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The Rise of Corporate Social Responsibility Understanding its History & Integrating It into Business Strategy

June 11, 2020

While the concept of corporate social responsibility (CSR) has existed for the last several decades, the belief that the private sector should be accountable to all stakeholders has gained traction in recent years.

Highlighting the rapid growth of CSR, a report by the Governance & Accountability Institute found that 86% of S&P 500 Index Companies published sustainability or CSR reports in 2018, compared to fewer than 20% in 2011.

What is Corporate Social Responsibility?

Corporate social responsibility is a management practice whereby companies integrate social, environmental, and economic concerns into their business operations. Examples of CSR initiatives can range from philanthropic efforts and involvement in the local community to diversity and inclusion and transparency.  Rooted in the belief that businesses can play a role in shaping a better world, CSR can be a part of all companies – from large global corporations to small local businesses.

Corporate Social Responsibility Origins

Although corporate giving and concern for employee welfare have existed for centuries, the concept of CSR did not fully take root until a few decades ago. Historically, companies have used CSR programs as a public relations tactic in order to shape positive perceptions of their brands. However, with the rise of consumer activism and socially responsible investing, companies have increasingly ingrained CSR as an essential part of their larger business strategy.

Illustrating the importance of CSR, a study by Cone Communications found that 63% of Americans are hopeful that businesses will take the lead to drive social and environmental change and 76% will refuse to purchase a company’s products or services upon learning it supported an issue contrary to their beliefs.

The Case for Corporate Social Responsibility

While all companies should invest responsibly and positively contribute to local communities, in addition to better public relations and increased satisfaction of customers and stakeholders, evidence shows that a robust CSR program can lead to improved financial performance. A study by IO Sustainability and Babson College’s Lewis Institute for Social Innovation found that CSR programs have the potential to increase market value, reduce systemic risk, and increase productivity because strong CSR practices can augment business performance to deliver additional return on investment (ROI) and make up for deficiencies in business performance to preserve and even grow ROI.

These benefits further make the case for companies to view CSR as a crucial aspect of business strategy, rather than simply a tactic. The rise of CSR in the private sector is a reflection of the evolving role of business in society and the ever-changing world as a whole.

For assistance in developing your own community engagement or CSR program, visit our Communications practice page. For more information on how WBD supports USAID’s private sector engagement policy, visit our international development page.

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