January 3, 2022

Viability of Corporate Social Responsibility (CSR)

Corporate Social Responsibility in times of New Work and the generational shift to Millennials and Gen Z. Here's how your company can position itself for the future.

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This article takes a look at the generational shift in the workforce and the impact of corporate social responsibility on it. And, of course, on your company. In the age of New Work and New Leadership, CRS can no longer be ignored. Moreover, it is also about the legacy to be passed on to future generations and this planet.

Are you interested in digital transformation? In our series "Digitalization 2021" you will discover the effects and opportunities of digital transformation in different departments and areas of a company.




In Germany, Millennials and Generation Z currently (Dec. 2020) make up around 42% of the working population. The US has a similar situation with about 46 %. Of course, the trend is increasing from year to year. 

(Fig. 1: Statista - Number of inhabitants in Germany by generation on December 31, 2020)


Previous generations considered salary to be among the highest motivators, but attitudes are changing with Millennials.

"For 83% of Millennials, CSR is an important consideration when choosing a job, and 75% are even willing to take a 30% pay cut to work for a company with strong social values."

Cone Communications study


Thus, corporate social responsibility is no longer "nice-to-have" for organizations, but increasingly critical for the future success of the company.

Find out here what other benefits can be derived from CSR.

What is Corporate Social Responsibility? 

The term corporate social responsibility, or CSR for short, refers to the voluntary social responsibility of organizations (also known as entrepreneurial social responsibility) in the sense of sustainable economic activity and the impact on society.

CSR encompasses ecological, social and economic aspects. More specifically, this means employee-oriented HR policies, climate and environmental protection, fair business practices, local commitment and responsibility in the supply chain.

Corporate social responsibility is also part of corporate citizenship. This involves a company's commitment to the local community. So again, the motive of social responsibility towards society.

What are the 4 types of corporate social responsibility?

Corporate social responsibility is commonly divided into four categories: environmental, ethical, philanthropic, and economic.

Ecological responsibility

Environmental responsibility is the belief that organizations should behave in as environmentally friendly a manner as possible. In other words, the use of environmentally friendly practices, such as avoiding greenhouse gas emissions and pollution or the exploitation of natural resources.

Depending on the size of the company, this can extend to the use of alternative energy sources or sustainable materials. In fact, it is one of the most common forms of corporate social responsibility. Some organizations use the term "environmental stewardship" to describe such initiatives.

Ethical responsibility

Ethical responsibility refers to companies applying fair and ethical ways of doing business in all areas. That means treating all stakeholders respectfully and fairly: Employees, management, customers, suppliers, investors and other stakeholders.

This type of responsibility can take a wide variety of forms. For example, setting a higher minimum wage than the legal one. Or even ensuring that all employees receive comprehensive social benefits. Similarly, a company can ensure that materials and ingredients come from ethical sources (produced fairly and sustainably, no child labor, etc.).

Philanthropic responsibility

The intention of philanthropic responsibility is to actively improve society. Companies not only act in an environmentally friendly and ethical manner, but also donate a portion of their revenues. For instance, by sponsoring benefit events of non-profit local institutions or donating to charities.

Economic responsibility

An economic responsibility as part of CSR means that an economic efficiency is created by the factors of the above-mentioned areas. In other words, growth or profit through a positive impact on the environment, people and society. This would be, for example, the decision for a supplier who in turn focuses on sustainability, even if this will initially lead to higher costs for a company. Or deciding in favor of a transparent and gender-neutral salary system.

(Fig. 2: The CSR Journal - Pyramid of CSR according to Carrol)


What are the benefits of corporate social responsibility in a business context? 

Talentmagnet Employer Branding

So let's go back to the beginning. Corporate social responsibility is a strong argument for Millennials and the upcoming Generation Z. Together, they will dominate the workforce in a few years. Talented individuals are attracted to companies that have a deeper and more sustainable purpose. The feeling of being in the right place, where employees can make a real difference, will be increasingly more important in the future than the size of the salary.

It also means that corporate social responsibility is also beneficial in retaining talent. This is because Millennials expect their companies to help them get more involved in the community, or in volunteering, even away from work.

A plus in employee engagement

The mere fact that a company is committed to CSR increases the motivation of its workforce. And corporate social responsibility also requires the support of employees. It starts with the design and development of the CSR program and extends to voluntary commitment to a cause. 

Your employees will feel a strong sense of purpose and appreciation. And that's priceless. In addition, their relationships improve and overall workforce engagement increases as well. 

Not only is employee engagement a performance indicator of the effectiveness of corporate social responsibility, it is also an important indicator of business performance.

Comprehensive research shows that CSR and a strong sense of purpose for employees actively contribute to higher employee engagement. Besides being available as a KPI to measure CSR effectiveness, employee engagement is also a positive indicator of other business performance. 

Improved financial balance 

This is because the productivity of engaged employees increases by 17%, they are 21% more profitable and also have 41% less sick leave. There was also a positive correlation between CSR initiatives and the efficiency of companies.

Moreover, innovation increases in an engaged workplace. Innovative ideas are something that can often increase sales and profits exponentially. Innovations can also lead to the development of new products, services or even entire business models.

And then there's the other side of motivation: In the U.S., unmotivated employees cost companies between $450 billion and $550 billion annually. And it doesn't stop with the individual; it can negatively impact the morale of the entire team or department. A single unmotivated employee can create an unpleasant or even toxic work environment through unprofessional behaviour.

Steps towards a better world

In 2015, the member states of the United Nations set 17 Sustainable Development Goals (SDGs). The 17 goals are in turn divided into 169 sub-goals. It is a universal call to action for all countries to achieve these goals. The goals include ending poverty, ending world hunger, combating climate change and switching to clean energy. 

Therefore, companies are called upon to make their contribution as well. Engagement also has a positive impact on employer branding and contributes positively to a better world.


(Fig. 3: The CSR Journal - Carrol's Pyramid of CSR)


Companies like Orange, for example, select six of these goals and have ambitious plans to implement them as part of their corporate social responsibility. 

Customer retention and loyalty

Research has shown that people are more likely to buy a product from a company whose values they agree with. Furthermore, half of the consumers are willing to spend more money on a product if the company has a solid CSR strategy.

These statements are especially true for the service sector. As a service cannot be judged before use, it requires a high degree of trust regarding the company selling it. Corporate Social Responsibility has been proven to improve the trust of customers in an organisation.

Through CSR, companies have the opportunity to show engagement and consistency and thereby gain loyalty. Ultimately, this translates into more long-term customer loyalty, higher customer lifetime value and more sales and profits.

Increasing brand value

As customer loyalty increases, so does brand value. Social responsibility gives a company recognition. It makes apparent that the company is about more than just making a profit.

Customers, like employees, learn about the values and social aspects that are promoted and feel positive about the brand and the company. CSR activities also lead to brands being perceived as premium brands, for which "premium prices" are also accepted.


Conclusion

Corporate social responsibility remains anchored in many people's minds as a mere cost factor. But applied properly, it is the very opposite and attracts future and existing talent to your company. 

It is important that your CSR strategy is in line with the values of your customers. Just think of Apple's "Challenging the status quo" statement. Customers trust such companies and remain loyal to them as part of this shared mission. 

And finally, it is also about the legacy of preserving our world so that our children and future generations have the chance to grow up in a world worth living in. Sounds dramatic, but unfortunately, it is increasingly the reality. We now have the chance to shape this reality positively. And we should use it.