In the past decade, the importance of corporate social responsibility has increased exponentially. Today, most companies, especially the most profitable, have invested in CSR efforts and other brand-building initiatives. But why are CSR efforts so important?

In 1970, Nobel Prize-winning economist Milton Friedman famously stated that the only social responsibility of companies was to increase profits. The statement was an accurate reflection of the state of corporate responsibility at the time. However, today, companies are beginning to place a greater importance on their social and environmental impact.

People are increasingly expecting companies to deliver both economic and social value. But what does that mean? Research by Barie Carmichael, author of Reset: Business and Society in the New Social Landscape, found that 71% of people said their expectations for companies’ impact have increased, 68% said it's more important to know how companies operate than what they sell, 94% of those surveyed said companies can shape a better society, 87% said most companies exist to create value for multiple interests in society (rather than just profit) and 75% said they converted their opinions of a company into action. So, what brought on this change in company culture? 

With the increased importance of data transparency, and the resulting rise in availability of data, companies are facing greater scrutiny from the public into what a company stands for and how its values translate into actions that benefit society. As a result, companies are beginning to realize that “increasing profits” is no longer enough—paying attention to the longer term, to the perceptions of their company, and to the social consequences of their products is good business.

Accordingly, the importance and prevalence of corporate social responsibility (CSR) efforts has increased tremendously. In 2011, only 20% of S&P 500 companies published reports on CSR and related initiatives; by 2016, the amount of companies involved in CSR efforts jumped to 82%. This increase is a sign that these companies are beginning to understand that embracing their social responsibilities is one of best ways to cultivate positive relationships with their customers and communities, as well as a larger sign of the priority shift towards CSR efforts.

The benefits of focusing on integrating social impact into the boardroom go beyond just a long-term marketing strategy. Incorporating good, solid CSR efforts helps not only create trust between a company and the public, but also sends a message about the company’s values and culture to other key stakeholders, including regulators, shareholders and customers. Over time, we will continue to see a rise in the importance of social impact and corporate social responsibility.