What Is CSR And Its Function? Here's The Detail

YOGYAKARTA - Have you ever heard of Corporate social responsibility, aka CSR? Then how far do you understand it, try to state what CSR is and its functions?

What is CSR and Its Functions

Corporate social responsibility (CSR) is a self-regulating business model that helps companies be socially responsible to themselves, their stakeholders and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can realize the kind of impact they have on all aspects of society, including economic, social and environmental.

Engaging in CSR means that, in the normal course of business, a company operates in a way that improves society and the environment instead of contributing negatively to them.

Understanding CSR Functions

Corporate social responsibility is a broad concept that can take many forms depending on the company and industry. Through CSR programs, philanthropy and volunteer efforts, businesses can benefit society while enhancing their brand.

For a company to be socially responsible, it must first be accountable to itself and its shareholders. Companies that adopt CSR programs often grow their business to the point where they can give back to society. So, CSR is usually a strategy implemented by big companies. After all, the more visible and successful a corporation is, the greater responsibility it has to set standards of ethical behavior for its peers, competition, and industry.

Types of CSR

In general, there are four main types of corporate social responsibility. A company may choose to engage in any of these separately, and a lack of involvement in any one area does not necessarily exclude a company from social responsibility.

Environmental Responsibility

Environmental responsibility is a pillar of corporate social responsibility rooted in nature conservation. Through optimal operations and support from related causes, a company can ensure that it leaves natural resources better than before it started operating. Companies often pursue environmental stewardship through:

• Reducing pollution, waste, consumption of natural resources and emissions through its manufacturing process.
• Recycling goods and materials throughout its processes including promoting reuse practices with its customers.
• Offsetting negative impacts by replenishing natural resources or supporting causes that can help neutralize the company's impact. For example, a producer who cuts trees may commit to planting the same number or more.
• Distribute goods consciously by choosing the method that has the least impact on emissions and pollution.
• Create product lines that enhance these values. For example, a company offering gas-powered lawn mowers could design electric lawn mowers.

Ethical Responsibility

Ethical responsibility is a pillar of corporate social responsibility that is rooted in fair and ethical conduct. Companies often set their own standards, although external forces or demands by clients may shape ethical goals. Examples of ethical responsibilities include:

• Fair treatment of all types of customers regardless of age, race, culture or sexual orientation.
• Positive treatment of all employees including favorable wages and benefits exceeding the mandated minimum. This includes consideration of fair employment for all individuals regardless of personal differences.
• Expanded use of vendors to tap into different suppliers of different races, genders, Veteran statuses, or economic statuses.
• Timely and respectful disclosure of operating concerns to investors. Although not always mandated, a company may choose to manage its relationship with external stakeholders beyond what is legally required.

Philanthropic Responsibility

Philanthropic responsibility is a pillar of corporate social responsibility that challenges how companies act and how to contribute to society. In its simplest form, philanthropic responsibility refers to how a company spends its resources to make the world a better place. This includes:

• Does the company donate profits to charity or the causes it believes in?
• Does the company only conduct transactions with suppliers or vendors that are in line with the company philanthropically?
• Does the company support employee philanthropic efforts through appropriate leave or contributions?
• Whether the company sponsors fundraising events or is present in the community for related events?

Financial Responsibility

Financial responsibility is a pillar of corporate social responsibility that unites the three areas above. A company makes plans to focus more on the environment, ethics, and philanthropy; however, companies should support these plans through program financial investments, donations, or product research. This includes expenses for:

• Research and development for new products that drive sustainability.
• Recruiting different types of talent to ensure a diverse workforce.
• Initiatives that train employees on DEI, social awareness, or environmental issues.
• Processes that may be more expensive but produce greater CSR results.
• Ensuring transparent and timely financial reporting including external audits.

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