Corporate responsibility (CR) is about the impact an organisation makes on society, the environment and the economy. Having an effective CR programme contributes positively to all stakeholders as well as adding value for the organisation itself, and ensures it operates in a sustainable way.
This factsheet discusses why corporate responsibility matters, and highlights HR’s role in putting it into action. Factors and mechanisms influencing corporate responsibility include legal and voluntary measures, partnerships with external agencies, and social and environmental reporting. The factsheet also outlines current debates on corporate responsibility, examining both its proponents and opponents. It ends with guidelines for introducing a corporate responsibility strategy which apply especially to employers and people professionals.
What is corporate responsibility?
Corporate responsibility (CR), also known as corporate social responsibility (CSR) or business sustainability, is about the ethics which drive an organisation’s activities and how it operates so that it’s viable over the long term. These two factors are intrinsically linked because a business that damages the systems on which it depends will ultimately be unsustainable.
CR starts with recognising that organisations’ activities impact on society, the environment and the economy, as well as on their own workforce. Value creation is not just a matter of finances. Indeed, the traditional shareholder value approach to business, and the short-termism that often goes with this, are central reasons for the global economic crisis and numerous environmental and other ethical corporate disasters - we look briefly at social value creation below. An organisation committed to maximises the positive impacts of its operations for all its stakeholders.
Areas of corporate responsibility
CR initiatives usually fall into four main areas:
Workplace – What’s the best way to look after employees and other workers in the value chain?
Market place – What impact does the organisations’ products or services have? Do they comply with all fair trading, corporate taxes and anti-bribery requirements?
Environment – How can environmental impact be minimised or improved?
Community – fHow can the organisation contribute positively to society?
Why does corporate responsibility matter?
The need to focus on CR has become increasingly apparent in recent decades. In tackling environmental disasters, poor labour standards or the type of reckless lending which caused a global financial crisis, organisations need to be part of the solution.
Businesses are witnessing increasing demands from statutory bodies for detailed information about their corporate standards. At the same time, the widespread loss of trust in business means a genuine focus on CR is crucial for restoring and maintaining consumer and investor confidence. CR is not a luxury but a necessity that has grown in importance through the global recession. And in ‘doing the right thing’ by their stakeholders, organisations will themselves realise a range of benefits from brand enhancement and reputation, to building employee retention and satisfaction.
See our factsheets on employer brand and employee engagement for more on those topics.
What is social value?
TThe emergence of ‘social value’ as a key driver for business is no fad. Social value considers more than just financial transactions and can include happiness, health, well-being, inclusion and empowerment. It’s often difficult to measure but is ‘of value to people in society’. Social value goes beyond traditional corporate responsibility since it actually drives core business purpose rather than sitting alongside it.
Embedding corporate responsibility into practice
There are various factors and mechanisms involved in putting CR into action.
Stakeholders in corporate responsibility strategy
At the heart of any organisation’s CR strategy are its different stakeholders, and how to create value for each. The long-and short-term interests of customers should be considered, as well as employees and workers throughout the wider value chain, as well as the general public. This informs an organisation’s understanding of the potential value it creates or the damage it can cause for employees, local communities, customers and the environment, as well as shareholders.
Legal and voluntary measures
Many ethical considerations in the core areas of CR are enshrined in law, including employment law. However, CR strategy typically aims to go beyond legal obligations with organisations taking voluntary measures and initiatives. Indeed, CR has grown in part due to perceived limitations of legislation, either in its scope, detail or power to influence.
Some of the most visible voluntary CR activity relates to community-based activity, for example, supporting local community projects financially or via employee volunteering programmes.
In shaping how an organisation creates value and questioning how it operates, CR relates closely to corporate governance, the mechanism for holding executive management to account. Effective boards will hold a long-term view, have a clear understanding of business models and will have the strength and independence to challenge the business.
The role of HR
HR has an important role to play in building and maintaining ethical cultures within organisations, where corporate responsibility is recognised by all. For instance, HR might encourage decision-makers to review the ethical dimensions of business decisions. Additionally, people professionals build people management systems that support ethical behaviours through appropriate reward and performance management processes. Read more on how HR can help establish an ethical culture.
As well as ensuring fair practices for employees, HR teams also play a coordinating role in other elements of CR, particularly in the absence of a CR team. This might include running an organisation’s volunteering programme, for example.
HR’s role in CR takes various forms, including:
Employment and people management practices. People professionals must first look at their own area and embed CR into core HR practices. It must ensure that, as a minimum, statutory obligations are met in all aspects of employment and people management. Ideally the organisation should aim to go beyond this where possible. This applies to the whole range of HR practices, including recruitment, terms and conditions, health and safety, communications, diversity and fair treatment, learning and development, performance management and reward and benefits. One area of HR practice that has received particular attention is the fair treatment of whistleblowers.
Supporting a broad CR strategy. HR teams have a role in communicating with and educating employees at all levels on their social and environmental responsibilities. As well as embedding sustainability concerns through all people management policies and practices, people professionals are central in aligning the organisation’s values, culture and business activity. Equally, learning and development functions play an important role in developing management capability and promoting organisational learning in corporate responsibility.
Volunteering schemes. HR often leads community-based schemes such as employer-supported volunteering programmes. Various CIPD research has argued that these can make important contributions to learning and development as well as employee benefits and engagement.
Beyond its remit of people management practices, HR is ideally placed to be able to gauge, understand and help change organisational culture. This critical aspect of corporate responsibility is often summed up as ‘how we do things around here’ and runs through all aspects of an organisation.
However, this is often not reflected in HR's current standing. Our research report The role of HR in corporate responsibility shows that many business leaders do not consider that HR plays a central role in CR. This is not just a problem of perception. The research shaping the CIPD’s Profession for the Future strategy shows that people professionals often feel they have to compromise their principles to meet current business needs. Following standard ‘best practice’ may not suffice because contexts vary. A surer approach emphasises the principles that need to be followed for ethical decision making. We used principle-based standards for people management in our new Profession Map.
Partnerships with external agencies
Understanding stakeholder interests is not easy and an organisation’s potential impact and responsibilities vary greatly depending on their size, sector and the nature of their work. CR strategies can benefit from working in partnership with government bodies and non-governmental organisations that protect or represent stakeholder groups, so that the organisation’s local and global responsibilities can be appropriately reflected within its business strategy. Our report Youth social action and transitions into work: what role for employers? shows that working with charities can also increase the effectiveness of community focused CR activity, as employers can draw on their expertise and infrastructure.
Measurement and impact reporting
CR initiatives can contribute to business targets directly (for example, through reduced environmental costs) and indirectly (for instance, increased employee engagement). Both can be assessed. One way to measure outcomes is through a balanced scorecard approach which includes different types of factors that contribute to a business’s bottom line such as internal people, processes and customers.
Alternatively, CR or sustainability reports which focus on impact and outcomes, are now widely used, particularly by larger companies, to communicate information regarding the organisation’s social, environmental, economic and ethical performance to a variety of stakeholders, including shareholders, customers, employees, local communities, regulators and government. These can be standalone reports or embedded in a company report or website. The main features include a policy statement, targets, measuring progress and assessing key impacts.
The Global Reporting Initiative (GRI) is a not-for-profit organisation that promotes economic sustainability, provides guidance and support to organisations around sustainability reporting and has produced a comprehensive framework that is used worldwide. The FTSE Group also produces a FTSE4Good Index Series, which aims to measure the companies’ performance in meeting certain globally-recognised CR standards. See Useful contacts for these and other external organisations.
Debates over corporate responsibility
Critiques of corporate responsibility
Sceptics of CR argue that it's an attempt by companies to pre-empt regulatory requirements and maintain the initiative in the area of business ethics and corporate standards, and that it is essentially a publicity exercise to enhance company brand. These may be factors to some extent, and companies should keep them in check, but they do not invalidate CR. Overall, the initiatives and standards that a voluntary focus on CR has brought about strongly testify to its potential for good.
Advocates of corporate responsibility
Perhaps the major drive to promote CR has come from the United Nations Global Compact. It promotes ten principles, focused on human rights, labour, environment and anti-corruption, which are derived from Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption.
Guidelines for introducing a corporate responsibility strategy
The following guidelines may be helpful for HR teams and/or the organisation as a whole to consider when introducing a CR strategy:
- Identify all the stakeholder relationships needed for ethical and sustainable business success.
- Clarify the areas of CR relevant to the organisation.These might include environmental impacts, remuneration policy, labour conditions in subcontractors and supply chains as well as societal and community impact.
- Understand how the CR strategy is aligned to business strategy and HR practices.
- Get the top team on board, and know how to argue the case for CR, including the business benefits, to different stakeholders.
- Ensure CR is properly reflected in employee induction and development.
- Measure and evaluate CR performance effectively so the results can be clearly seen and improved.
- Publicise and promote successes.
Useful contacts and further reading
Books and reports
BLOWFIELD, M. and MURRAY, A. (2019) Corporate social responsibility. 4th ed. Oxford: OUP.
KEW, J. and STREDWICK, J. (2016) Human resource management in a business context. 3rd ed. London: Chartered Institute of Personnel and Development
LEIPZIFER, D. (2017) The corporate responsibility code book. 2nd ed (ebook). London: Routledge.
Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print.
BASKA, M. (2019) Jobseekers prefer 'woke' businesses, says survey. People Management (online). 13 September.
DE STEFANO, F., BAGDADLI, S. and CAMUFFO, A. (2018) The HR role in corporate social responsibility: a boundary-shifting literature review. Human Resource Management Journal. Vol 57, No 2. pp549-566.
EHNERT, I., PARSA, S. and ROPER, I. (2016) Reporting on sustainability and HRM: a comparative study of sustainability reporting practices by the world's largest companies. International Journal of Human Resource Management. Vol 27, Nos.1-2, January. pp88-108.
PALMER, S. (2020) UK businesses ignore climate change. People Management (online). 20 February.
RANGAN, K., CHASE, L. and KARIM, S. (2015) The truth about CSR. Harvard Business Review. Vol 93, No 1/2, January/February. pp40-49.
CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.
Members and People Management subscribers can see articles on the People Management website.
This factsheet was last updated by Fiona Scott.
Fiona Scott: Senior Community Investment Manager
Fiona joined the Community Investment team at CIPD in March 2017 and oversees a number of our volunteering programmes. Part of Fiona’s remit is to raise the profile of social action within the profession so that more people professionals give their time and skills to the community. She brings a wealth of corporate social responsibility experience from her nine years at professional services firm EY and charity EY Foundation, as well as her charity background in corporate fundraising.