Corporate social responsibility

Corporate social responsibility (CSR) refers to companies conducting their core operations in a responsible and sustainable way to create a positive corporate social impact. It is a form of international private business self-regulation, which aims to contribute to societal and environmental goals by reducing harm. For instance, by reducing a company's carbon footprint or increasing positive outcomes for all stakeholders. It is related to the company's commitment to be ethical in its production, employment, and investment practices.

While CSR often takes the form of a philanthropic, activist, or charitable nature by supporting volunteering through pro bono programs, community development, and by administering monetary grants to non-profit organizations for the public benefit, corporations have been seen shifting to a holistic and strategic approach. Strategic CSR is a long-term approach to creating a net positive social impact based on brand alignment, stakeholder integration, and ethical behaviour. Moreover, some scholars and firms are using the term "creating shared value", an extension of CSR which allows for social obligations to be met while the company reaps a profit.

For publicly listed companies, CSR often takes the form of environmental, social, and governance (ESG) practices and reports, but many companies have pledged to go beyond that. In some countries, companies are mandated or incentivized by governments to measure and report their impact on society, the community, and/or the environment. In addition, national and international standards, laws, and business models have been developed to facilitate and incentivize this phenomenon. Various organizations have used their authority to push it beyond individual or industry-wide initiatives. Further, CSR has been considered a form of corporate self-regulation, shifting from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels.

When focusing on corporate environmental responsibility, most firms use the term "sustainability" to explore the effort the company makes to reduce environmental harm such as by reducing waste and emissions, or by making a contribution through climate action and climate activism. Other companies focus more on their social impact, activism, or corporate citizenship. It is, therefore, important to know that CSR reports can take any of these names.

Businesses engage in CSR for strategic, ethical, or instrumental reasons. From a strategic perspective, CSR can contribute to firm performance, particularly when CSR is embedded strategically in the company, aligned with its brand, and occurs when the company utilizes its market position to create impact. Doing so, could lead to higher levels of financial and employee performance. These benefits accrue by increasing positive public relations and high ethical standards to reduce business and legal risk by taking responsibility for corporate actions. CSR strategies encourage the company to make a positive impact on the environment and stakeholders including consumers, employees, investors, communities, and others. From an ethical perspective, some businesses will adopt CSR policies and practices because of the ethical beliefs of senior management: for example, the CEO of outdoor-apparel company Patagonia, Inc. argues that harming the environment is ethically objectionable.

Proponents argue that corporations increase long-term profits by operating with a CSR perspective, while critics argue that CSR distracts from businesses' economic role. A 2000 study compared existing econometric studies of the relationship between social and financial performance, concluding that the contradictory results of previous studies reporting positive, negative, and neutral financial impact were due to flawed empirical analysis and claimed when the study is properly specified, CSR has a neutral impact on financial outcomes. Critics have questioned the "lofty" and sometimes "unrealistic expectations" of CSR, or observed that CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. In line with this critical perspective, political and sociological institutionalists became interested in CSR in the context of theories of globalization, neoliberalism, and late capitalism.