Corporate Social Responsibility Employs Many Models to Strategically Align Business and Philanthropy
By Patty Janes and Olivia Rau
While there are a variety of terms in use to describe an organization’s social giving (corporate citizenship, triple bottom line, etc.), corporate social responsibility (CSR) is often used as an overarching term. CSR can be defined as actions outside an organization’s normal scope of business that seek to address the needs of the community beyond pure economics (Carroll, 1999). These activities seek to align social good and ethical obligations with business objectives. CSR is a function to meet — and hopefully exceed — stakeholder expectations.
Throughout this last decade, CSR in various shapes has taken deeper root. A 2015 KPMG Survey of Corporate Responsibility Reporting estimated that 92% of the Fortune 250 took action toward a larger social mission and produced an annual report summarizing their actions and impacts. These activities varywidely, but share the intent to benefit both the “organization” — through motivated employees and increased profits — and the“community” it serves — by addressing relevant social issues. Further, 82% of the S&P 500 produced reports detailing their CSR initiatives in 2016, a significant increase from less than 20% reporting their CSR efforts in 2011 (Coppola, 2017).
CSR Models. Definitions and models attempting to explain the CSR phenomena have evolved significantly over the years. Early analysis focused on the obligation of businesses to consider how their decisions impact surrounding communities and meet public expectations (Davis & Blomstrom, 1966). Archie Carroll’s (1999) CSR Pyramid sought to reconcile four categories of business responsibilities — economic, legal, ethical, and philanthropic — stating that organizations’ philanthropic responsibility didn’t begin until profitability occurred. Newer models attempt to situate CSR and market value within a single conceptual framework (García-de-Madariaga & Rodríguez-de-Rivera-Cermades, 2010).
Another recent approach by Tracee Keys, Thomas Malnight, and Kees van der Graaf (2009) is to use McKinsey & Co.’s matrix, which pinpoints CSR’s primary objective: to align successful business practices while pursuing benefits to society. Ultimately, this model leads to “strategic” CSR that results in high benefits for society and for business, recognizing that organizational practice’s range and subsequent benefits to society and the organization also vary accordingly.
The matrix (Figure 1) demonstrates that some efforts have a higher benefit to society than to business. At the low impact, “pet projects” level, employees may ask those in the workplace to adopt a family during the holidays. More significant giving occurs in “philanthropy,” where the organization may identify a charitable cause to support throughout year. These examples could be classified as corporate philanthropy.
What Keys and colleagues label as “propaganda” are efforts in which the benefits to society are low, but high to the organization. For example,a hotel asking guests to help save the environment by not having linens washed daily during their multi-day stay may or may not benefit society. However, the financial savings to the organization is significant.
Finally, those actions of high value to both the organization and society are defined as “strategic.” These include practices that center around the organization, from employee volunteerism in human resources to fair trade supplier relationships; or practices that are externally focused, from energy and waste saving practices to disaster relief.
SMEs strategically embracing CSR. Although more and more companies are engaging in and reporting on their CSR activities, commitment levels are wide ranging, and thus the benefits are too. What also varies is the size and types of organizations taking strategic action.
While top performers in the private sector are the most documented, the CSR trend isn’t limited to only the largest of organizations. Small and medium enterprises (SMEs) are embracing CSR, however some scholars suggest fewer are producing annual reports and engaging with CSR as a strategic initiative (Perälä & Saukkonen, 2017). Yet, small businesses account for nearly half of the U.S. workforce and over 30 million organizations (Giese, 2019). Further, of the 5.6 million employer firms in the U.S. in 2016 “the vast majority (88%) of employer firms have fewer than 20 employees, and nearly 40% of all enterprises have under $100k in revenue” (JP Morgan Chase & Co., n.d.). In fact, 98.2% of firms have fewer than 100 employees (SBE Council, 2018). Despite their undeniably large part in the U.S. workforce, the Global Reporting Initiative found that only 10% of SMEs conduct annual sustainability reports (GRI, 2016). As such, SMEs are not reaping the same CSR benefits as those that have strategically implemented and publicly report their philanthropic initiatives.
In 2020, CSR will continue to evolve strategically for SMEs as they too will benefit their communities and help solve social issues while, in turn, more successfully achieving their organizational objectives.