What Is CSR (Corporate Social Responsibility)?

Corporate Social Responsibility (CSR) Definition

Social Responsibility, also called corporate social responsibility in business contexts, is the concept that businesses, in addition to maximizing profits, must also act in a way that benefits society as a whole.

The purpose of social responsibility is to ensure that companies do not engage in unethical and potentially damaging actions for the sake of profit.

Is CSR Forced by Law?

Some elements of social responsibility are written into law.

For example, insider trading, a practice in which investors with privileged knowledge about the direction of a stock that the public does not have, is a behavior that disadvantages other investors.

It is also illegal.

Other elements that may not be written into law may be part of a business’ code of ethics.

For example, it is not illegal for a company, such as a social media platform, to collect and sell your data without your direct consent.

However, many companies are forthright about what they do and do not collect, and will decline to collect certain data without your approval.

Is CSR Necessary?

Some critics argue that social responsibility conflicts with the purpose of doing business, which they say is to maximize profit.

They argue that since acting with a social conscience will almost always impact profits, it doesn’t make sense for businesses to do so.

Others, such as economist Milton Friedman, believe that social responsibilities for businesses are too difficult to enforce, stating that they have an “analytical looseness and lack of rigor.”

What Is ESG?

Despite the criticism, social responsibility is becoming an increasingly component of corporate practice in the eyes of both investors and consumers.

Social responsibility is a component of a larger corporate concept, which is Environmental, Social, and Governance (ESG) criteria.

Many investors use these criteria to determine the worthiness of a company for investment.

What Is CSR (Corporate Social Responsibility) FAQs

CSR stands for Corporate Social Responsibility.
Social responsibility, also called corporate social responsibility in business contexts, is the concept that businesses, in addition to maximizing profits, must also act in a way that benefits society as a whole.
The purpose of social responsibility is to ensure that companies do not engage in unethical and potentially damaging actions for the sake of profit.
Some critics argue that social responsibility conflicts with the purpose of doing business, which they say is to maximize profit.
Some actions carry legal responsibility. For example, insider trading, a practice in which investors with privileged knowledge about the direction of a stock that the public does not have, is a behavior that disadvantages other investors. It is also illegal. Other elements that may not be written into law may be part of a business’ code of ethics.
True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.