How Corporate Social Responsibility contributes to sustainable development

By Associate Professor Dr. Lew Tek-Yew and Wee Yee Shyen 

There is an increasing awareness nowadays of Corporate Social Responsibility (CSR) with the growing concern about environmental issues. CSR is recognised when corporations show continuous commitment to meet the expectations of stakeholders and achieve balance between social integrity, economic prosperity and environmental responsibilities in an ethical and responsible manner.

The goal of CSR is to voluntarily incorporate economic, social and environmental responsibilities into business operations to build sustainable growth of business and show positive impact to the environment, employees, consumers, shareholders and communities. In short, development is sustainable when current and future generation’s needs are fulfilled with the available resources.

CSR is mainly focused on three keys pillars of sustainability, namely economy (profit), social (people) and environment (planet), which are known as the ‘Triple Bottom Line’. There are two approaches to CSR – business-in-society approach and strategic approach, the former aimed at giving back to society by organising social welfare events, and the latter requiring organisations to communicate CSR efforts to stakeholders to satisfy their needs.

Sustainability involves satisfying customers’ needs and achieving organisational goals without compromising CSR responsibilities. Hence, the combination of CSR and sustainable development is important towards creating sustainable and socially responsible business.

Organisational citizenship behaviour is promoted when employees demonstrate environmentally positive behaviours in socially-responsible organisations which have implemented CSR and achieved sustainability. Therefore, it is not uncommon for environmentally conscious stakeholders to implement CSR proactively to reduce environmental degradation and satisfy societal needs.

For instance, designers used ethically-sourced and sustainable materials to make garments showcased at the 2018 and 2019 New York Fashion Week. Taobao Corporation’s CSR Program mandates that five per cent of their product prices are donated to children in rural areas when customers purchase their children’s furniture online. Many companies are integrating the 17 aspirational Sustainable Development Goals (SDGs) of the United Nations’ 2030 agenda into their Triple Bottom Line to achieve long-term social responsibility.

The CSR Pyramid espoused by notable CSR expert Archie Carroll is a valuable model as it includes economic, legal, ethical and philanthropic responsibilities.

Economic responsibilities refer to the way companies make profits and provide goods and services to fulfil societal needs by utilising resources effectively. Legal responsibilities involve ensuring profit gains and operational management are in accordance to laws and regulations. Ethical responsibilities dictate that companies’ core values connect with moral norms, while philanthropic responsibilities represent voluntary activities such as donations to charities to improve quality of life.

Swedish giant furniture company IKEA serves as a good example of CSR as the company fulfils all the responsibilities outlined in Carroll’s CSR Pyramid. IKEA’s vision is to create better everyday life for people.

To fulfil its economic responsibility, the company aims to maximise profit for its owners and shareholders by providing high quality products and services. The company concentrates on cost leadership as it produces affordable, sustainable and functional furniture for customers, thus resulting in higher customer demand and enhanced economic efficiency.

IKEA includes its CSR policies in its code of conduct, sustainability report and national IKEA website according to relevant laws and regulations. It follows the Greenhouse Gas Protocol published by the World Resources Institute and World Business Council for Sustainable Development for carbon emissions reporting standards. IKEA’s suppliers do not source wood from illegal forests and its sustainably-sourced wood are Forest Stewardship Council Certified (FSC).

Multinational computer technology company Dell has strengthened its CSR by issuing CSR reports according to the Global Reporting Initiative (GRI), which is an international independent standard that allows stakeholders to compare sustainability corporate performance with the standard framework.

The company has organised a Restricted Materials Program to restrict suppliers from acting unethically, such as supplying faulty materials for the manufacturing of IT products to Dell. It allows customers to have full control of accessing, deleting or sharing their personal data to protect their privacy, and embraces a global culture of acceptance of Lesbian, Gay, Bisexual and Transgender (LGBT) rights in the workplace.

Meanwhile, IKEA has introduced ‘The IKEA Way of Purchasing Home Furnishing Products’ (IWAY) code of conduct to encourage its suppliers to avoid unethical acts which can damage the brand image. The IWAY code focuses on environmental issues, proper working conditions regarding safety, minimum wages in the workplace and refusal of child labour.

IKEA’s Anti-Bribery and Corruption Policies dictate that the company must not engage in criminal activities. The company treats its workers fairly and ethically by providing equal pay and rewards to motivate them to provide good customer services. IKEA also considers gender equality as a fundamental human right and values its workers and customers in different social orientations and gender identities.

As a result, workers feel respected, engaged and included. In this way, an ethical approach to the manufacturing process, user’s privacy, gender equality and fairness in the workplace can lead to social sustainability.

IKEA fulfils its philanthropic responsibilities by contributing to social welfare through the IKEA Foundation. Since 2003, IKEA has been donating €1 for every soft toy it sells to support poor children, and €7.7 million to the Brighter Lives for Refugees Campaign. In addition, it has introduced a ‘Re-food Project’ to distribute surplus food to the needy.

Dell demonstrates volunteerism by donating its technological products to assist education institutions in their online learning processes.

Therefore, IKEA and Dell are considered good corporate citizens because of their involvement in philanthropic activities, and thus achieving sustainability. Both companies have successfully achieved their economic goals, and complied with legal requirements, moral ethics and social welfare by applying Carroll’s CSR Pyramid.

As environmental dimension is strongly emphasised in its CSR approach, IKEA has updated its home delivery services using electric vehicles to reduce carbon emissions and traffic noise. In cities like New York and Los Angeles, it is working towards achieving 100 per cent electric deliveries by 2020.

IKEA’s turnkey home solar and energy storage offer available in Europe and Australia allows consumers to purchase home solar kits from their website. These kits are used to produce clean electricity for homes, helping to reduce carbon footprints and save costs.

IKEA also invests in wind turbines in different countries, helps consumers save water through water ram recycling to achieve sustainability, and engages in urban farming to produce fresh food ingredients for restaurants at its outlets. These help reduce the carbon footprint compared to conventional production.

Since wood is widely used to make furniture, IKEA has developed PrimeBoard, a sustainable and biodegradable wood alternative consisting of agricultural fibre extracted from wheat straw leftovers. IKEA also uses yeast derived from South Africa’s wine industry as an eco-friendly alternative to palm oil.

One of the world’s largest car manufacturers, Volkswagen, implements CSR to fulfil philanthropic and social responsibilities. The company organises a ‘Life in Traffic Game’ programme to educate children about traffic safety, whilst its ‘Volkswagen in the Community’ projects encourage employees to engage in volunteering services. Volkswagen rewards the winning project team to keep them motivated them to achieve social sustainability. Volkswagen also achieves gender equality by training women to make bags or accessories using Volkswagen’s car equipment in its ‘Sewing the Future’ programme.

In conclusion, CSR practices are a form of management strategy that contribute to sustainable development and assist organisations to achieve Triple Bottom Line performance, that is, environmental, social and economic performance, which are crucial to meeting the needs of the present and future generations.

Dr. Lew Tek-Yew is an Associate Professor at the Department of Management, Faculty of Business, Curtin University Malaysia. He is also the Faculty’s Associate Dean of Learning & Teaching. Dr. Lew’s research interests include human resource management, organisational behaviour, psychological capital, organisational commitment, turnover intention, mindfulness at work, destination image, tourist satisfaction, revisit intention, and higher education. He holds a PhD in Human Resource Development and has published over 25 articles in peer-reviewed journals such as International Journal of Culture, Tourism and Hospitality Research, Asia Pacific Journal of Marketing and Logistics, International Journal of Leisure and Tourism Marketing, Journal of Asia Business Studies, World Review of Entrepreneurship, Sarawak Development Journal and Bankers’ Journal Malaysia. Ms. Wee Yee Shyen is a second-year Bachelor of Commerce student at Curtin Malaysia.