Embracing Corporate Social Responsibility (CSR): Why and How for Startups
Corporate Social Responsibility (“CSR”) is a type of business model that promotes self-regulation and keeps a company accountable to itself, its investors and the public.
In practising CSR, companies monitor their impact on society through their environmental and business activities. In partaking in CSR, a business can acknowledge that its activities have an impact on society. Businesses that practise CSR strive to have a positive impact that enhances the surrounding environment rather than negatively contributing to it.
CSR can be classified into four main categories:
Environmental CSR’s aim is to maintain and uplift natural resources and the environment.
Ethical CSR refers to a company that is working to act and initiate trade in an ethical manner.
Philanthropic CSR refers to ways in which a company aims to contribute to society and ethical causes through its trade.
Financial CSR is the conjunction of the above three forms of CSR and includes the fact that companies must achieve their CSR goals through financial investments.
However, CSR is not a legal necessity. So why should a business take on CSR responsibilities?
Brand recognition: consumers are more likely to prefer a company which acts favourably to them and its employees, and is honest regarding their product/service.
Customer loyalty: with the assurance that your company is acting according to certain CSR initiatives and effectively generating a positive impact, customers may form loyalty to your brand.
Investor relations: as your business establishes trust, transparency and therefore accountability regarding their operations, investor relations are likely to improve.
Increased employee engagement: employees working under fair, ethical and rewarding conditions are likely to be more engaged and motivated with their work.
Startups might choose to adopt a range of CSR practices. Some examples include:
Reduce waste, recycle more and distribute goods by means which have a minimum environmental impact;
Act in a non-discriminatory manner towards customers, employees and third parties you interact with;
Employ a diverse range of professionals;
Be transparent about your undertakings, where you are successful and where you are not, and how you will improve;
Ensure a positive and healthy work environment;
Support and build relationships with other businesses whose ethos you support, and interact with charities who share your CSR objectives. Also, encourage employees who wish to lead philanthropic endeavours and support the process of these projects.
Holding your company and its mission accountable, and encouraging third parties to engage in CSR, can also help facilitate and promote CSR within your business. This might look like encouraging suppliers or other organisations involved in the running of your business to engage in your company's CSR goals, or keeping your customers up to date on how you are approaching and achieving your goals.
For example, Reformation, a Certified Climate Neutral company whose mission is to “bring sustainable fashion to everyone”, publishes a sustainability report on their website and sends it to consumers. On its website, you can also access “RefScale”, an internal lifecycle tool that tracks every garment’s environmental impact and informs the consumer how much CO2 they save by shopping at Reformation compare to the average US clothing brand.
All companies, including startups, need to consider their target audience. The next wave of consumers is a part of a generation that places a lot of importance on sustainability, transparency and accountability. In Business of Fashion’s “The State of Fashion 2019” report, they found that 66% of global millennials were willing to spend more on sustainable products, where transparency won them over in deciding between two brands to support.
The common misconception that in ensuring a neutral or positive impact from your operations and product, you will need to take on an increased and significant financial burden, has seemed to discourage brands from engaging in CSR. However, in reducing your company's consumption of resources, emissions and waste, you help the environment whilst reducing your expenditure to increase your profits. Even though your product may cost more in comparison to a product produced through unsustainable practices, you will achieve a sustainable pricing point.
CSR for Start-Ups
CSR is associated chiefly with big corporations as they tend to attract more media attention and thus are concerned with protecting their brand whilst enhancing their reputation with the public and their investors. Nonetheless, CSR for SMEs generally stems from the same motivations larger corporations have. Companies primarily want to avoid downside risk and exploit the upside opportunities.
However, SMEs, at their roots, have intrinsic motivations before their instrumental ‘business’ motivations for incorporating CSR practices. When a firm pledges to incorporate CSR into their practices, they do so because they believe it is the right thing to do and do so out of their free will without coercion. In day-to-day life, this approach can be paralleled with one acting on their free will in achieving a goal versus a third party forcing them to take on a certain task; the former will always provide better results.
In start-ups and SMEs alike, the business is commonly managed and operated by its owners. As such, there often is a more personal connection to the business and what it is committed to. William Lever, who founded what is now Unilever, intended to sell soap to promote hygiene and save lives. Not many successful entrepreneurs have the mere intention of achieving financial gains. Therefore, for sustainable long-term growth, start-ups will benefit from employing CSR strategies and keeping societal needs in mind.
As a startup or small business, it is easier to keep to CSR promises. The close involvement of investors, owners and founders of startups in the company’s operations and impacts means that CSR targets are often kept close to a startup’s core mission and goals. So as a startup, don’t be discouraged in your efforts to initiate CSR throughout your business - your small or medium company size may just make it more manageable and realistic to effectively implement CSR.
In summary, there are several key reasons why employing a CSR strategy is a key step for start-ups, which include:
Your target audience is likely to comprise Gen Z’s, who value CSR policies greatly when making decisions as to where to shop.
Sustainable growth: attention to CSR will ensure steady growth and an increase in revenue.
CSR is increasingly more attractive to investors, due to it being a signal to a sustainable business.
Likelihood of higher employability & less employee turnover.
Author: Yasmin Welsh -
Author: Yasmin Welsh -
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DISCLAIMER
This article has been written by law students for the sole purpose of providing informative insight. The information in this article is intended for educational purposes only and does not constitute legal advice, nor should the information be used for the purpose of advising clients. You should seek independent legal advice before relying on any of the information provided in this article.
Sources
Jason Fernando, 'Corporate Social Responsibility (CSR) Explained With Examples' (Investopedia, 27 May 2022) <https://www.investopedia.com/terms/c/corp-social-responsibility.asp> accessed 22 October 2022
Reformation, 'The Sustainability Report' (Reformation, 2022) <https://www.thereformation.com/sustainability-report-q3-2022.html>accessed 22 October 2022
Kayla Marci, 'Reformation: What makes the ‘cool girl’ brand so successful with millennials?' (Edited, 2022) <https://blog.edited.com/blog/resources/reformation-brand-analysis> accessed 29 August 2019
Chastity Heyward, 'The Growing Importance Of Social Responsibility In Business' (Forbes, 18 November 2020) <https://www.forbes.com/sites/forbesbusinesscouncil/2020/11/18/the-growing-importance-of-social-responsibility-in-business/?sh=9934f2a2283b> accessed 22 October 2022
Forbes, 'When It Comes to CSR, Size Matters' (Forbes, 14 August 2013) <https://www.forbes.com/sites/insead/2013/08/14/when-it-comes-to-csr-size-matters/?sh=694ae82d52a2> accessed 29 October 2022
