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Corporate Social Responsibility

Companies incorporate social and environmental concerns into their business practices according to their perceived “corporate social responsibility” (CSR). The term was coined in 1953 by American economist Howard Bowen, who described CSR as the obligation on a business to adopt policies “which are desirable in terms of the objectives and values of our society”. The Australasian Centre for Corporate Social Responsibility defines modern CSR as: “the organisational practices that address the impacts of an organisation on business, society and the environment or seek to create positive societal value through core business”.

CSR posits that corporations are responsible not only for the economic consequences of their actions but the social and environmental consequences. It covers actions which further the social good and go beyond the interests of the company and what is required by law. CSR is commonly expressed via corporate volunteering, charity partnerships, philanthropy and environmental initiatives.

Advantages of Corporate Social Responsibility action

Being a “good corporate citizen” has many benefits for a company, including:

  • better access to capital and markets;
  • competitive advantage;
  • operational cost savings;
  • improved productivity and work quality;
  • improved image and reputation;
  • enhanced customer loyalty;
  • better risk management;
  • better employee retention and recruitment.

There can be disadvantages, however. Engaging in CSR action can sometimes involve structures and strategies that are expensive to plan, execute and measure. Also, a  poorly planned CSR program can become a business liability and damage a business’s reputation.

How is Corporate Social Responsibility measured?

There is no specific tool to measure the effectiveness of CSR measures, but Environmental, Social and Governance criteria; the United Nations’ Sustainable Development Goals; the Corporate Responsibility Index and the Global Reporting Initiative are often used.

ESG criteria

Business leaders and investors use Environmental, Social and Governance (ESG) criteria when assessing corporate behaviour against corporate social responsibility. Investors, consumers and employees favour businesses that score well against ESG criteria because this reflects adherence to CSR principles.

Environmental criteria includes:

  • climate change;
  • resource depletion;
  • waste and pollution;
  • energy efficiency.

Social criteria includes:

  • working conditions;
  • community relations;
  • employee engagement;
  • health and safety;
  • gender and diversity;
  • human rights;
  • labour standards.

Governance criteria includes:

  • executive pay;
  • bribery and corruption;
  • political affiliations and donations;
  • lobbying;
  • board composition, diversity and structure;
  • auditing and tax strategy.

Sustainable Development Goals

These targets adopted in 2015 have formed the yardstick for assessing recent achievements in CSR. The goals address global challenges in areas including poverty, inequality, climate change, environmental degradation, peace and justice.

Corporate Responsibility Index (CRI)

The CRI ranks Australian companies according to their impact on society and the environment. Results are based on a voluntary, self-assessment survey and compare the systems and performance of a company in areas such as strategy, integration, management, impact and assurance.

Global Reporting Initiative (GRI)

GRI is an independent body that helps businesses, governments and other organisations to be transparent about their sustainability impacts. It supports best practice reporting on sustainability by using the widely accepted GRI Standards, which cover topics including water, biodiversity, human rights and corruption.

Corporate Social Responsibility in action

Companies around the world have recognised the value of expressing their corporate social responsibility. These companies include:

  • Nestle: In 2015, the global food giant offered a prize of more than half a million dollars for organisations working in the areas of nutrition, water and rural development.
  • Telstra: In 2016, the telco publicly declared its support for marriage equality after a customer backlash.
  • BHP: In 2016, the mining giant announced a plan to achieve employee gender balance globally by 2025.
  • Sony: The entertainment technology company aims to achieve a zero environmental footprint by 2050.
  • PricewaterhouseCoopers: The professional services company aims to invest in the growth of 15 million people, NGOs and social and micro enterprises by 2022.
  • Netflix: The TV subscription service has introduced 52 weeks of paid parental leave.
  • Lego: the toy manufacturer is investing $150 million over 15 years to address climate change and reduce waste. In 2019 it reached its goal to operate entirely on renewable energy, three years ahead of schedule.
  • Woodside Petroleum: In 2020, more than half of the company’s shareholders voted to support a motion for the fossil fuel giant to set climate targets in line with the Paris climate agreement, after it failed to act on climate change.
  • Starbucks: The global coffee chain will link executive pay to diversity targets in 2021, and is aiming to raise the number of corporate Black, Indigenous and People of Colour (BIPOC) employees from 18.5 per cent to 30 per cent by 2025.
  • Pfizer: The pharmaceutical giant has donated more than 875 million doses of antibiotics to 40 countries to fight the eye disease trachoma.
  • Zambrero: The Mexican food chain’s Plate 4 Plate initiative aims to stop world hunger by donating meals to people in need. The company has donated more than 40 million meals, with a goal of 1 billion by 2025.

If you require legal advice or representation in any legal matter, please contact Armstrong Legal.

Sally Crosswell

This article was written by Sally Crosswell

Sally Crosswell has a Bachelor of Laws (Hons), a Bachelor of Communication and a Master of International and Community Development. She also completed a Graduate Diploma of Legal Practice at the College of Law. A former journalist, Sally has a keen interest in human rights law.

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