Corporate social responsibility is the term used to describe the way that a business takes into account the financial, environmental and social impacts of decisions and actions it is involved in. It is an increasingly important issue in business, as managers, consumers, investors and employees have begun to understand how economic growth is linked to social and environmental well-being.
Corporate social responsibility is a key issue for any organisation aiming for long term sustainability. Whilst it is a mostly voluntary concept, there is increasing pressure on organisations to make a positive contribution to society, or at the least, reduce their negative impact. Internationally, governments are also moving towards the enforcement of certain elements of corporate social responsibility, particularly in regards to the protection of the environment.
Responsible businesses may not necessarily be able to measure the positive impact their behaviour has on their performance, however, irresponsible businesses are likely to notice the negative impact their decisions have on their bottom line. Business sustainability now and in the future depends on organisations taking into account the social and environmental consequences of their decisions and actions.
In the past, many businesses and managers were primarily concerned with increasing shareholders’ value. Shareholders are the people who own part of a business and share in its profits. For a small business, this may be a single business owner. In a large corporation, this could include thousands of people who hold shares in the company and receive dividends.
Traditionally, managers were focused on short to medium term profits and driving the share price up. However, there has been a developing trend that goes away from simply increasing the return for shareholders and instead focuses on increasing the value of the business in terms of the stakeholders. Stakeholders are the people who are affected by the actions and performance of the business, and include both internal and external parties. Business stakeholders include people such as consumers, shareholders, associates, employees and business owners. Businesses that are socially responsible aim to make decisions that are in the best interests of their various stakeholders.
Developing your understanding of corporate social responsibility and implementing it into your business now may help you to get a step ahead of your competitors. You can use it to gain a competitive edge and it provides you with the opportunity to provide benefits to a wider range of business stakeholders.
The triple bottom line refers to an extension of the criteria used to measure organisational success. Traditionally, business success (or failure) is measured in terms of its economic performance. A business is considered to be successful if it has generated a sufficient financial return from its investments, financing activities and operating activities. The triple bottom line takes into account three criteria for assessing organisational performance; economic, social and environmental.
The financial or economic performance of an organisation is the easiest of the three criteria to measure accurately. Traditional accounting methods take into account the inflow and outflow of resources from the business, generally including cash and finances, assets, liabilities and other easily definable business resources. The economic criteria can then be used to determine how much an organisation generates in monetary value. It can also be used to determine the net worth of the business at a given point in time.
The social performance of an organisation is somewhat more difficult to define and measure. The social criterion of the triple bottom line takes into account the impact that a business has on people within the business (employees) and people outside of the business (the community). A business applying the triple bottom line principles will act in a way that benefits the community and will ensure that people are not being exploited or endangered by the operation of the business. Social factors that should be considered include labour utilisation and wages, working conditions and contribution to community living standards.
Environmental performance is concerned with a business’ total impact on the natural environment. Triple bottom line organisations aim to improve the environment where feasible, or at the very least, reduce and limit their negative impact on the environment.
Organisations need to look at more than just obvious environmental issues (like pollution) and should consider the total lifecycle impact of their products and services.
Triple bottom line reporting is becoming more widespread amongst both large and small organisations. Triple bottom line reporting makes business decisions and actions more transparent and allows people to gain a thorough understanding of a business’ level of corporate social responsibility. The triple bottom line report also helps manager to assess and compare their performance across all three criteria against the business objectives and long term goals.
South African Business Index (SABI), which is an independent national networking and business alliance organization, was formed in order to fill a significant gap identified in the networking and communication sector of the business market.