A socially responsible and sustainable bank is aware of the impact of its activities on society and acts accordingly. The impact of the banks on the stability of the economy requires integrity and due diligence including:

• Managing activity-based risks and setting up mitigation actions;
• Promoting transparency towards customers and stakeholders about its operational management and the products offered;
• Acting as engine of the economy, by e.g. providing loans and giving advice to new start-ups.

Within corporate social responsibility, 4 types can be distinguished: direct philanthropic giving such as donation; environmentally sustainable initiatives such as reducing carbon footprint; and the last 2 such as ethical business practices and focus on economical responsibility which will be described more into detail in this article.

Read Also: Five Ways the Banking Industry has been Transformed by IT

Indirectly, banking activities stimulate a sustainable society by offering of sustainable products such as sustainable saving products, ethical funds and green loans.

Banking policies including Corporate or Social Responsibility or CSR criteria in the funding of governmental bodies, companies and private persons, borrowers encourage to take sustainability into account in projects.

Moreover, the financial sector, being a large-scale employer, also has social responsibility: attractive and challenging long-term employment, as well as a fair and balanced remuneration policy.

Finally, banks also have direct ecological impact due to power and paper consumption in the many branches and the mobility of the employees.

• What are the Four Types of CSR?
• How can Banks Achieve Corporate Social Responsibility?
• Why is Corporate Social Responsibility in Banking so important?
• What are the 3 Main Issues with CSR?
• What are the Benefits of CSR to Different Companies?
• Some Corporate Social Responsibility Companies

What are the Four Types of CSR?

There are several different forms of corporate social responsibility, all of which address individual issues. However, the four main types of CSR are discussed below:

Environmental Corporate Social Responsibility

One of the most common forms of corporate social responsibility, a number of companies focus their CSR efforts towards reducing their impact on the environment.

Whilst some UK businesses are now obliged by law to report on their greenhouse gas emissions, many others that are not required to are also beginning to address cutting their carbon footprint.

Though harmful effects on the environment were once dismissed as a necessary and unavoidable cost of doing business, pollution and excessive consumption of resources now also pose a social and political concern on a global level.

For this reason, environmental CSR has taken off, with many companies now prioritising the impact that their business has on the environment.

Broadly, environmental CSR tends to focus on a business cutting down its greenhouse gas emissions and waste. This involves re-evaluation of a business’s production processes in order to identify wasteful acts and cut these from the company’s business plan.

Environmental CSR Company Example:

One example of a business focusing on environmental responsibility in their CSR strategy is Unilever.

The UK’s largest deodorant manufacturer, in 2014 Unilever began compressing the cans of their deodorants, cutting the carbon footprint of each aerosol spray by 25% per can.

The business achieved this by using 50% less propellant gas and 25% less aluminium.

The deodorants still last the same length of time as the older designs, however are half the size, meaning that 53% more cans fit into pallets and therefore fewer lorries are required, meaning a cut in transport emissions too.

In addressing everything from the product design phase to shipping, Unilever have cut their costs in addition to their impact on the environment.

Ethical Corporate Social Responsibility

Ethical corporate social responsibility programmes focus on ensuring that all stakeholders in a business receive fair treatment, from employees to customers.

Ethical responsibilities are self enforced initiatives that a company puts in place because they believe it is the morally correct thing to do rather than out of any obligation. Businesses consider how stakeholders will be affected by their activity and work to have the most positive impact.

Whilst economic and legal responsibilities are the primary concerns of a company, after addressing these fundamental requirements businesses can then begin to focus on their ethical responsibilities.

Ethical CSR initiatives are intended to enforce fairer treatment for all employees, with common examples including paying higher wages, offering jobs to those who might otherwise struggle to find work, ensuring that decent standards are maintained in factories and refusing to partner in business with unscrupulous businesses or oppressive countries.

Ethical CSR considers every level of the supply chain, including employees who may not be directly working for the business.

For example, CSR programmes might be in place to ensure that people producing clothes for a company receive fair treatment, or to prevent small scale farmers from being exploited by offering fair payment for their crops.

Though sometimes difficult to enforce, these programmes are intended to help ensure that employees, customers, shareholders and all other stakeholders get the fairest deal possible.

Ethical CSR Company Example:

Cosmetics company Lush is known for its global campaigning against animal testing and strong ethical initiatives. Alongside the annual Lush Prize which fuels innovation of anti-testing methods, Lush has been dedicated to operating fair and direct trade.

The company consistently sources ingredients from producers directly, allowing them to ensure that their suppliers’ working conditions are dignified and they receive fair prices for their products.

Doing so also allows the company to ensure they source the safest and most suitable raw materials for their products, ensuring that consumers receive the best quality cosmetics.

The company also insists that their suppliers do not support child labour. If their producers become aware of any child labour, they are expected to support the child back into education through a training and transition programme.

Placing ethics above profits, the company has continued to partner with sustainable suppliers, working with them from the ground up to establish solid long-term relationships.

Philanthropic Corporate Social Responsibility

Philanthropic social responsibilities go beyond simply operating as ethically as possible and involve actively bettering society.

This type of corporate social responsibility is frequently associated with donating money to charities, with many businesses supporting particular charities that are relevant to their business in some way.

However, philanthropic CSR does not only refer to charity donations. Other common philanthropic responsibilities include investing in the community or participating in local projects. The main intention is to support a community in some way that goes beyond just hiring.

By investing in the community, the business encourages loyalty from employees whilst benefiting from an improved support system.

Corporate philanthropy also serves as a way of representing a company’s commitment to society, demonstrating that they value the community beyond simply providing a workforce or source of revenue.

For example, businesses might offer their employees the opportunity to volunteer with local charities during working hours or through matching gift programmes where workers’ donations to charities are matched by the company.

Philanthropic CSR Company Example:

Google is well known for its corporate philanthropy, running multiple charity programmes through Google.org that have provided over $100 million in grants and investments.

The company carries out a volunteer programme which allows employees to dedicate up to 20 hours of work time to volunteering in their communities each year.

In addition, Google has a matching gift programme in place where donations made by employees that are between $50 and $12,000 are matched at a 1:1 ratio.

However, beyond these programs, Google has carried out numerous initiatives focusing on improving particular regions. One such example of this is their work with Learning Equality towards making digital content accessible online in order to allow students without the internet to have better access to learning resources.

By making materials available through a cloud library, Google hopes to help contribute to reducing the gap between disadvantaged communities in India, Latin America and Africa and countries with better access to technology.

With the company’s motto being ‘You can make money without doing evil’, it makes sense that Google is known for its philanthropy, having a track record of meeting the interests of its stakeholders and their communities.

Company Diversity and Labor Practices

Business leaders realize that diversity in the workplace is beneficial when everyone is getting along and working as a team. However, labor policies must apply to all employees, even those at the highest levels of the company.

The scandals with Harvey Weinstein and Steve Wynn show that no company is impervious to the ramifications of sexual harassment. This movement has also given rise to other diversity issues in the workplace that need attention and consistent action.

As a business leader, review your own diversity policies and protocol to address any complaints and violations. This is not only good for your company image, it also helps build a positive company culture with good morale and high productivity.

How can Banks Achieve Corporate Social Responsibility?

Firstly, CSR as a concept need to be woven into the DNA of the banks enabling the realisation of the goals of conscious capitalism and compassionate corporations.

Although it would be naïve to assume that since the concept of CSR has been mainstreamed, banks can relax residing by the fact that the rest will follow automatically as still a way has to be crossed before the goals of the idea of CSR are achieved.

Although, it would not be ideal to end up in a situation where the imperatives of the 21st century force banks and corporations to change their behaviour.

Corporatizing the idea of CSR will only have the intended outcome, when the media, the businesses, and the citizens themselves understand what is at stake and behave accordingly and initiate a change in the mindset and attitude is to be borne in mind when they push for socially responsible practices.

Secondly, a good corporate governance is a prerequisite to CSR, otherwise there would be issues of credibility and trust. Banking leaders ought to concentrate first on providing sound governance and fair business practices.

Then they should look towards practicing CSR. The point here is that banks must first be internally and externally conscionable. This can be achieved by following transparent accounting, oversight over business practices and regular auditing of the company’s procedures and processes.

Only when protagonists of fair business practices take the lead and mechanisms for complaints are set up, there can be good corporate governance. And only when there is good corporate governance can there be effective interest for society.

Banks must accomplish their vision for society by following sound business practices which would go a long way in ensuring reputational benefits. For example, large banks are known for their good corporate governance and hence society looks up to them for guidance and direction whenever ethical and social concerns are discussed.

Further, these banks set standards for others to follow and are therefore considered benchmarks on which corporate governance ought to be measured.

Consequently, a good corporate governance is the first step towards keeping employees, shareholders and other stakeholders happy and hence is the first step towards practicing CSR.

When banks function with integrity and trust they induce confidence among the stakeholders which fosters socially responsible business practices.

Why is Corporate Social Responsibility in Banking so important?

CSR enhances eminent business insight. For instance, banks exist in a symbiotic relationship with their external environments where their exchange with the larger environment determines to a large extent how well they do in their profit generation.

Socially responsible business practices are indeed in the interest of the firm and disapprove of imposing hidden social taxes on the firms by undertaking socially responsible business practices which entails that it is all about how well the firm exists in harmony with its external environment and how this exchange of inputs and outputs with the environment determines the quality of its operations.

CSR goes a long way in creating a positive image for the organization on the whole. Doing something for society, stakeholders, customers would not only take your business to a higher level but also ensure long term growth and success.

CSR plays a key role in making a brand popular among competitors, media, other organizations and last but not least direct customers.

Brands promoting initiatives of educating poor children, planting more trees for a greener environment, bringing electricity to a village, providing employment to people have a positive impact.

Corporate social responsibility also gives employees a feeling of belonging together, employees take pride in educating poor people or children who cannot afford to go to regular schools and receive formal education.

CSR activities magnify the bond among employees. These employees develop a habit of working together as a real team and try to help others.

Actually they start enjoying working together and also create a real bond in due course of time and at the same time they also feel this bond in a sense of loyalty and attachment towards their organization.

Corporate social responsibility also goes a long way in building a positive image of the brand; the brand becomes a “commoner’s brand”.

People start believing in and trusting the brand, hence positive feedback eventually helps to generate more revenues for the organization.

Current example of CSR in Banking – Know Your Customer Due Diligence

Know Your Customer is a single, central source of collecting primary customer information to support the conduct of due diligence checks on your correspondent counterparties. It is required to take a proactive approach to maintaining relationships with submitting banks.

The accurate and timely collection of the data and documents needed to comply with KYC due diligence requirements can be achieved by maintaining regular contact with touchpoints.

Points to remember about KYC and Customer Due Diligence are:

Important data quality checks to meet KYC needs:
• Reduce the number of manual and repetitive tasks in order to avoid mistakes as much as possible
• Streamline the collection of KYC data and due diligence documentation and implement a target automated process
• Identify the Ultimate Beneficial Owner of a corporate or financial institution to correctly asses the risk
• Evaluate the customer’s behavior in terms of transactions, political relationships and trade from and to foreign countries
• Maintain and adjust the list of risky countries and businesses that are suffering embargoes and sanctions, and implement it in each KYC and Due Diligence process performed

The most important advantages of customer due diligence are:
• Diminish compliance burden with quick and easy access to the required documentation
• Supervise changes to correspondent banking portfolio’s documents
• Minimize on-boarding time of new bank counterparties
• Upgrade the efficiency of counterparty reviews

What are the 3 Main Issues with CSR?

Corporate social responsibility (CSR) aims to optimise the benefit to an enterprise’s stakeholders and to prevent or dampen the potential adverse affects of its activities.

CSR therefore covers a broad spectrum of issues that must be taken into account in business conduct.

This includes working conditions, human rights, the environment, preventing corruption, corporate governance, gender equality, occupational integration, consumer interests and taxes.

Human Rights

An enterprise’s responsibility to respect human rights relates to internationally recognised human rights, particularly those of the United Nations.

Human rights due diligence enables enterprises to identify any adverse effects resulting from its activities and in its value chain in good time and to prevent or reduce them.

The shape it takes in practice depends above all on the size of the enterprise and on certain risk factors such as the region and sector.

Working Conditions

By ensuring the best possible employment conditions based on the applicable statutory provisions and international labour standards, in particular those of the International Labour Organization, enterprises can play a role in creating high-quality jobs.

This primarily concerns the granting of trade union rights, the abolition of child and forced labour and the elimination of employee discrimination (e.g. based on where they come from, their social background, skin colour, religion or political views).

Constructive cooperation with social partners is also an important part of this.

The Environment

Responsible environmental management aims to continuously improve an enterprise’s impact on the environment.

This includes a progressive internal environmental management system based on high standards, environmental due diligence, an environmentally friendly strategy with closed cycles, consistent reduction of greenhouse gas emissions and a contingency plan for reducing harmful effects on the environment.

Other CSR Related Issues

Combating Corruption

Corruption has an extremely harmful effect on democratic institutions, good corporate governance, investments and international competition.

Enterprises can play a key role in combating corruption by introducing internal control mechanisms to avoid and expose it. It is also important to publish the policy on combating corruption supported by the management and to train employees.

Disclosing Information

As part of a transparent reporting process, enterprises inform the public about their business activities and their effects in terms of the economy, society and the environment. The regular, timely and pertinent disclosure of information improves an enterprise’s transparency and credibility.

The reporting process also gains the trust of the enterprise’s stakeholders (e.g. shareholders, financial institutions, employees and interest groups) and can facilitate access to capital.

Corporate Governance

Good corporate governance involves striving towards transparency and a balanced ratio of management and control while protecting the decision-making power and efficiency at the topmost corporate level.

These are underpinned by good accounting und reporting practices, supervision by the Board of Directors and respect for shareholder rights and the concerns of key stakeholders.

Consumer Interests

For consumers, it has become increasingly difficult to compare products and services and to make informed decisions about purchases, particularly due to the increasing numbers of products on offer and the complexity of many markets.

They are therefore reliant on enterprises adopting fair business and marketing practices and guaranteeing the safety and quality of their products and services. This involves providing accurate and clear product information, promoting sustainable consumption and taking customer concerns seriously.

Gender Equality

As part of their activities, enterprises should be guided by the basic principle of gender equality in employment and, in this regard, should refrain from any discrimination towards their employees based on gender. Balancing work and family and equal pay are key corporate challenges.

Occupational Integration

By identifying its employees’ health issues early on and quickly taking the appropriate measures, enterprises can safeguard their staff’s employability.

This will reduce the number of people leaving the job market due to health problems as much as possible. Employees with a health problem should be supported throughout the reintegration process.

Taxes

If an enterprise lawfully pays its taxes both in Switzerland and also on its overseas business transactions, it is contributing to public finances and to the development of its host countries.

It also avoids putting its finances, reputation and supervision by authorities at risk. It is also important for enterprises to cooperate well with the competent authorities so that these can apply the relevant taxes.

What are the Benefits of CSR to Different Companies?

Besides encouraging companies to re-evaluate their business plans to become more ethical and conscious of their impact on society, corporate social responsibility has a number of other benefits.

Whilst costs associated with CSR might seem inhibiting initially, many of them reap valuable long-term benefits.

 Benefits of CSR for companies:

• Better company image and customer loyalty – Corporate social responsibility schemes not only increase a brand’s recognition, they moreover contribute to a better public image. It makes sense that consumers want to shop with companies that care about causes and have a sense of social responsibility. Companies that appreciate and respect consumers are favoured, encouraging customer loyalty. Consumers want to be appreciated and support businesses that are ethical.
• Identifying areas for improvement – CSR efforts often lead to businesses reviewing and evaluating their current processes, with many leading to the discovery of ways that the business could be improved. For example, in 2010 PepsiCo found energy saving opportunities worth $60m as part of an energy assessment programme it carried out.
• Increased employee engagement and satisfaction – Naturally, employees want to work for a company involved in positive initiatives and with a strong public image. CSR schemes create a sense of community and bonding amongst employees, engaging them and encouraging positive relations. When stakeholders like employees, customers and even suppliers can have a strong input to areas of impact, CSR becomes a truly powerful influence.
• Attracts talent and investors – Companies that demonstrate a dedication to improving communities through CSR programmes are much more likely to attract valuable and engaged employees.

Likewise, investors want to work with companies who are reputable and have a sense of corporate social responsibility. Businesses with CSR initiatives demonstrate to investors that profit isn’t their only priority, additionally having a concern for worthy causes and the bettering of society.

 Benefits of CSR for charities:

• More volunteers – Companies that operate CSR volunteering schemes provide a steady flow of volunteers for charities, helping to ensure that a certain number of volunteer hours can be met each year.
• More funding and exposure – It might sound obvious, but by companies publicising their support for a charity, awareness of the cause spreads, acting as free marketing and in turn encouraging more funding. CSR initiatives like matching gift programmes also mean that charities can receive up to double the amount that they would otherwise, hugely increasing their funding.
• Stable partnerships – Partnerships formed through CSR between companies and charities can often lead to long-term collaborations. Whether through ongoing community projects or programmes created from the ground up, businesses can provide the means and resources for charities that would otherwise not have the financial mobility for such campaigns. This work creates stability for charities, whilst also bringing more attention to the cause.

Some Corporate Social Responsibility Companies

Many well known corporate social responsibility companies are larger, more established businesses with the comfortable means to give back to society.

Having a solid business plan that has proven results and is profitable, the companies are much better placed to participate in large-scale CSR initiatives.

For these companies, business isn’t just about profit. They also take active steps to contribute to the community through sustainable projects and partnerships.

For examples specific to the three types of corporate social responsibility, please refer to our corresponding sections above. However, here are a couple more examples of businesses with a number of different types of corporate social responsibility programmes in place.

Microsoft – Microsoft have one of the best reputations as a corporate social responsibility company. The business operates a number of initiatives, including 4Afrika which focuses on helping African youth and entrepreneurs develop skills and opportunities.

So far, the scheme has brought over 500,000 SMEs online, upskilled almost 800,000 people and assisted 82 startups expand their businesses.

Similarly, YouthSpark is a global initiative by Microsoft in partnership with governments and charities to offer free computer programming resources and courses to help create educational, employment and entrepreneurial opportunities for over 300 million young people across the globe.

However, Microsoft doesn’t just have strong programmes. The business also operates environmental corporate social responsibility efforts, with 44% of all electricity used in Microsoft data centres coming from wind, solar and hydro power electricity and this number expected to pass 50% by 2018.

As if that weren’t impressive enough, the company’s global operations have been carbon neutral since 2012.

TOMS – Since 2006, TOMS have given one pair of shoes to a child in need for each pair purchased, supplying over 60 million shoes in over 70 countries.

As part of their ‘One for One’ campaign, the company’s CSR efforts have also expanded to providing access to water and sight-saving eye surgery and prescription glasses in communities, leading to improved health and in turn increased economic potential.

The programmes TOMS runs in these communities also helps to provide valuable training and work, with their safe birth scheme providing teaching for birth attendants in addition to ensuring safe births for over 25,000 mothers as of 2016.

The TOMS eyesight initiative also provides basic eye care training to local volunteers and teaching, whilst also creating a number of professional jobs, often for young women.

As with Microsoft, TOMS have committed to investing in communities consistently and in valuable, tailored ways. For example, the shoes that TOMS gives out vary depending on the region’s terrain and season to ensure that the users receive the best support for the long-term.

Read Also: Innovation in the Banking System of the United States in the Digital Age

With CSR initiatives by TOMS the intention is to implement programmes that will continue to benefit the communities for years to come, as illustrated by their creation of sustainable water systems.

Final Words

The key take-away is that banks do gain tangible and intangible benefits by practising CSR and by projecting an image of good governance and social responsibility to the external world.

Sometimes, banks resort to “Green Washing” which is a form of spin in which green PR or green marketing is deceptively used to promote the perception that an organization’s products, aims or policies are environmentally friendly.

The point about this example is that these banks not only pursue socially and environmentally responsible strategies but also make it a point to be on cordial terms with all the stakeholders such as the suppliers, governmental agencies, employees, consumers and society at large which translates into measurable and immeasurable benefits to these companies.

As a consequence, good corporate behaviour is rewarded and banks must seek to do well by for instance helping new start-ups in actualizing their visions for society and by being transformational change agents as well as catalysts for CSR.