike has a huge footprint on society. One of the most visible examples of their CSR strategy is the 2019 brand campaign with former NFL quarterback and activist Colin Kaepernick.

The ad included a black-and-white picture of Kaepernick that said, “Believe in something. Even if it means sacrificing everything." The line was a reference to Kaepernick’s decision to kneel during the national anthem to protest police brutality against African Americans. This led to him being unofficially blacklisted in the NFL, where he hasn’t played since 2016.

The ad showed Nike’s commitment to diversity as part of its overall CSR approach, a risky move in today’s polarized political climate. A poll taken soon after the ad’s release showed that 37% of Americans between ages 35 to 44 were against the ad, and 32% of those between 18 to 34 opposed it.

Consumers rewarded Nike for taking this bold stance. Shares in Nike increased more than 30% in less than 10 days after the ad’s release, eventually reaching a record high.

Diversity isn’t the only CSR initiative for Nike. The company also has a new shoe line called Nike Flyleather, made with 50% reclaimed leather. Nike claims that these shoes have an 80% smaller carbon footprint than other shoes in their production inventory. This process also uses 90% less water.

Benefits of Corporate Social Responsibility

Research from the Kellogg School of Management at Northwestern University found that companies that implemented green initiatives performed better than companies that didn’t. Even if the initial implementation was costly, it always paid off—as quickly as the second year in most cases.

Companies that also spent money on CSR saw their shares rise as well. Investors view CSR spending as an expense that corporations take on only when they have enough money to spend, which gives these companies an appearance of stability and success.

How to Engage in CSR

The B Lab is a non-profit that provides B certifications, which designate a positive “environmental, community, customer, worker and overall impact.” Both publicly traded and private firms are considered for this certification, including major brands, such as Ben & Jerry’s.

You can search for specific companies on the B Lab website. If the name comes up, it means they’re B certified. If they’re not on the list, it means they haven’t been documented or that they failed certification.

The B Lab judges on the following criteria:

  • Governance

  • Workers

  • Community

  • Environment

  • Customers

Each of these five categories has several sub-categories, including civic engagement and giving, worker ownership and transparency. Every category and sub-category has a score with a final figure ranging from 0 to 100.

B Lab produces an annual list of honorees, which includes an overall list and the winners in each of the five categories listed above. They also produce a list of Changemakers, featuring companies that had the biggest positive score change from the previous year.

Consumers who want to support companies that care about CSR can do so with their dollars. Wealthsimple has a Socially Responsible Investing portfolio targeting firms that place a higher priority on CSR.The SRI fund features corporations that prioritize fewer carbon emissions and gender diversity, as well as government programs that subsidize affordable housing. If you prefer investing in individual stocks or want to research before you buy certain products, you can look at companies one-on-one to compare their CSR policies. There are several ways to find out if a company is practicing ethical CSR principles.

How Businesses Can Become More Socially Responsible

Transitioning to a CSR model may be difficult for businesses, especially those that have been around for a long time. It may be hard to see the benefit, especially if profit margins are thin.

A 2018 article from Harvard Business Review reported that companies who rewarded employees with philanthropic acts—like donating to a specific charity after the successful completion of a project—increased productivity and retention. Those employees also requested fewer salary increases.

Unfortunately, the benefit seemed to dissipate if workers felt like the company was only incorporating these tactics for the sake of making more money. Employees can see through transparent strategies and attempts to improve the bottom line. Even if it simply means engaging with the community. Some firms let employees take days off to volunteer at a local non-profit or charity, while others organize group volunteer efforts at places like Habitat for Humanity. This prioritization of community stewardship can build morale, improve productivity, increase employee satisfaction and contribute to a robust CSR strategy.

Employees who care about implementing a CSR system at work should discuss the topic with their coworkers and supervisors. They may have meaningful and impactful ideas for becoming more sustainable or more diverse.

Last Updated December 5, 2019

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