WHAT IS 'Corporate Citizenship'

Corporate citizenship involves the social responsibility of businesses, and the extent to which they meet legal, ethical and economic responsibilities, as established by shareholders.

BREAKING DOWN 'Corporate Citizenship'

Corporate citizenship refers to a company’s responsibilities toward society. The goal is to produce higher standards of living and quality of life for the communities that surround them and still maintain profitability for stakeholders. The demand for socially responsible corporations continues to grow, encouraging investors, consumers and employees to use their individual power to negatively affect companies that do not share their values.

All businesses have basic ethical and legal responsibilities, however the most successful businesses establish a strong foundation of corporate citizenship, showing a commitment to ethical behavior by creating a balance between the needs of shareholders and the needs of the community and environment in the surrounding area. These practices help bring in consumers and establish brand and company loyalty.

Companies go through different stages during the process of developing corporate citizenship. Companies rise to the higher stages of corporate citizenship based on their capacity and credibility when supporting community activities, a strong understanding of community needs, and their dedication to incorporate citizenship within the culture and structure of their company.

Development of Corporate Citizenship

The five stages of corporate citizenship are elementary, engaged, innovative, integrated and transforming.

In the elementary stage, a company’s citizenship activities are basic and undefined because there is scant corporate awareness and little to no senior management involvement. Small businesses in particular tend to linger in this stage. They are able to comply with the standard health, safety and environmental laws, but they do not have the time nor the resources to fully develop greater community involvement.

In the engagement stage, companies will often develop policies that promote the involvement of employees and managers in activities that exceed rudimentary compliance to basic laws. Citizenship policies become more comprehensive in the innovative stage, with increased meetings and consultations with shareholders and through participation in forums and other outlets that promote innovative corporate citizenship policies. In the integrated stage, citizenship activities are formalized and blend in fluidly with the company’s regular operations. Performance in community activities is monitored, and these activities are driven into the lines of a business. Once companies reach the transforming stage, they understand that corporate citizenship plays a strategic part in fueling sales growth and expansion to new markets. Economic and social involvement is a regular part of a company’s daily operations in this stage.

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