4 types of corporate social responsibility and its benefits

By Indeed Editorial Team

Published 30 June 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Corporate social responsibility (CSR) improves the reputation of the organisation and benefits society. It provides an opportunity for companies to engage customers and employees in their projects. Learning about corporate social responsibility can help you plan similar activities for your organisation. In this article, we discuss the different types of corporate social responsibility and their respective benefits.

What are the types of corporate social responsibility?

Corporate social responsibility, also known as corporate citizenship or corporate conscience, is a voluntary practice that helps companies stay accountable to their stakeholders and be socially responsible. Businesses use their profits to evaluate and impact social, environmental and economic issues. Companies can create a positive impact on society through such initiatives. It is a self-regulatory business plan that encourages companies to conduct their business ethically and sustainably.

There are several avenues that a company can focus on for their corporate social responsibility activities. A company may engage in activities that benefit a marginalised group or the environment or donate money for a cause. Rather than focusing on a single type of CSR, they might combine a number of different approaches. Depending on how a company conducts its activities, corporate social responsibility can take four different forms:

1. Environmental responsibility

Environmental responsibility is when organisations take active measures to promote sustainability and natural conservation. Customers often prefer companies that engage in sustainable packaging or dedicate a portion of profits from a sale to an environmental cause. Companies can implement environmental responsibility in several ways:

  • adopt processes in their daily functioning that are environmentally friendly and sustainable

  • reduce the use of single-use plastic and control greenhouse gas emissions

  • donate to relevant causes and fund research on sustainable materials, environment-friendly packaging and environmental conservation

For example, an organisation pledges to plant 10 trees every time someone purchases their product. They also provide some seeds to their customer with every purchase to encourage them to plant a tree. They speak about this activity through all their marketing channels to increase awareness. To stay accountable to the public, the organisation updates its stakeholders with evidence of the woodland they've created or rejuvenated.

2. Ethical responsibility

Ethical responsibility helps the firm set operational policies that are fair. Companies ensure all employees get equal opportunities. The guidelines don't discriminate against any leader, employee, investor, supplier or customer based on their gender, culture, heritage or religion. These policies help build an inclusive culture in the organisation and reflect on the work it does. Some organisations may also set ethical codes to define how it does business and with whom it engages. Such policies help the organisation make decisions holistically and invite diverse perspectives in problem-solving.

For example, an organisation looking for supplies for its manufacturing unit may refrain from procuring them from an agent who employs child labour. Buying from such a supplier could be regarded as exploiting child labour, and rejecting them could help to reduce its incidence. Doing so also reflects on the company values and how the organisation attempts to uphold them. Such values are present in the company policies and imparted to all employees.

Related: How to talk about race, gender and social issues at work

3. Philanthropic responsibility

Philanthropy involves donating a portion of your wealth to an environmental or social cause. Businesses often do this by dedicating a part of their profits to charities and non-profit organisations that align with the company values. Some firms may also create charities that focus on a particular cause. Engaging in such activities can help improve society and the environment by aiding research, creating awareness or supporting specific sections of the community. Organisations that run charities or contribute to a particular cause also engage their employees in such activities.

For example, some scientists engaged in finding the cure for a long-term chronic disease don't have the resources to progress their research. A firm may create a charitable trust and then systematically invest in research on a new vaccine, medication or treatment that may benefit people. They may not be a pharmaceutical company but still engage in activities that can improve the healthcare system.

4. Economic responsibility

Economic responsibility is an amalgamation of environmental, ethical and philanthropic social responsibilities. Companies engaging in economic responsibility take measures that benefit the business and society. Businesses often do this by merging their business values and financial decisions, keeping in mind the good of the community. Business decisions are more empathetic and go beyond just being focused on profits.

For example, a product manufacturing company may choose to use only sustainable packaging for its products. The company needs to evaluate costs and engage with suppliers who can make this a cost-effective process. It positions the company as environmentally conscious and helps connect with customers. These business decisions reflect the company values, engage the customer and showcase the company's commitment to the environment.

Benefits of corporate social responsibility to companies

Corporate social responsibility is an opportunity for companies to use some of their profits in activities that benefit society. It also serves as an opportunity to build and maintain its brand image. Some benefits of corporate social responsibility are:

Serves as a marketing tool

Companies speak about their corporate social responsibility initiatives across multiple channels, including television, radio, social media and print media. It helps gain attention to the organisation's initiatives to benefit the environment, employees or wider society. Many companies may use this to spread awareness about the initiative, increase profits, reach more customers or increase transparency within the organisation.

Gets media coverage

When an organisation engages in a corporate social responsibility activity, it gains media attention and helps businesses gain positive coverage. Some companies may pay for media coverage, while others may earn it for the work they do. It helps reach out to more people and widen the support and impact of the social, economic or environmental activity.

Increases customer trust

Customers purchase from companies they trust and who share similar values. Engaging in CSR activities helps companies establish their core business values through their actions. CSR activities attract a lot of attention and help broaden the company's reach, reinforce customer loyalty and improve brand image.

Related:10 ways to consistently offer good customer service

Provides competitive advantage

When companies engage in CSR activities and talk about it in the media, it helps them differentiate themselves from their competition. Companies that stand for an environmental or social issue create an empathetic bond with their customers and increase customer recall. It establishes that the company cares about benefiting society and the environment and not just increasing their profits.

Increase employee engagement

Companies can engage their employees in activities that benefit society or the environment. Employees may be responsible for organising events or taking part in a cause. Employees who identify with the cause are likely to stay with the organisation, reducing employee turnover rates.

Related: 12 social, professional and personal benefits of volunteering

Attracts new talent

When companies run corporate social responsibility activities, they showcase company values and build a strong brand image. Candidates with whom this resonates are more likely to reach out to these organisations for a job. These candidates bring a new perspective and help add value to the company's CSR activities.

Related: how to welcome new employees (with steps and examples)

Increase company accountability

A company that engages in CSR activities showcases its commitment to the betterment of society or the environment. This could happen by integrating CSR activities into business operations or supporting a cause through the sales generated. It establishes that the company processes aren't harming the environment or society and are taking active measures to improve the situation.

Drive change

Any CSR activity aims to improve the current economic, environmental or ethical conditions in a particular region, country or even globally. Companies can associate themselves with causes that resonate with their customers and align with their values. With the support of their partners, businesses aim to create positive change that benefits everyone in the community and beyond.

Grow the business

All the attention and media coverage the CSR activity garners helps increase brand awareness, brand recall and sales which can lead to considerable growth. If customers remember the brand, they are more likely to make purchases. CSR activities help companies widen their portfolio and can attract investments and sponsorships.

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