What is corporate social responsibility?

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What’s the purpose of investing? For most investors, the primary objective is to grow wealth and achieve long-term financial goals. And for the companies consumers are investing in, going public is a way to garner the funds necessary to grow and evolve a business.

But in investing, as in all areas of life, both companies and individuals have the opportunity to find ways to make a positive impact on a larger scale.

They might try to effect change by focusing on and enacting ethical values, whether that means ecological sustainability, social justice, or supporting a cause.

That leads us to corporate social responsibility: the ways companies can use their financial position and operations to build more ethical business models and a better world.

By following socially responsible protocols, companies could have the opportunity to make significant social, economic, and ecological changes.

And by investing in companies that support those practices, investors could have the opportunity to make a positive impact on the world while also potentially building their nest eggs.

Related: How to start investing in stocks

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What is corporate social responsibility?

What is corporate social responsibility?

Corporate social responsibility is, in large part, what it sounds like on the box: a corporation’s dedication to enacting practices that support socially responsible movements, such as environmental sustainability, ethical labor practices, social justice initiatives and more.

By buying stocks in companies that practice corporate social responsibility, or CSR, investors have the opportunity to use their own wealth management strategies to make a positive impact on the world.

When the companies that enact socially responsible policies prosper, those practices become more commonplace and widespread — and other companies may be incentivized to change their own policies to match.

In other words, investing in companies that practice corporate social responsibility gives consumers the chance to vote with their wallets on how they want the companies around them to behave.

It could also be a way to grow wealth in the long run. Let’s dive deeper into CSR, and what it means

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Corporate social responsibility areas of focus

What is corporate social responsibility?

Corporate social responsibility is an umbrella term that captures a wide array of corporate policies. CSR-focused companies may target their efforts on one or more specific social, economic, or environmental areas of concern.

Here are some of the most common.

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Environmental sustainability

What is corporate social responsibility?

With climate change threatening to have serious impacts as soon as 2050, more and more companies are committing to creating sustainable methods of production, distribution and overall business practices.

Sustainable investing could mean seeking out companies that promise to hold to sustainable business practices — and doing the research to ensure they’re keeping that promise in real life.

But it could also mean focusing on companies that are specifically involved in creating the products that allow for environmental sustainability in the long term, such as renewable energy, biofuels, or hybrid cars.

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Philanthropy

What is corporate social responsibility?

One of the ways large companies might align themselves with CSR values is by supporting philanthropic efforts.

Certain foundations, for instance, may help bring health care and education to communities that lack access to them by partnering with a wide range of smaller, local organizations.

However, it’s important to look at all aspects of a company’s ostensible charity before committing support.

Some argue that certain philanthropic measures are really a way to build public trust, acquire more customers, or simply receive a tax break — so it’s worth doing some googling (or searching Charity Navigator) to double-check the initiative’s actual impact.

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Ethical labor practices

What is corporate social responsibility?

It’s hard to trust that a company is supporting globally beneficial initiatives if it can’t prioritize equity and fairness internally.

Thus, corporations that commit to ethical labor practices, such as focusing on diversity and inclusion or having a zero-tolerance policy on sexual harassment, may garner more favor among investors looking to support a socially responsible company.

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Volunteering

What is corporate social responsibility?

Another way almost any business, and especially smaller businesses, can get in on the CSR action might be to support local volunteering efforts, either by sending out their own representatives or fundraising for other volunteering organizations and movements.

Companies might also support volunteerism by offering their employees paid time off specifically for that activity. Some companies offer employees one day off per year, which they can use to participate in any volunteering effort they choose.

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Companies that practice corporate social responsibility

What is corporate social responsibility?

While we’ve listed some examples above, investors may be wondering how to find companies that are devoted to CSR practices in order to figure out which ones they might want to invest in.

Many companies in the technology space are conspicuous in their commitment to social responsibility. Both of those digital monoliths have lots of consumer-facing literature dedicated to their practices and protocols surrounding sustainability and other CSR topics.

But many other companies outside of the tech industry are also devoted to CSR-aligned values.

However, it can be difficult to ascertain which companies are really CSR-aligned and which are attempting to look that way for the purpose of gaining both investor and consumer confidence.

One easy thing to look for are companies that are certified B Corps, which are legally required to consider their overall impact in their business operations. Not all B Corps are publicly traded companies, but some are large and recognizable ones.

An investor could also speak with a qualified financial planner, who may have some examples of corporate social responsibility companies that might be worth investing in.

The ideal CSR investment opportunity might offer both high earning potential and a reliable track record of supporting socially responsible initiatives, so all of the investor’s goals could be in balance.

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Corporate social responsibility and investments

What is corporate social responsibility?

Navigating the world of investing can be overwhelming and confusing even for those who’ve been at it for years — let alone beginning investors.

It’s difficult enough to know how to assess a potential investment’s risk-reward ratio, or to figure out how to create a diverse portfolio as part of a risk management strategy, before adding CSR concerns to the mix.

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

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