CSR: What is Corporate Social Responsibility? Definition Examples Benefits

Summary

In this video, Alex discusses the importance of Corporate Social Responsibility (CSR) for businesses, highlighting how companies like IKEA, Starbucks, and Patagonia manage their socio-environmental impacts. The video delves into how CSR can lead to increased profits, improved brand image, and better working conditions, while also scrutinizing which companies are genuinely committed to sustainability and which may be greenwashing. Alex also emphasizes the importance of consumer awareness and introduces the concept of B-Corp certification as a standard for ethical business practices.

Takeaways

• 📈 Corporations focus on making money but also need to take responsibility for their socio-environmental impacts.
• 🌍 Corporate Social Responsibility (CSR) helps companies capture opportunities and avoid risks while promoting sustainability.
• 🏢 Examples of CSR in action include IKEA, Starbucks, and Patagonia, with varying levels of commitment and impact.
• 📊 CSR practices include ethical sourcing, compliance with regulations, charitable donations, and improving working conditions.
• 💡 Embedding CSR into a company’s DNA can significantly increase profitability, with benefits like increased market share and reduced costs.
• 🛠 Starbucks claims 98.6% ethical sourcing but faces criticism for its environmental impact, like disposable cup waste.
• 🔍 Patagonia is more transparent about its environmental impact, using recycled materials and organic cotton while engaging customers in sustainable practices.
• 👀 Evaluating a company's CSR efforts requires looking at both how they make and spend their profit, focusing on their environmental and social impacts.
• 🏅 B-Corp certification is a private certification recognizing companies for their social and environmental performance.
• 🎯 Companies that genuinely prioritize people and the planet tend to succeed by building strong goodwill and trust in the marketplace.

Q & A

What is Corporate Social Responsibility (CSR) as described in the video?

Corporate Social Responsibility (CSR) is the concept where businesses take responsibility for their socio-environmental impacts. It includes self-regulated initiatives like philanthropy, compliance with environmental regulations, ethical business practices, and efforts to improve working conditions and reduce carbon footprints.

Why is CSR important for corporations according to the video?

CSR is important because it helps corporations capture opportunities and avoid risks, improves their market share, reduces operational costs, increases employee productivity, and enhances brand image. Companies that integrate CSR into their operations can see significant profit increases.

How does the video suggest consumers can differentiate between companies that are genuinely committed to CSR and those that are 'faking it'?

Consumers can differentiate by analyzing how companies make and spend their profits. They should look at the environmental and social impacts of a company’s products and services, how they treat their employees and suppliers, and whether their profits are reinvested in sustainable practices or simply used to increase shareholder wealth.

What are some of the socio-environmental issues IKEA has been involved in according to the video?

IKEA has been involved in issues related to waste management, dangerous chemical use, child labor, poor working conditions in factories, and unsustainable wood procurement.

What role do millennials play in the importance of CSR for companies?

Millennials play a significant role in CSR's importance because many of them consider a company's commitment to social and environmental issues when deciding where to work. Additionally, a substantial percentage would accept a lower salary to work for a company that aligns with their values.

How does Starbucks approach CSR according to the video?

Starbucks claims that 98.6% of its coffee is ethically sourced, has trained 200,000 farmers, and invested in farmer loans and emergency relief funds. However, the company faces criticism for its environmental impact, such as contributing to landfill waste through disposable cups.

What makes Patagonia’s approach to CSR stand out in the video?

Patagonia stands out because it acknowledges the environmental impact of its products, uses recycled fibers for 64% of its materials, grows 100% of its cotton organically, and ensures that 82% of its products are Fair Trade certified. The company also promotes consumer responsibility by encouraging customers to buy less and demand more sustainable products.

What is B-Corp certification, and how is it relevant to CSR?

B-Corp certification is a private certification for companies that meet high standards of social and environmental performance, accountability, and transparency. It is relevant to CSR because it provides a credible measure of a company’s commitment to positive social and environmental practices.

How can CSR impact a company's profitability according to the research mentioned in the video?

Research by Bob Willard suggests that embedding CSR in a company’s operations can significantly increase profitability, ranging from a 51% increase for small and medium businesses to an 81% increase for large corporations. This is achieved through improved market share, reduced costs, and enhanced productivity.

What are the main benefits of integrating CSR into a company's business model as described in the video?

The main benefits include increased revenue and market share, reduced energy and material expenses, enhanced productivity, lower employee turnover, reduced risks related to brand image and compliance, and overall improved financial performance.

Outlines

00:00

📈 Introduction to Corporate Social Responsibility (CSR)

Alex introduces the concept of Corporate Social Responsibility (CSR), emphasizing that while most corporations are profit-driven, there are significant benefits to addressing their socio-environmental impacts. The video aims to explain CSR, explore its profitability, and examine real-world examples such as IKEA, Starbucks, and Patagonia to determine which companies are genuinely responsible and which may be merely posturing.

05:04

🌍 Importance of CSR and Public Perception

CSR is crucial for companies due to the growing consumer and employee demand for responsible business practices. Alex highlights how companies like IKEA have faced scrutiny over various socio-environmental scandals. Despite this, IKEA is considered a relatively good corporate citizen. The discussion emphasizes that with a significant portion of consumers seeking purposeful brands and millennials valuing a company's commitment to the community, CSR is not just a moral obligation but a profitable strategy.

📜 Evolution of CSR: From Charity to Compliance

The concept of CSR has evolved from a self-regulated initiative focused on philanthropy to a more comprehensive approach that includes compliance with environmental regulations and social norms. As environmental concerns like climate change and pollution have become more prominent, businesses are now compelled to report on their ethical practices, contributions to charity, environmental impact, and how they manage their supply chains and carbon footprints.

💡 Financial Benefits of CSR for Businesses

Research by Bob Willard indicates that embedding CSR within a company's operations can lead to significant profit increases—51% for small and medium businesses and 81% for large corporations. These profits stem from various benefits, including increased market share, reduced operational costs, higher productivity, and lower risks related to talent management and brand image. Essentially, CSR has become synonymous with corporate sustainability and is recognized as smart business practice.

☕️ CSR in Practice: Starbucks and Its Impact

Starbucks is often cited as a company with strong CSR credentials. They claim that nearly all of their coffee is ethically sourced, and they have invested in farmer support initiatives. However, the company's environmental impact, including their contribution to plastic pollution, raises questions about the effectiveness of their sustainability efforts. For example, only 2.8% of drinks were served in reusable cups in 2019, leading to billions of disposable cups being discarded.

👗 CSR in Practice: Patagonia's Genuine Efforts

In contrast to Starbucks, Patagonia openly acknowledges the environmental impact of their products. They use a significant amount of recycled materials and have committed to organic cotton for their clothing. Socially, they ensure fair trade practices for 82% of their production, impacting over 72,000 workers. Patagonia also encourages customers to buy less and demand more, reflecting their genuine commitment to sustainability.

🔍 How to Evaluate CSR: Authenticity vs. Marketing

Alex advises viewers to critically assess companies' CSR efforts by examining both how they generate profit and how they spend it. While some companies may use CSR as a marketing tool, genuine efforts typically focus on sustainable practices and fair treatment of people. Tools and frameworks discussed in previous videos can help in making informed judgments. Additionally, the B-Corp certification is highlighted as a benchmark for social and environmental performance.

🎯 Conclusion: The Business Case for Genuine CSR

Genuine CSR efforts lead to positive market perception and can result in long-term success. Alex quotes Interface's late CEO to emphasize that authentic CSR initiatives create goodwill far beyond what advertising can achieve. The video concludes with a call to support the channel through Patreon, encouraging viewers to subscribe, like, and share the content.

Keywords

💡Corporate Social Responsibility (CSR)

CSR refers to the commitment of corporations to consider the social, environmental, and economic effects of their operations and to balance profit with the well-being of society. In the video, CSR is the central theme, discussed as a way for companies to increase profits while also contributing positively to society and the environment. Examples of CSR practices are given, like IKEA's efforts to address socio-environmental scandals and Starbucks' ethical sourcing of coffee.

💡Socio-environmental Impacts

Socio-environmental impacts encompass the effects that a company's operations have on society and the environment. The video script mentions that corporations can take responsibility for these impacts, which can include issues like waste, dangerous chemical use, and child labor. IKEA's involvement in such issues from 1981 to 2006 is highlighted to illustrate the scrutiny major corporations face.

💡Consumer Behavior

Consumer behavior refers to the actions and decisions of consumers in relation to purchasing goods and services. The script notes that 40% of consumers seek purposeful brands and that 70% of millennials consider a company's community commitment when choosing employment, showing the influence of CSR on consumer behavior.

💡Millennials

Millennials are the demographic cohort following Generation X, typically born between the early 1980s and the mid-1990s to early 2000s. The video emphasizes the importance of CSR to this generation, with 50% willing to accept a pay cut to work for a company that aligns with their values, indicating a shift in workplace expectations.

💡Business Ethics

Business ethics involve the standards and values that guide the conduct of a company's operations, including fair treatment of employees, honesty in business practices, and respect for the environment. The script describes how CSR reporting often includes business ethics, as part of a company's commitment to responsible practices.

💡Regulations and Compliance

Regulations are rules or directives made and maintained by an authority, while compliance refers to the act of conforming to these rules. The video mentions that CSR has evolved with the emergence of environmental issues and the increase in regulations, forcing corporations to report on their adherence to these standards.

💡Supply Chain

A supply chain is the network of organizations, people, activities, information, and resources involved in producing and delivering a product or service. The script discusses how CSR involves considering the impact of a company's supply chain on the environment and local communities, as part of its broader responsibility.

💡Carbon Footprint

A carbon footprint is the total amount of greenhouse gases, primarily carbon dioxide, that are emitted directly or indirectly by a person, organization, event, or product. The video script notes that CSR now includes reporting on a company's carbon footprint, reflecting growing awareness of climate change.

💡Sustainability

Sustainability refers to the ability to maintain processes or states into the indefinite future, often in the context of environmental responsibility and social equity. The video equates CSR with corporate sustainability, suggesting that responsible business practices are not just ethical but also smart for long-term success.

💡B-Corp

B-Corp, or Benefit Corporation, is a certification for for-profit companies that meet high standards of social and environmental performance, accountability, and transparency. The script briefly mentions B-Corp as a tool for companies to demonstrate genuine commitment to CSR beyond marketing claims.

💡Goodwill

Goodwill refers to the positive feelings or public esteem that a company gains through its actions and reputation. The video concludes by emphasizing that companies genuinely committed to CSR and sustainability can earn goodwill in the marketplace, which can translate into business success.

Highlights

Corporate Social Responsibility (CSR) is crucial for businesses to manage their socio-environmental impacts and gain long-term benefits.

CSR has evolved from self-regulation to a vital part of business ethics, driven by social pressure, environmental issues, and regulations.

Companies with strong CSR practices can see profit increases from 51% to 81%, depending on their size.

Key benefits of CSR include increased revenue, reduced costs, enhanced productivity, and reduced risks.

Examples like IKEA, Starbucks, and Patagonia illustrate different approaches to CSR, with varying levels of commitment and authenticity.

Patagonia emphasizes sustainability with 64% of its materials made from recycled fibers and 100% organic cotton since 1996.

Starbucks has been criticized for its limited sustainability efforts, such as only 2.8% of drinks served in reusable cups before the pandemic.

Patagonia also participates in '1% for the Planet,' donating to environmental non-profits and encouraging consumers to buy less.

Consumers and employees increasingly prioritize companies with strong CSR, influencing brand trust, market share, and talent retention.

Tools like sustainability frameworks and B-Corp certifications help consumers and businesses assess and improve CSR efforts.

B-Corp certification recognizes companies that meet high standards of social and environmental performance.

CSR is not just about philanthropy; it's about integrating sustainability into business practices for long-term success.

The video emphasizes the importance of scrutinizing companies' CSR claims to distinguish genuine efforts from marketing tactics.

Educating oneself and using frameworks to analyze CSR practices can lead to more informed and ethical consumer choices.

Support for content creators through platforms like Patreon helps maintain independent production of educational content.

Transcripts

Hi folks, Alex here. Most corporations are in the business of making money. But there

are many ways in which they can take responsibility for their socio-environmental impacts and

there is much to gain by doing so… This is often called Corporate social responsibility.

In this video we are going to talk about what we mean by CSR, why good corporate citizen

make a lot more profit and we’ll look at examples like IKEA, Starbucks and Patagonia

to see if we can figure out who is real and who is faking it. Ok, Let’s get drawing!

On this channel we share tools for YOU to change the world so subscribe if you’re

into that.

This is why companies have to take corporate social responsibility seriously. This is a

representation of all the major socio-environmental scandals IKEA was involved in worldwide between

1981 and 2006. These were about waste, dangerous chemical use, child labour, poor working conditions

in factories, wood procurement, etc. And this is not because IKEA is worse than the others,

if anything, it is probably one of the more decent corporate citizens out there, but any

major corporation is under a lot of scrutiny. Add to that the fact that 40% of consumers

seek purposeful brands and trust in brands to act in the best interest of society, 70%

of millennials listed their company’s commitment to the community as an influence on their

decision to work there and 50% of millennials say they would take a pay cut to find work

that matches their values. CSR matters!

Originally, corporate social responsibility was a self-regulated way for businesses to

include philanthropic and charitable contributions in their organizational policies. With the

emergence of environmental issues such as climate change, toxic substances, plastic

pollution, etc., NGOs appeared, as well as industry-wide, national and international

regulations and social pressure became greater forcing corporations to address and report

on the way they were running their business.

Nowadays, when businesses report on their CSR, it usually includes their business ethics,

how much money they donate to charitable organizations, compliance with regulations, norms, standards

and labels, working conditions, how their business affects local communities where they

work, the environment, their supply chain and their carbon footprint.

In other words, Corporate social responsibility is about capturing opportunities and avoiding

risks. According to Bob Willard’s research, any company that embeds corporate social responsibility

within its DNA can increase its profit dramatically: by 51% for small and medium businesses to

81% for a large corporation. Mostly through these 7 benefits:

Increased revenue and market share due to better products and more customers

reduced energy and waste expenses reduced materials expenses from dematerialization

and substitution (see my video on circular economy for more details on this)

increased productivity and reduced turn-over because people like working for a company

that does good in the world and reduced risks on talent management, brand

image, compliance to regulations, customer demand, etc.

(there is a link in the description below if you want to find our more about that)

Essentially, corporate social responsibility is now another word for corporate sustainability

and it is just smart business.

Let’s looks at a couple of examples of what companies do. When searching online for companies

reputable for their CSR, I ran into Starbucks many times so let’s have a quick look at

what they are doing. On the social front, they claim that their coffee is 98.6% ethically

sourced (meaning fair trade, there is no mention of organic), that they trained 200,000 farmers

and invested in farmer loans and emergency relief funds. Now, Starbucks has to do this

because the business of coffee growing is at risk altogether due to farmers worldwide

not having the financial means to adapt to climate change and the fluctuating price of

coffee. In 2019 before the pandemic, 2.8% of the drinks were served in reusable cups.

As an order of magnitude, this left more than 3 billion disposable cups going to the landfill.

And the disposable cups are made of 10% post-consumer fibre. I personally don’t call that “leading

in sustainability.” In a trash audit performed by Greenpeace in 2019, Starbucks also ranked

as the 3rd most polluting company in Canada, where I live.

Another name that comes up often in the world of CSR is Patagonia but in contrast, they

acknowledge at the top of their sustainability web page that “everything they make has

an impact on the planet.” On the environmental side, 64% of their materials are made from

recycled fibres and since 1996 100% of the cotton they grow for their clothes is grown

organically. On the social side, 82% of their line is Fair trade certified sewn impacting

more than 72,000 workers. They are also part of 1% for the planet providing support to

environmental non-profit organizations around the world. More importantly, Patagonia produces

videos engaging their customers to buy less and demand more

from their clothes.

But how do you figure out who is genuine and who is faking it? Well, to be honest you have

to educate yourself and use your own judgement to read between the lines of companies’

slick marketing. For me, a good rule of thumb is to make sure that I look at both 1) how

companies make their profit (for example what are the direct and indirect environmental

impacts of their products and services, my video on the sustainability analysis of iPhone

can help for example and how do they treat their people and suppliers in the process);

2) And secondly how they spend their profit (do they invest in their people, in sustainable

innovation or are they making their shareholders richer?) As fellow Youtuber “Our changing

climate” explained in a recent video, the money donated to charities can be misleading

and doesn’t tend to address the root causes of our sustainability challenges. Finally,

tools and frameworks like the ones I presented in previous videos can also be helpful to

make up your own mind in a rigorous way.

There is also a private certification of "social and environmental performance" of for-profit

companies called B-Corp. Companies get the certification by receiving a minimum score

on the assessment and by integrating B Corp commitments into their governing documents.

This will probably be the topic of another video.

The good news is, the companies that genuinely put their business at the service of the people

and the planet get the good-will of the market place and end up doing well by doing good.

As Interface’s late CEO put it, “there no amount of slick advertising, at any cost,

that we could have done that would have created the good will that this effort has created.”

If you found this video useful and are wondering how you can help me create more, you can do

it on Patreon. In a nutshell, you make a pledge that will apply to each new video I will post

in the future and you get perks like your name in the credits, access to my drawings,

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and stay independent.

If you can’t or don’t want to, that’s totally fine. You can always subscribe, give

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who make these videos possible and thank you for watching!