Corporate Social Responsibility (CSR) is a phrase that will shape the future of business and therefore society. The underlying principle of CSR is the recognition that organisations must focus on stakeholders, as much or more as they focus on shareholders. Stakeholders are the employees of the business, the clients of the business, the suppliers of the business, and the overall environment in which the business operates. That environment is not just the natural environment but also the social environment in which the business functions. An organisation that is socially responsible will have a positive social impact by holding at its core aims of inclusive and sustainable growth. In essence CSR is about the balancing of purpose and profit.
CSR isn’t necessarily easy. It requires seeing the organisation as an eco-system that operates within a wider eco-system, which means it is at the centre of a complex web of relationships. To fulfil that role responsibly the organisation needs to be open, honest and willing to change but the benefits are immense.
Like it or loathe it, corporations have no choice but to get on board with CSR lest they be left spluttering in the wake, because that social ship has well and truly sailed.
Dr Ioannis Ioannou is Associate Professor of Business Strategy at London Business School and holds a BA from Yale and a PhD from Harvard. Iannou’s research has found that in the early 1990s investment analysts thought that responsible companies were significantly destroying shareholder wealth and would recommend selling shares in those companies. The belief at the time was that companies acted responsibly at the expense of economic returns.
By contrast, Ioannou has found that today, companies with a superior focus on sustainability have better access to finance. The reason for this is that investment analysts recognise that organisations that are ethically driven are more transparent and have more stable relationships with their stakeholders.
At a primal level, CSR is essential simply because companies do better who implement it. A 2011 study conducted by the National Bureau of Economic Research and published by the Harvard Economic Review found that corporations that adopt environmental and social polices out-perform those that do not in the long term.
Like it or loathe it, corporations have no choice but to get on board with CSR lest they be left spluttering in the wake, because that social ship has well and truly sailed.
We are at a point in human history with the impact of COVID-19 where we are examining the old structures that have been laid bare. Through the rise and rise of corporate social responsibility we have the capacity to build a future prosperity that is both shared and enduring.
