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Corporate & Social Responsibility in the Age of Recession

Whilst the UK economy has so far skirted around a full-blown recession despite the grim economic conditions we’re living through – the economy grew 0.1% GDP in the last quarter – most economists are predicting a recession by the end of the year.

In fact, it’s generally held that trust in businesses wanes during hard economic times, like a recession.

Companies, which are forced to lay off employees to keep themselves afloat, find that their reputation, as well as their profitability, suffers during hard economic times.

What does corporate and social responsibility look like during a recession? What do HR managers need to do to ensure that a company’s reputation doesn’t suffer? How can organisations support society during hard times? In this blog, we explore everything you need to know about corporate and social responsibility in a recession.

What is Corporate and Social Responsibility?

We’ve written extensively on corporate social responsibility elsewhere on our blog, so please check our articles there if you’re looking for a more in-depth analysis of the topic. Here’s a brief recap though.

How to live up to the principles of Corporate and Social Responsibility

1.   Act responsibly to your employees

The most important thing that organisations should do during a recession or a period of economic hardship is fairly obvious. Especially if your company has already committed to corporate and social responsibility enough to have a dedicated policy. It’s simply, be responsible. In other words, live up to the spirit of the corporate and social responsibility policy that you’ve already been implementing.

Acting responsibly means honouring your obligations, acting with respect towards others and performing the duties expected of you, to the required standard. In the context of organisations, this means respecting your employees, your customers and wider society when you’re making difficult decisions.

In times of economic stress, organisations generally start to look for ways to reduce one of the most significant costs to them: salaries and wages. This usually takes the form of dismissing employees, freezing hiring or reducing benefits and renumeration. Whilst this might be an easy way to recoup some costs on paper, the damage that this can do to your reputation on corporate and social responsibility in the long-term is huge.

Over the past five years, unscrupulous fire-and-rehire scenarios, where companies fire employees en-masse and then rehire them on contracts with worse terms and conditions in order to improve profitability, has come under increased scrutiny by society. That’s due, in no small part, to the number of companies that have tried to use this approach, bringing it front and center into the public consciousness. 

Numerous companies have attempted to fire-and-rehire their employees and have often succeeded, but the damage caused to their brand in negative media coverage has been immense. A recent poll found that 76% of people surveyed wanted fire and hire practices to be banned and it’s clear that momentum is moving towards the practice being outlawed. If your organisation wants to be on the right side of history and remembered for the right reasons, treating your employees with respect, no matter how hard economic times get, is a good place to start.

Two professionals discussing feedback in meeting

2.   Act responsibly towards your customers and clients

The same point about respect holds true when we’re thinking about the ways that organisations engage with clients during a recession. In the pursuit of balancing the books, many businesses can find it tempting to reduce the quality of the products or services that they offer to their customers, clawing back some profit from their ever-squeezed margins. At the same time, they don’t necessarily reduce their prices. In some cases, they even put them up.

This shows an obvious lack of respect towards the customers and clients that they serve.

The UK economy, now in the grip of a cost-of-living crisis with record high inflation and interest rates, is currently experiencing a situation like this, with many commentators and politicians accusing organisations like supermarkets and petrol stations of profiteering: making an excessive and unfair profit at the expense of consumers.

Whether or not there is truth to the accusations, it’s clear that the reputations of many organisations have been damaged by the way that consumers perceive their actions during the current situation. Arguably, a more open and honest approach to corporate and social responsibility could have helped them to respond appropriately and protect their reputations. 

A corporate and social responsibility policy isn’t just for the good times and it’s not something that can be jettisoned as soon as times turn tough: it’s something that defines the core operating philosophy of a company and how we treat the people that we serve. Without it, a company loses an essential part of what makes it a responsible business.

3.   Don’t lose sight of the long-term goal

As this fascinating blog by the Harvard Business School explores, short-termist thinking is ultimately driven by

As an economic system, capitalism is particularly prone to boom-and-bust cycles: periods of growth, followed by periods of contraction. Recessions are periods of time where the economy ‘contracts’ and gets smaller and they can have huge effects on the health and stability of businesses and the wider economy.

In terms of businesses and organisations, recessions limit confidence, investment and lead to companies actively tightening the purse strings by reducing their expenditure. They often lead to unprofitable businesses folding. The obvious lack of investment that’s triggered by a recession can have long lasting, structural effects on the economy as a whole, limiting future growth and depressing supply and demand.

In terms of employees, customers and wider society, recessions actively threaten jobs, lead to widespread poverty and cause massive social problems across society. The damage caused by recessions is often long-term. For example, the IMF has found that the effects of the 2008 global financial crash are still with us today, with lingering problems in economies worldwide that have been caused and exacerbated by the recessions that followed.

All of this should be a clear reason as to why sticking to your corporate and social responsibility policy during a recession – taking the long view – is so essential. Recessions are times when organisations can prove that they are committed to the common good and are willing to give back to society rather than just profit from it. If living up to the spirit of your corporate and social responsibility policy means taking a short-term hit, shoulder it – the long term rewards in terms of being known as an organisation that lives up to its values are more than worth a short period of economic pain.

A grey haired woman sat at a desk with an open laptop

4.   Look at ways your organisation can help those in need

During the Great Recession caused by the 2008 financial crash, around 3.7 million people – one in seven – were estimated to have lost their jobs in the UK. At a time of record jumps in inflation and price rises, where we’re teetering on the edge of a recession, organisations should be examining their corporate and social responsibility policies and looking at areas where they can provide direct support to people in need.

Some possible ways that you can help people in need include:

  • Donating directly to relevant charities, non-profits or other organisations
  • Hosting events related to particular social issues to raise awareness of the situation
  • Hosting fundraising drives to raise money for particular causes
  • Implementing a volunteering scheme

Stay true to your values

Corporate and social responsibility is one of the fundamental elements of your organisation. It’s one of the features that defines the values of your organisation and the core ideas that it believes in. During economic hard times, it’s vital that organisations live up to the ideals espoused in their CSR policies, in word and deed. Without it, companies lose a vital part of their soul.

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