Corporate Social Responsibility (CSR) refers to operating a business in a manner that accounts for the social and environmental impact created by the business. CSR means a commitment to developing policies that integrate responsible practices into daily business operations, and to reporting on progress made toward implementing these practices.

Common CSR policies include:

• Adoption of internal controls reform in the wake of Enron and other accounting scandals;
• Commitment to diversity in hiring employees and barring discrimination;
• Management teams that view employees as assets rather than costs;
• High performance workplaces that integrate the views of line employees into decision-making processes;
• Adoption of operating policies that exceed compliance with social and environmental laws;
• Advanced resource productivity, focused on the use of natural resources in a more productive, efficient and profitable fashion (such as recycled content and product recycling); and
• Taking responsibility for conditions under which goods are produced directly or by contract employees domestically or abroad.

In the past five years great strides have been made toward integrate CSR into the core culture of major companies. Blue chip companies as varied as Chevron Texaco, General Electric, Microsoft and Hewlett Packard have a stated public commitment to CSR and regularly report on CSR performance. Some European governments require companies to report on their social and environmental performance. Companies compete to be included on Fortune's annual list of the best companies to work for and to pass the screens of social investment funds.

"Some see this work as charity, philanthropy, or an allocation of resources that could better be donated by shareowners themselves, " writes Debra Dunn, Hewlett Packard Senior Vice President for Global Citizenship in the company's 2005 report. "But to us, it is a vital investment in our future, essential to our top-line and bottom-line business success."

Early CSR reports often focused on philanthropy as a driver of CSR. That notion has been supplanted by a broad commitment to protecting and improving the lives of workers and the communities in which companies do business. CSR reports now typically address issues impacting virtually every area of operations: governance and ethics; worker hiring, opportunity and training; responsible purchasing and supply chain policies, and energy and environmental impact.

Sustainability and CSR

Emphasis on social environmental and economic sustainability has become a focus of many CSR efforts. Sustainability was originally viewed in terms of preserving the earth's resources. In 1987, the World Commission on Environment and Development published a landmark action plan for environmental sustainability. The commission, named after former Norwegian Prime Minister Gro Harlen Brundlandt, defined sustainability as "meeting the needs of the present without compromising the ability of future generations to meet their needs." Companies are now challenged by stakeholders including customers, employees, investors and activists to develop a blueprint for how they will sustain economic prosperity while taking care of their employees and the environment.

At the same time, mainstream investors are being challenged to ensure that they review CSR issues when analyzing companies. The United Nations Environment Program Financial Initiative asked one of the world's largest law firms to research whether institutional investors such as pension funds and insurance companies are legally permitted to integrate environmental, social and governance issues into their investment decision-making and ownership practices. The resulting report, released in October 2005, concluded that investors were not only permitted to but also sometimes required to take such factors into account.

"Integrating environment, social and governance considerations into an investment analysis so as to more reliably predict financial performance is clearly permissible and is arguably required in all jurisdictions," the report concluded.

Global Reporting Guidelines

One weakness of CSR and sustainability reports is lack of common measures of performance which can lead to hyperbole and greenwashing. The Global Reporting Initiative is a multi-stakeholder process which seeks to refine a set of common, globally applicable CSR/sustainability reporting guidelines. This process has incorporated the active participation of representatives from business, accountancy, investment, environmental, human rights, research and labor organizations from around the world. More than 700 companies have published CSR or sustainability reports in accordance with GRI guidelines.

Socially responsible shareholders have been a key catalyst asking companies to develop a CSR agenda for the past decade. In recent years, mainstream financial institutions have also come to value CSR. A January 2005 survey of mainstream investment managers found that 73% of predicted that socially responsible investment indicators will become commonplace in mainstream investing within 10 years.

Progress in Banking Sector

In 2004 and 2005, several banking sector companies to adopted rigorous CSR policies to limit lending related to destructive projects. In response to pressure from environmental activists and shareholders, Bank of America, Citigroup, and JP Morgan Chase agreed to not finance projects in endangered or high conservation value forests or where illegal logging is occurring. Goldman Sachs was the first global investment bank to adopt a comprehensive environmental policy, acknowledging the scientific consensus on climate change and calling for urgent action by public policy makers and federal regulators to reduce greenhouse gas emissions.

Despite progress made by many companies, adoption of CSR policies and reporting are still in its early stages at most corporations. Our Corporate Social Responsibility Program engages companies to adopt strong social and environmental policies, and follows us to ensure that commitments are kept. This website contains many examples of companies that have adopted CSR strategies in response to our work.

For a guide to key CSR reports and resources, click here.