In last week’s blog on sustainability, I made the case for companies to prioritize this value. I explained that minimizing impact on the environment is key to being responsive to stakeholders’s values. However, as the triple bottom line implies, it’s not just the planet that people care about. As a reminder, that triple bottom line considers profits, the planet… and people. Company stakeholders care about how companies affect people, including their customers, employees, and community members. That’s why companies need to get serious about corporate social responsibility.
Defining Social Responsibility
The Centre for Social Impact in Australia has created a definition for social impact. They see this as “the net effect of an activity on a community and the well-being of individuals and families.” This means taking into consideration all the ways that a company’s operations affect people. It also means considering various levels of impact. For instance, a company that pays well above minimum wage is creating a positive impact on its individual employees. But what if employees have to work 80 hours per week to keep their job? That’s going to hurt their families. And what if the company’s hiring practices are discriminatory? Then, they might be widening a gap in economic opportunity in the community at large. That could lead to increased poverty, a distinctly negative social impact in the big picture. All this nuance means that quantifying social impact is not simple.
That’s where corporate social responsibility comes in. As this article and video from Investopedia explain, this business model helps companies be accountable for their social impact. The goal of implementing this model is to benefit society. That goal is achieved through accountability to company stakeholders and the public. So how does a company go about accepting social responsibility?
ISO 26000: Make the Ideal Real
The ISO 26000 is a set of guidelines to help companies make the concept of corporate social responsibility tangible. Developed by the International Organization for Standardization (ISO), these guidelines represent an international consensus. The ISO develops international standards for a range of industries and business practices. The ISO 26000 specifically focuses on social responsibility.
This is a visual overview of the contents in these guidelines. ISO 26000 covers key terms, seven principles, seven core subjects, and best practices for corporate social responsibility. I think it’s worth knowing the seven principles especially. They are Accountability, Transparency, Ethical behavior, Respect for stakeholder interests, Respect for the rule of law, Respect for international norms of behavior, and Respect for human rights.
These principles might feel very abstract. However, there are very practical ways to think of them. For instance, consider the respect for stakeholder interests. Employees are major stakeholders in every company. Imagine that a company’s employees indicate that they are interested in healthy snack options in the workplace. Respecting stakeholder interests might then mean offering peanuts and dried fruit in the cafeteria. When it comes to respect for international norms of behavior, a very current example comes to mind. Many companies are currently imposing sanctions on Russia in response to the invasion of Ukraine. That is becoming an international norm for how companies should respond.
Benefits of Corporate Social Responsibility
It might feel like the principles described above are good for society but not for businesses. After all, buying snacks for employees costs money. Imposing sanctions can disrupt the supply chain and upset customers. However, there are a lot of benefits to implementing corporate social responsibility.
This Investopedia article hints at one major category of benefits: impact on employees. Accepting social responsibility tends to boost employee morale and increase their loyalty to the company. These statistics, compiled by Harvard Business School in 2021, explain those effects. Most employees want to work for a company that creates positive social impact. For instance, 88% of employees believe companies should not be making money at the expense of society. Moreover, 95% of employees believe that companies should benefit all stakeholders, not just shareholders.
When employees feel that companies are responsive to their values, it shows in the bottom line. Employees who feel heard and valued are more engaged and more productive. They’re also less likely to leave the company, leading to lower costs associated with recruitment and training for new talent. Those are just some of the financial benefits identified by this research. That’s all cited in this Forbes article, which encourages companies to think of corporate social responsibility as an investment. The evidence shows that this investment pays off.
Best Practices
That same Forbes article outlines some best practices for integrating corporate social responsibility into your company. First, collaborate across departments. There is no way that one team dedicated to this strategy can make these changes alone. They need to be in touch with HR, financial, legal, and other departments. If you’re looking for a tool that can promote collaborative, task-based communication, check out Pyrus. This software also supports customizable workflows to help collaborative work move forward faster.
Another tip is to set key performance indicators (KPIs) to target metrics related to social impact. For instance, businesses can measure supplier diversity. Supplier diversity refers to working with more suppliers owned by economically disadvantaged folks like racial and ethnic minorities, women, veterans, and others. (If you’re not sure why women-owned businesses fall into this category, check out this earlier post.)
One more tip: prioritize data-driven assessment. This is the key to making positive social impact align with profit. Look for opportunities to make change in the data. For example, if your business is spending a lot on training costs due to high turnover, that’s an opportunity. Ask your employees what it would take for them to stay. Then, make that investment. You’ll not only lower the costs associated with turnover but also create a positive impact for employees and the community.
Let the Context Inspire Change
I could just share some generic ideas as to how companies can increase their social impact. This article suggests encouraging employees to volunteer, donating to charities, and sponsoring local charity events, for instance. However, there’s no one-size-fits-all approach. It depends on societal need and what your company can do. For instance, this NPR article describes the efforts companies made in response to the national racial reckoning. A big priority at that time was increasing representation of Black individuals on boards and in executive positions.
This study on how COVID affects corporate social responsibility highlighted other efforts. For instance, Zoom removed time restrictions on meetings on Thanksgiving in 2020. That choice was responsive to the unique need of society on that day.
If we’ve learned anything from the pandemic, it’s how interconnected we are. Companies do have impact on society. It’s time to take on that corporate social responsibility and lead the way into the future.
