Corporate social responsibility and sustainability - Stakeho...

Learning Outcomes

After reading this article, you will be able to explain the meaning and importance of corporate social responsibility (CSR) and sustainability. You will distinguish internal, connected, and external stakeholders and assess their needs. You will apply the concept of the triple bottom line to business decisions. You will understand how organisations consider stakeholder interests, set CSR objectives, and report their environmental and social impact.

ACCA Business and Technology (BT) Syllabus

For ACCA Business and Technology (BT), you are required to understand the principles and real-world application of CSR and sustainability, including:

• The definition and significance of corporate social responsibility and sustainability in business organisations
• The types of stakeholders: internal, connected, and external, and their different objectives
• How organisations identify and analyse the needs of their stakeholders
• The triple bottom line: its components and usage in reporting and decision-making
• The social and environmental duties of businesses to all stakeholder groups
• How organisations create and report on sustainability and CSR practices

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What are the three components of the triple bottom line in business reporting?
2. Give one example each of an internal, a connected, and an external stakeholder.
3. State two benefits for a company that actively implements CSR initiatives.
4. Explain why stakeholder needs analysis is essential for setting effective CSR objectives.

Introduction

Corporate social responsibility (CSR) and sustainability challenge organisations to consider more than just financial results. Businesses are increasingly held accountable for their impact on people and the environment. Meeting legal requirements alone is not enough—stakeholders expect ethical conduct and sustainable practices. CSR and sustainability reporting help businesses measure and communicate their performance in economic, social, and environmental areas.

Key Term: corporate social responsibility (CSR)
The obligation of an organisation to act in ways that benefit society and the environment as well as its own economic interests.

What is Corporate Social Responsibility (CSR)?

CSR requires businesses to balance profit-making with responsibilities to a broad range of stakeholders. This includes employees, customers, suppliers, the community, and the environment. CSR practices may be driven by ethical beliefs, stakeholder expectations, or risk management—but must be embedded in company policies and actions.

Worked Example 1.1

A manufacturing company introduces a policy to reduce emissions, invests in renewable energy, and donates to local schools. Is this CSR, and why?

Answer:
Yes. The company goes beyond legal compliance to consider how its operations affect the environment and society, addressing the needs of multiple stakeholders.

Why Is CSR Important?

CSR can:

• Improve a company's reputation and attract customers who value ethics
• Reduce risks of legal penalties or reputational crises
• Motivate employees and attract talent
• Preempt regulatory changes by adopting higher standards
• Drive long-term profitability through positive stakeholder relationships

Key Term: sustainability
A principle that calls for current business needs to be met without limiting the ability of future generations to meet their own needs.

Stakeholders and Stakeholder Analysis

Organisations have many parties with interest in, or who are affected by, business activities. Understanding each group's needs is necessary for sound CSR and sustainability planning.

Key Term: stakeholder
An individual or group with an interest in, or ability to be affected by, an organisation's actions.

Types of Stakeholders

• Internal stakeholders: People within the organisation (e.g., employees, managers).
• Connected stakeholders: Those with a business relationship (e.g., shareholders, suppliers, customers).
• External stakeholders: Wider groups with no direct relationship (e.g., government, community groups, environmental organisations).

Worked Example 1.2

A retailer is planning longer opening hours. Who are the relevant stakeholders, and how might their needs conflict?

Answer:
Employees (internal) may need fair working conditions and predictability. Customers (connected) may want convenience. Local residents (external) may be concerned about noise. The company must balance these sometimes conflicting needs.

Stakeholder Needs Analysis

Stakeholder needs analysis is a structured process used to:

1. Identify all significant stakeholder groups for an organisation.
2. Gather information on their interests, expectations, and influence.
3. Prioritise their needs and assess potential conflicts.

Worked Example 1.3

A construction firm wins a contract to build near a residential area. Using stakeholder needs analysis, whose interests should it consider?

Answer:
Employees (safe conditions), local residents (noise and disruption), the local council (compliance with regulations), suppliers (payment terms), and environmental groups (protection of habitats).

Exam Warning

When analysing stakeholders, remember that not all groups have equal power or interest. Failure to prioritise key stakeholders can lead to unsuccessful CSR strategies and potential business risks.

The Triple Bottom Line

Traditional business reporting focuses on financial results. The triple bottom line (TBL) requires organisations to measure and report social and environmental performance as well.

Key Term: triple bottom line
A framework for reporting and managing an organisation's impact measured by three areas: profit (economic), people (social), and planet (environmental).

The Three Pillars

• Profit: Financial performance and economic value generated.
• People: Social responsibility to employees, communities, and other stakeholder groups.
• Planet: Environmental impact, including resource use, waste management, and emissions.

Sustainability Reporting

Organisations communicate their performance and progress through sustainability reports. These documents describe actions taken, results achieved, and future targets in social and environmental areas. International guidelines, such as the Global Reporting Initiative or Integrated Reporting, may be followed to standardise disclosures.

Key Term: sustainability reporting
The process by which an organisation publishes information about its environmental, social, and economic impacts to stakeholders.

Key Term: integrated reporting
A reporting approach that presents financial and sustainability data together to show how an organisation creates value over time.

Taking Account of Stakeholder Needs

Organisations should regularly consult stakeholders and integrate their viewpoints into CSR and sustainability objectives. This may be done through:

• Surveys, interviews, or focus groups
• Public meetings or consultations
• Partnerships with community organisations

Actively considering these interests helps avoid legal or reputational issues and encourages long-term, positive relationships.

Revision Tip

When revising, use actual company reports to identify real examples of how the triple bottom line and stakeholder engagement are presented in practice.

Benefits of CSR and Sustainability

Companies with strong CSR and sustainability strategies can achieve:

• Enhanced brand value and trust
• Better employee engagement and lower turnover
• Competitive advantage in attracting investors and customers
• Improved compliance and risk management
• Potential cost savings through reduced waste and increased efficiency

Limitations and Challenges

• Addressing all stakeholders' needs equally is unrealistic—prioritisation is necessary
• Implementing CSR may initially increase costs
• Measuring social or environmental outcomes can be difficult
• There is risk of "greenwashing" if reporting is not matched with real action

Summary

CSR and sustainability require organisations to manage their impact beyond profit. Identifying, understanding, and responding to the needs of stakeholders is fundamental. Applying the triple bottom line ensures that decisions consider social and environmental as well as financial results. Effective CSR provides both reputational benefits and long-term business value.

Key Point Checklist

This article has covered the following key knowledge points:

• Define and explain corporate social responsibility (CSR) and sustainability
• Distinguish between internal, connected, and external stakeholders
• Describe stakeholder needs analysis and its importance
• Apply the triple bottom line framework: profit, people, planet
• Outline sustainability reporting and integrated reporting
• Assess the benefits and limitations of implementing CSR and sustainability strategies

Key Terms and Concepts

• corporate social responsibility (CSR)
• sustainability
• stakeholder
• triple bottom line
• sustainability reporting
• integrated reporting