Corporate citizenship entails the social responsibility of businesses and how well they meet their legal, ethical, and economic obligations as defined by shareholders.
Corporate citizenship has gained increasing importance as individual and institutional investors seek companies with responsible orientations, including their environmental, social, and governance (ESG) practices.
Key Takeaways
- Corporate citizenship is about a company’s responsibilities toward society.
- It is becoming crucial for investors who prioritize socially responsible orientations like ESG practices.
- Companies progress through various stages in developing strong corporate citizenship.
What is Corporate Citizenship?
Corporate citizenship reflects a company’s responsibilities toward society. The aim is to enhance living standards and life quality for surrounding communities while remaining profitable for stakeholders.
Demand for socially responsible corporations is growing, prompting investors, consumers, and employees to leverage their power to influence corporate management. Companies are encouraged to balance shareholder needs with community and environmental aspirations, fostering consumer trust and brand loyalty.
The International Organization for Standardization (ISO) introduced voluntary standards in 2010 to guide companies in implementing corporate social responsibility.
Organizations that advance further in corporate citizenship demonstrate capacity and credibility in supporting community activities, understanding community needs, and integrating citizenship into their culture and structure.
The Stages of Corporate Citizenship
Corporate citizenship develops through five stages:
- Elementary
- Engaged
- Innovative
- Integrated
- Transforming
Elementary
In this stage, corporate citizenship activities are basic and undefined due to limited awareness and minimal senior management involvement. Small businesses often remain in this stage, complying with fundamental health, safety, and environmental regulations without the resources for extensive community engagement.
Engaged
During this stage, companies create policies promoting employee and manager involvement in activities beyond basic legal compliance.
Innovative
Corporate policies become more comprehensive, linking routine meetings and consultations with shareholders and participating in forums promoting creative corporate citizenship.
Integrated
Here, citizenship activities are formalized and smoothly integrated into the company’s operations. Performance in community activities is monitored and aligns with business operations.
Transforming
At this pinnacle, corporate citizenship is intrinsic to the company’s strategy. It drives sales growth, market expansion, hiring top talent, cheaper capital access, and fosters emotional brand loyalty. Economic and social involvement is deeply integrated into daily operations.
Embracing Corporate Social Responsibility (CSR)
Corporate social responsibility (CSR) is a broad aspect of corporate citizenship that manifests in varied forms depending on the company and industry. Through CSR programs, philanthropy, and volunteer efforts, companies benefit society while enhancing their brands.
CSR fosters stronger bonds between employees and corporations, boosts morale, and connects employees and employers more deeply with their surroundings.
Before becoming socially responsible, companies must first ensure self-responsibility and shareholder accountability. Firms that embrace CSR typically have scaled to a point allowing societal contributions. As companies grow more visible, they shoulder increased responsibility in setting ethical standards for their peers and the industry.
Starbucks: A Model of Corporate Citizenship
Long before its 1992 IPO, Starbucks was renowned for its commitment to corporate social responsibility, sustainability, and community welfare. Milestones achieved by Starbucks include:
- Achieving 99% ethically sourced coffee
- Establishing a global farmer network
- Leading green building initiatives for its stores
- Contributing millions of community service hours
- Creating a noteworthy college program for employees
Starbucks aims to hire 10,000 refugees across 75 countries, reduce the environmental impact of its cups, and engage employees in environmental leadership.
Related Terms: Corporate Social Responsibility, ESG, Business Ethics, Sustainability.
References
- Starbucks. “Culture and Values”.
- Starbucks. “Starbucks Ethical Sourcing of Sustainable Products”.
- Starbucks Stories & News. “Starbucks Hiring Efforts for Military, Youth and Refugees”.
