Nowadays, the success of a company goes beyond things like profitability and brand recognition, as customers and sometimes even employees judge it by how it impacts the society and the environment.

These practices should prove that an organization doesn't only care about profit and expansion, but also about improving the life of local communities and even the environment on a local or even global scale.

What is corporate social responsibility (CSR)

Corporate social responsibility (CSR) is a business model which implies that the company can be accountable to the wide public for the actions that it takes and that affect both the society and the environment. This means that, before making a decision, managers must balance both profit and the interests of the community.

Some of the CSR actions that a company can implement are promoting equality and inclusion at the work place and being environmentally friendly.

Types of CSR actions

CSR actions can be separated into four different categories, those being environmental, philanthropic, ethical and economic responsibility.

Environmental responsibility is one of the most important CSR initiatives for companies these days, with climate change in mind.

By being environmentally responsible, organizations should try to improve the environment as much as they can, through things like reducing pollution, using more renewable energy sources and offsetting the negative impact they might have.

This can be done by planting trees or donating to climate causes, among other things.

Ethical responsibility is also important for a company, as it means that it must treat all parties that are involved in its operation, which include leaders, investors, employees and customers.

Philanthropic responsibility means that a company wants to improve certain aspects of the society or the world, through donating part of its earnings to charities or nonprofit organizations. Some companies take things further and create their own charitable organization in order to help communities.

Finally, economic responsibility implies that the company must make sure that it will honor its commitments regarding its selected CSR actions

CSR actions - advantages

There are multiple benefits that corporate social responsibility can bring to a company, such as attracting top talent, improving the company's reputation and even increasing customer loyalty.

Another important advantage of CSR practices is that they can attract investors, as they believe that a company's commitment to improving the world will contribute to its long-term success.

Also, social responsibility initiatives might have a positive effect on the employees as well, as they could be more motivated to work for a company that values things like the community and the environment, besides just profit.

Building a loyal customer base can bring more customers through recommendations, which in turn causes profits to rise.

Corporate social responsibility drawbacks

Implementing CSR policies within a company is no easy thing to do, and there are a few things that might prove to be challenge when it comes to making a company more socially responsible.

The first drawback of CSR is the fact that it costs money to implement, which for large companies might not be a big problem, but smaller organizations might not have the budget necessary to become more socially responsible.

This is tied to the fact that CSR also impacts profitability. This means that managers might find themselves within situations that would mean sacrificing social-responsible actions for more revenue or vice-versa.

Another disadvantage of CSR isn't even about implementing these actions, but rather not implementing them. Some companies used social responsibility actions as a way to make themselves look better in front of the public, without making any change if any at all.

This is why ESG evaluation is very important and it is an action that's being implemented more and more across companies across the globe, since climate-focused actions are becoming very popular among various industries and some companies may be tempted to greenwash.

Ultimately, corporate social responsibility can be a powerful tool for companies to attract investors, well-prepared workforce and even the admiration of customers and the society.

Still, it is important both for communities around the world and for the environment, that organizations implement CSR actions and don't just use them as empty words to get to the top.