Corporate social responsibility (CSR) has become a hot topic in the business world – and rightly so. Research literature suggests it confers a host of benefits to companies, including reputation, marketability, and financial performance.
The same factors that drive those external benefits are also in play within a company’s own workforce. Just as CSR improves consumer response, it also has positive impacts on employees. Smart CSR initiatives can help a business attract and retain top talent, and motivate existing employees.
This is more important now than ever before; the global Covid-19 pandemic profoundly changed employee expectations and shifted the employer-employee relationship by ushering in mass resignations, ratcheting up competition for employees, and creating a widespread work-from-home movement.
What is Corporate Social Responsibility?
The United Nations Industrial Development Organization (UNIDO) defines CSR as a “management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.”
UNIDO goes on to describe CSR as a triple-bottom-line approach that addresses economic, environmental, and social goals. A key characteristic of CSR is that it is voluntary action that goes beyond what is required by law.
Corporate CSR programs are often grouped into two broad categories: environmental sustainability and human sustainability.
Environmental sustainability initiatives involve resource use and environmental impact. Initiatives might include scope 1 & 2 greenhouse gas emission inventories, product lifecycle analyses, and renewable energy projects.
Human sustainability initiatives focus on employees, shareholders, customers, and community members. These can be either internal or external, focusing on educational programs, job growth opportunities, employee health and wellbeing, and community development, among other initiatives.
CSR has its roots in the labor movement and environmental movement of the mid-20th Century. Changing expectations for corporate behavior drove changes in corporate governance, a large body of academic work on CSR, and the creation of new regulatory agencies.
Interest in CSR has gone global in the decades since, with the United Nations Millennium Declaration, United Nations Development Program, and the historic 2015 Paris Climate Agreement which was signed by 196 nations.
For Consumers, CSR is Crucial
The positive consumer response to CSR initiatives is well-documented. A meta-analysis of 52 studies found that CSR is positively correlated with increased corporate financial performance and improved reputation. A 2017 Cone Communications CSR study found that 87% percent of consumers prefer to buy from companies that advocate for issues they care about.
For consumers, CSR has become nearly as important as price, quality, and convenience.
For Employees, CSR is Even More Important
Just like consumers, employees also respond favorably to corporate social responsibility.
Employees are a company’s most important resource. Attracting and retaining top talent drives financial performance.
Research shows that CSR offers three big benefits to employers:
1. Attracting new hires by signaling corporate values,
2. Retaining great employees by increasing satisfaction, loyalty, and commitment, and
3. Enhancing employees’ intrinsic motivation.
Sending the Right Signal to Job Seekers
Employee recruitment is becoming ever more challenging as the values of job seekers evolve.
A skilled, creative, and driven workforce is a key component of competitive advantage. Strong CSR initiatives help companies gain this advantage by attracting great employees. Signaling theory helps us understand how this works.
“Job seekers frequently lack specific details about important employment characteristics, such as the working conditions and the quality of relationships within the organization,” Christopher Bauman and Linda Skitka stated in their research paper, so employees “look for signals that allow them to anticipate what it would be like to work for a given company.”
Another study found that over half of employees queried explicitly referenced community involvement and environmental sustainability practices as signals of an employer’s values.
Become a High-Status Company
Employees who identify with the values and culture of an organization show stronger job satisfaction and are less likely to leave. This is called “organizational identification” and it’s crucial to retaining top talent.
Identification is strongest with organizations that are distinctive, prestigious, and competitive.
According to researcher Jean-Pascal Gond and his colleagues, “people seek to join and remain with high-status organizations, because such group membership is rewarding and creates a sense of pride.”
A growing body of evidence supports the idea that a company’s CSR initiatives help create a resilient and engaged workforce with improved retention rates. One study of employees at ten multinational companies, including Facebook, Google, Procter & Gamble, Unilever, General Electric, Amazon, Best Buy, The Coca – Cola Corporation, Microsoft, and Starbucks, found a highly significant relationship between CSR activities and employee satisfaction.
Employees responded well to genuine perceived commitments to CSR, including efforts to reduce carbon emissions and contributions to communities.
“Employee satisfaction for these respondents was enhanced when the focus is on value co-creation of social and sustainable practices,” the researchers concluded, “because a lot of the CSR initiatives explored in this research implied their direct involvement and co-creation.”
Increasing Intrinsic Motivation
Research shows that motivated employees tend to be more productive, creative, persistent, produce higher quality work, and stay with an organization longer. In contrast, unmotivated employees often have poor work performance, higher absenteeism, and are more likely to exit the organization.
It’s not surprising that maintaining a motivated workforce is critical to business performance.
But how does CSR improve motivation?
In his 2008 book, Work Motivation in Organizational Behavior, Craig Pinder defined work motivation as “a set of energetic forces that originates both within as well as beyond an individual’s being, to initiate work-related behavior, and to determine its form, direction, intensity, and duration.”
Self-determination theory further refines the definition and helps us understand how CSR influences employee motivation. Two concepts in self-determination theory are at work here: intrinsic motivation and extrinsic motivation.
Intrinsic motivators are actions performed for their own sake rather than an exchange of rewards. They relate to satisfaction, task enjoyment, ability to challenge oneself, feeling accomplishment, and positive evaluation.
Extrinsic motivators are derived from the ability to satisfy one’s needs indirectly through monetary compensation, including salaries, benefits, incentives, and bonuses.
Intrinsic motivators are precisely the sort of things CSR can influence.
Researchers Vida Skudiene and Vilte Auruskeviciene found that a company’s CSR behavior has a positive effect on intrinsic motivators. Employees of companies with well-executed CSR strategies tend to exhibit higher commitment levels, satisfaction, trust, and loyalty.
In addition, CSR can strengthen employees’ self-image, fulfill the need for belonging, facilitate teamwork, and boost morale.
Although CSR is now nearly ubiquitous for large companies, not all CSR initiatives are equally effective.
CSR must be authentic, well-executed, and integrated into company-wide communications to succeed. Once great employees hire on, a company must be able to effectively use that talent to create competitive advantages that aren’t easily matched.
CSR programs that are successful can be used as strategic tools to improve brand image, market position, and the bottom line. They provide additional reasons for employees to hire on, stick around, and find the motivation to work hard.