# Corporate Social Responsibility (CSR): What It Is, How It Works, and Types

> **Definition**
>
> Corporate social responsibility (CSR) is a business model that encourages companies to operate in ways that enhance society and the environment while still being accountable to their stakeholders and the public.

## What Is Corporate Social Responsibility (CSR)?

Corporate social responsibility (CSR) is a [self-regulating business model](https://www.investopedia.com/b-corp-7488828) that helps a company be socially accountable to itself, its stakeholders, and the public. 

By practicing CSR, also called [corporate citizenship](https://www.investopedia.com/terms/c/corporatecitizenship.asp), companies are aware of how they impact different aspects of society, including economic, social, and environmental ones. Engaging in CSR also means a company operates in ways that [enhance society and the environment](https://www.investopedia.com/terms/c/conscious-capitalism.asp) instead of contributing negatively to them.

### Key Takeaways

*   Corporate social responsibility (CSR) is a [business](https://www.investopedia.com/the-best-small-business-loans-11751682) model by which companies make an effort to operate in ways that enhance (rather than degrade) society and the environment.
*   CSR strategies can help improve society and promote a positive brand image for companies.
*   CSR includes four categories: environmental impacts, ethical responsibility, philanthropic endeavors, and financial responsibilities.

![Corporate Social Responsibility](https://www.investopedia.com/thmb/sDhcdeKBBn0hVaDY_99pAYN9NWc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/corp-social-responsibility_revised-dc9a157213de4872b2159fea8450ad13.png)

*Companies that implement CSR strategies may improve their valuation in the eyes of investors. — Investopedia / Zoe Hansen*

## How CSR Works

Through [CSR programs](https://www.investopedia.com/ask/answers/011215/how-did-johnson-and-johnsons-corporate-responsibility-policy-pay-1982.asp), philanthropy, and volunteer efforts, businesses can benefit society while also boosting their brands. A [socially responsible](https://www.investopedia.com/terms/s/social-audit.asp) company is accountable to itself and its shareholders. CSR is a strategy commonly employed by large corporations. The more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and [industry](https://www.investopedia.com/terms/i/industry.asp).

> **Fast Fact**
>
> Small and midsize businesses also create social responsibility programs, although their initiatives are rarely as well-publicized as those of larger corporations.

## Types of CSR

*   **Environmental responsibility**: CSR is rooted in preserving the environment. A company can pursue environmental stewardship by recycling materials, reducing pollution and emissions in manufacturing, replenishing natural resources like trees, or creating product lines consistent with CSR.
*   **Ethical responsibility**: CSR includes acting fairly and ethically. Instances of ethical responsibility include fair treatment of all [customers](https://www.investopedia.com/terms/c/customer.asp) regardless of age, race, culture, or sexual orientation; favorable pay and benefits for employees; partnerships with diverse [vendors](https://www.investopedia.com/terms/v/vendor.asp); full disclosures; and transparency for investors.
*   **Philanthropic responsibility**: CSR requires a company to contribute to society, whether it donates profit to charities, enters into [transactions](https://www.investopedia.com/terms/t/transaction.asp) only with suppliers or vendors that align with it philanthropically, supports employee philanthropic endeavors, or sponsors fundraising events.
*   **Financial responsibility**: A company might make plans to be more environmentally, ethically, and philanthropically focused. However, it must back these plans through financial investments in programs, donations, or product research—including [research and development](https://www.investopedia.com/terms/r/randd.asp) for products that encourage sustainability, creating a diverse workforce, or implementing diversity, equity, and inclusion (DEI); social awareness; or environmental initiatives.  
    

### Volunteering

Some CSR models replace financial responsibility with a sense of volunteerism. Otherwise, most models still include environmental, ethical, and philanthropic as types of CSR.

## Benefits of CSR

According to a study published in the Journal of Consumer Psychology, consumers were more likely to act favorably toward a company that acted to benefit its customers. As a company engages in CSR, it's more likely to receive favorable [brand recognition](https://www.investopedia.com/terms/b/brand-recognition.asp). Additionally, workers are more likely to stay with a company they believe in. This reduces employee turnover, improves workplace morale, and means avoiding the [cost of hiring a new employee](https://www.investopedia.com/financial-edge/0711/the-cost-of-hiring-a-new-employee.aspx).

For companies looking to outperform the market, enacting CSR strategies may improve how investors view the company's value. The Boston Consulting Group found that companies considered leaders in environmental, social, and governance (ESG) matters had an 11% [valuation](https://www.investopedia.com/terms/v/valuation.asp) premium over their competitors.

CSR practices help companies mitigate risk by avoiding troubling situations. This includes preventing adverse activities like discrimination against employee groups, disregard for natural resources, unethical use of company funds, and activity that leads to lawsuits and [litigation](https://www.investopedia.com/terms/l/litigation-risk.asp).  

## Company Examples

In its 2024 Global Impact Report, [Starbucks](https://www.investopedia.com/articles/markets/101415/biggest-risks-investing-starbucks-stock.asp) ([SBUX](https://www.investopedia.com/markets/quote?tvwidgetsymbol=sbux)) highlighted taking care of its workforce and the planet among its CSR priorities through stock grants and additional medical, family, and educational benefits. The company's goals include achieving 50% reductions in greenhouse gas emissions, water consumption, and food waste by 2030.

Home Depot ([HD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=hd)) has invested over 1 million hours per year in training to help frontline employees advance in their careers, aims to produce or procure 100% renewable energy to operate its facilities by 2030, and plans to help customers reduce water use by 100 billion gallons by 2026.

General Motors ([GM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GM)) won the Sustainability Leadership Award from the Business Intelligence Group in 2022. The automaker provided $64 million in grants to nearly 400 United States nonprofits focusing on social issues in 2023, and it has agreements in place to use 100% renewable electricity across its global sites by 2035.

## Explain Like I'm 5

"CSR" refers to a type of business model wherein a company holds themselves to a higher standard of accountability. Unlike businesses that are solely focused on earning a profit, companies that implement CSR strategies are making a conscious effort to have a positive societal and/or environmental impact, even if there's no obvious financial benefit.

There are several ways a company can practice CSR. For instance, a business could work toward reducing its carbon footprint by decreasing its reliance on nonrenewable energy sources in favor of renewable alternatives. That same company may also decide to regularly organize and fund volunteer opportunities for its employees to take part in. Essentially, if a business is going above and beyond to be environmentally, philanthropically, ethically, and/or financially responsible, then it's acting in a way that's consistent with CSR.

A CSR initiative can also offer several benefits for the company that employs it, specifically for its brand image. As an example, it can improve employee retention and morale, as workers may be motivated to stick with a business that's making a difference. Additionally, some people will prefer to shop with/invest in companies that engages in CSR.  

## Why Should a Company Implement CSR Strategies?

Many businesses view CSR as an integral part of their brand image, believing customers will be more likely to do business with companies they perceive to be more ethical. In this sense, CSR activities can be an important component of corporate public relations. At the same time, some company founders are also motivated to engage in CSR due to their personal convictions.

## What Is ISO 26000?

In 2010, the [International Organization for Standardization (ISO)](https://www.investopedia.com/terms/i/international-organization-for-standardization-iso.asp) released ISO 26000, a set of voluntary standards to help companies implement corporate social responsibility. Unlike other ISO standards, ISO 26000 provides guidance rather than requirements because the nature of CSR is more qualitative than quantitative, and its standards cannot be certified. ISO 26000 clarifies social responsibility and helps organizations translate CSR principles into practical actions.  

## What Are the Benefits of CSR?

CSR initiatives strive to have a positive impact on the world through direct benefits to society, nature, and the community in which a business operates. In addition, a company may experience internal benefits through these initiatives. With the knowledge that their company is promoting good causes, employee satisfaction may increase and staff retention may improve. In addition, consumers may be more likely to transact with a company that's attempting to make a more conscious positive impact beyond the scope of its business.

## What Companies Have the Best CSR?

Since 1999, Corporate Responsibility Magazine has ranked the top 100 Best Corporate Citizens each year among the largest U.S. public companies. In 2025, the top-ranked companies include HP, Dell Technologies, and the Hershey Company.

## The Bottom Line

Companies striving to [measure success outside of bottom-line financial results](https://www.investopedia.com/terms/f/ftse4good-index.asp) may adopt CSR strategies that target environmental, ethical, philanthropic, and fiscal responsibilities extending beyond the products they sell.

> **Article Sources**
>
> 1.  Johnson, Zachary; et al. "Good Guys Can Finish First: How Brand Reputation Affects Extension Evaluations." _Journal of Consumer Psychology_, vol. 29, no 4, Fall 2019, pp. 563–702
>     
> 2.  Frontiers in Psychology. "[Corporate Social Responsibility and Employee Engagement: Enabling Employees to Employ More of Their Whole Selves at Work](https://www.frontiersin.org/articles/10.3389/fpsyg.2016.00796/full)."
>     
> 3.  Boston Consulting Group. "[Your Supply Chain Needs a Sustainability Strategy](https://www.bcg.com/publications/2020/supply-chain-needs-sustainability-strategy)."
>     
> 4.  Starbucks. "[Fiscal 2024 Starbucks Global Impact Report](https://about.starbucks.com/uploads/2025/05/Starbucks-Fiscal-2024-Global-Impact-Report.pdf)," Pages 8–9, 37, 40, 42.
>     
> 5.  Home Depot. "[Environmental, Social and Governance Report: Advancing Our Business FY2023](https://corporate.homedepot.com/sites/default/files/2024-08/2024_ESG_Report_The_Home_Depot.pdf)," Pages 23–24.
>     
> 6.  General Motors. "[2022 Sustainability Report: Everybody In](https://www.responsibilityreports.com/HostedData/ResponsibilityReportArchive/g/NYSE_GM_2022.pdf)," Page 6 (Page 7 of PDF).
>     
> 7.  GM. "[2023 Sustainability Report: Journey to Zero](https://www.gm.com/content/dam/company/docs/us/en/gmcom/company/GM_2023_SR.pdf)," Pages 3–4 (Pages 4–5 of PDF).
>     
> 8.  International Organization for Standardization. "[ISO 26000, Social Responsibility](https://www.iso.org/iso-26000-social-responsibility.html)."
>     
> 9.  3BL. "[100 Best Corporate Citizens 2024](https://100best.3blmedia.com/)."