Corporate Social Responsibility, can be based on three different levels. The first level is philanthropy, followed by improving operational effectiveness and finally the top level is transforming the business model.
What is Corporate Social Responsibility?
Philanthropy is the lowest level of integration when it comes to corporate responsibility. When a firm practices philanthropy it usually does affect its profit or operations. Most of philanthropy activities include donating to charities or community engagement. Two of the most common philanthropy efforts from companies is giving employees paid time off to volunteer in their communities as well as the company matching donations from employees to different organizations.
The second level of integration of Corporate Social Responsibility is improving operational effectiveness. This corporate social responsibility is an active part of a company’s business model. When companies use this strategy, they usually try to reduce waste or become more efficient in their processes. For instance, Unilever has begun to embrace the circular economy. This allows them to only utilize reusable plastics and other products to lower its footprint. Other strategies at this level are lowering the use of resources, water, or emissions. This level of Corporate Social Responsibility can also improve working conditions and perks for employees. Many times, this level can reduce costs or increase revenue.
The highest level of corporate social responsibility is transforming the business model. This occurs when a company makes a significant change to how they do business due to its social or environmental goals. This can be changing the way distribution is done or the construction on products. As more companies have begun setting lofty sustainability goals, it is anticipated that more companies will need to transform their business models. IKEA has started changing the design of furniture to ensure products can be easier recycled as it has a goal to be completely sustainable.
Although there are three levels of corporate social responsibility, each level tends to build on one another. This can be seen especially from improving operational effectiveness to transforming the business model. Improving operational effectiveness in the name of Corporate Social Responsibility is usually incremental whereas transforming the business model is a much larger jump. To reach large sustainability goals a company can expect to change the way they do business. The importance of corporate social responsibility grows as the levels increase. Regardless of how big of a goal a company sets, it can expect to engage in corporate social responsibility to succeed with the consumers of today.