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Why Small Businesses Should Prioritize CSR Right Now

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csr-esg-small business-corporate social responsibility-environmental

Carolyn Berkowitz is the president and CEO of the Association of Corporate Citizenship Professionals (ACCP), which advocates for corporate social impact professionals. We talked to her about why businesses should be a force for social and economic good, and how organizations with fewer than 500 employees can develop and implement policies to achieve this goal.

Carolyn Berkowitz

President and CEO, Association of Corporate Citizenship Professionals (ACCP)

“By prioritizing CSR and ESG initiatives, companies can enhance their reputation, attract and retain top talent, earn an advantage with customers, and contribute to a better world.”

What is corporate social responsibility?
Corporate social responsibility (CSR) is a concerted effort that businesses make to enhance society and the environment. Most include some combination of support for local charities; organizing employee volunteers; promoting diversity, equity, and inclusion; and protecting natural resources.

By prioritizing CSR and environmental, social, and governance (ESG) initiatives, companies can enhance their reputation, attract and retain top talent, earn an advantage with customers, and contribute to a better world.

Is CSR the same as ESG?

No. ESG is a rigorous set of standards used to screen investments and rate suppliers on their record of environmental sustainability (E); positive and fair relations with employees, suppliers, and communities (S); and ethical management and governance (G). ESG is factored into a company’s financial valuation because ignoring these issues exposes the business to costly risks. For small businesses, there is considerably less ESG compliance expected.

By contrast, CSR is a voluntary and proactive strategy to have a positive impact on society, and to communicate it to stakeholders. While the work of CSR often fulfills some ESG standards, CSR is a less rigorous approach that is not directly tied to financial analysis.

Why is it important for all businesses, regardless of size, to engage in CSR or ESG initiatives?

Business stakeholders — employees, consumers, and investors — expect businesses to contribute positively to society. Business research confirms that CSR and/or ESG initiatives increase the bottom line by enhancing a company’s reputation, helping to recruit and retain employees, increasing customer loyalty, and reducing risk. 

CSR isn’t just for large corporations with deep pockets. In fact, small businesses that adopt proactive social and environmental policies and practices stand out from their competitors, especially among customers and employees. 

Even though ESG performance of small businesses is not currently required, it does not mean it should be ignored. Because ESG expectations of large companies are increasing, many corporations are requiring that their suppliers comply and report on their own ESG performance. 

What are easily executed CSR practices a smaller business can engage in? 

Businesses can partner with community-based organizations by engaging employees or management in volunteer activities and providing other resources (cash or product donations) to local charities. They can also reduce environmental impact by implementing recycling programs or sourcing products and services from sustainable suppliers. By allowing employees to have a voice in choosing the social impact-related cause and activities, employees will find greater purpose in their work. Remember to share the story of the company’s community work with customers, employees and the media to increase recognition.

How do small businesses get started when they haven’t done this before?

Start small. CSR gains the most traction when employees and customers believe that the cause “makes sense” for the unique business, e.g., one that customers care about, employees have skills in, or aligns with the product or brand. Identify one cause or nonprofit and join initiatives already in place in the community (e.g., adopt-a-school, community-wide clean ups, food pantries to reduce the burden of organizing and to piggy-back on media coverage). 

Engage customers by collecting donations and “matching” their gifts or by collecting supplies for drives. To stand out and be authentic, contribute a mix of volunteers, business skills, and donations to a focused cause, rather than spreading it out thinly.

Does it make sense to invest in such policies despite economic uncertainty? 

Yes! CSR initiatives help businesses weather economic downturns by fostering customer loyalty and goodwill, recruiting and retaining employees, and managing risks associated with environmental and social factors. Also, depending on whether your company is a supplier, ESG may be a factor in being qualified to bid on, and win, contracts and business opportunities. 

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