What is Corporate Citizenship?
Corporate citizenship is the way a company conducts itself as a member or “citizen” of the society. It considers the impact of business operations on people and the environment and helps ensure that a company complies with all applicable laws. It is not only focused on profits but also fulfills the ethical responsibilities of a company within the community.
However, corporate citizenship goes beyond business sustainability. While the latter only aims to avoid negative environmental and social impact, corporate citizenship follows the “doing good while doing well” principle. This means that companies are socially aware and take actionable steps that aim to solve existing problems in society.
Benefits of Good Corporate Citizenship
Good corporate citizenship provides a number of benefits not only to society. In fact, it also offers the following advantages to the companies that practice it:
- Better access to capital – Ethical investing is a growing trend among individual and institutional investors as they seek out to support companies that align with their values. This enhances the stock prices of companies that display good corporate citizenship.
- Enhanced brand recognition and loyalty – Companies with ethical corporate practices and significant social contributions enjoy a more favorable public image. In fact, it was reported that 73% of millennials worldwide are even willing to pay extra for sustainable products and services.
- Increased employee engagement – Employees become purpose-driven, more motivated, and proud to work for companies that value ethical business practices.
- Improved risk management – Engaging in good corporate citizenship practices helps companies identify potential risks related to environmental, social, and governance concerns.
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5 Stages of Corporate Citizenship
Corporate citizenship can evolve in five distinct stages. Each of these stages displays the companies’ level of commitment to enhancing the quality of life within their communities. Below are the stages of corporate citizenship:
1. Elementary
Corporate citizenship is not a priority yet. There is very minimal to no engagement with the community at this stage. Instead, companies’ primary concern is making a profit and paying taxes. Actions are often done only to observe legal compliance.
However, companies become aware of corporate citizenship as a concept for the first time in the elementary stage.
2. Engaged
In this stage, companies have become sensitive to the needs of the society. They are now taking an interest in doing good work in the community. This is where the employees and managers start discussing internally how they can go beyond profitability and legal compliance.
3. Innovative
Companies at this stage look for innovative ways to adapt corporate citizenship into their business strategies. This involves discussions within the company and consultations with shareholders.
One of the key objectives at this stage is to structure company resources to facilitate the launch of corporate citizenship initiatives.
4. Integrated
Corporate citizenship initiatives are now an integral part of the companies’ core values and business operations. In this step, companies are implementing large-scale programs addressing a wide range of issues. During the implementation stage, companies monitor the impact of existing initiatives and raise the bar for upcoming programs.
5. Transforming
With the last stage, companies already have a solid reputation for making positive change within the community. Their corporate citizenship initiatives have become fully in line with making profits. This allows them to cross national boundaries for their global corporate citizenship initiatives by partnering with other companies, governments, and non-governmental organizations.
Corporate Citizenship Initiatives
Initiatives for corporate citizenship are widely known as “corporate social responsibility.” These refer to the actions and programs being done by companies to fulfill their duties to society beyond simply making profits.
Below are some corporate citizenship initiatives that companies have done in their environmental, social, and governance practices:
Environmental
These initiatives mainly involve the responsible stewardship of the environment.
- A global pharmaceutical company vows to source 100% of its electricity needs from renewable sources
- A technology company is already carbon neutral. Its manufacturing partners all over the world now support more than 13 gigawatts of renewable energy.
- A retail corporation works with suppliers to improve sustainability practices and sets goals to reduce emissions.
Social
The social aspect refers to the good relationship of a company with the community and its employees.
- An international chain of coffee shops practices fair and sustainable sourcing of coffee beans, tea leaves, and cocoa that benefits local farmers and suppliers all over the world.
- An internet company supports gender-based empowerment that provides scholarships to women wanting to pursue computer science degrees.
- A global consulting and construction firm takes diversity, equity, and inclusion in the workplace to heart. For this, it’s been awarded as a “Best Place to Work for LGBTQ Equality” for many consecutive years.
Governance
Lastly, governance involves the selection of company leaders and the transparent disclosure of critical information to stakeholders.
- A chocolate company observes diversity in its board of directors, comprising five women and three people of color.
- A crowdsourcing platform regularly publishes on its homepage the total number of projects funded, money collected, and donation pledges.
FAQs About Corporate Citizenship
Some companies assign a dedicated committee of board members and senior executives to oversee their corporate citizenship initiatives. However, the implementation of corporate citizenship may require a concerted effort from employees, external specialists, and other members of the community.
Corporate citizenship can start with the awareness of the companies’ responsibility to better their nearby communities and society in general. On the other hand, corporate social responsibility is the specific actionable steps or programs that lead them to be good corporate citizens.
The challenges of doing corporate citizenship include:
- Balancing corporate citizenship initiatives while remaining profitable
- Quantifying impact
- Shifting company culture and operations
- Experiencing employee or management resistance
Ramon Meris
