The Importance of Social Responsibility for Businesses

Corporate social responsibility (CSR) has evolved in recent decades from isolated initiatives by specific companies to a strategic, public-facing choice for global corporations from Nike Inc. (NKE) to McDonald’s (MCD).

However, in 2025, the Trump administration rolled back federal environmental regulations and other rules aimed at corporate America, while major companies like Wells Fargo & Co. (WFC), Coca-Cola Co. (KO), and Nestle SA (NSRGY) have cut back on their public sustainability commitments.

In addition, experts have noted an emerging practice of “greenhushing”—keeping such initiatives quiet to avoid political scrutiny—as regional standards between the U.S. and Europe have diverged, creating a crossroads moment for corporate responsibility.

We’ll review what critics see as a fundamental tension between profit-making and socially responsible outcomes, as well as the potential gains and limitations of corporate-driven change.

Understanding Corporate Social Responsibility (CSR)

CSR refers to a business model where companies integrate social, environmental, and ethical concerns into their operations and interactions with stakeholders. It’s an attempt to move companies beyond short-term profit-making to address broader societal goals, such as sustainability, community development, and ethical practices. CSR is often described using the “triple bottom line” approach, which emphasizes how a company must deal with economic, environmental, and social imperatives for long-term success.

Some readers may think it’s a matter of course that companies at least glance at community concerns. But going back decades, the title of Milton Friedman’s 1970 New York Times Magazine article, “The Social Responsibility of Business Is to Increase Its Profits,” succinctly stated what many took to be a company’s exclusive agenda. Friedman argued that any broader notion of a corporation’s social responsibility is a kind of theft from shareholders and others:

“…the corporate executive would be spending someone else’s money for a general social interest. Insofar as his actions in accord with his “social responsibility” reduce returns to stock holders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers’ money. Insofar as his actions lower the wages of some employes, he is spending their money.”

Nevertheless, given climate change and other significant threats that stem, often in great part, from corporate practices, governments worldwide have introduced policies and incentives to encourage businesses to adopt CSR initiatives. The U.K. and India, among others, have enacted legislation requiring corporations to allocate a portion of their earnings for CSR.

As corporate adoption of CSR practices spread, critics argued that many were doing little more than what was called greenwashing—an effort by companies to appear better on such issues than they actually were. It’s telling that in 2025, there are also accusations of “greenhushing”—a refusal to publicize environmental, social, and governance (ESG) efforts to avoid any unwanted political attention.

While some jurisdictions, such as California, continue to advance climate disclosure requirements in new laws, federal initiatives in the U.S. are being scaled back. Meanwhile, the European Union has moved forward with frameworks such as the Corporate Sustainability Due Diligence Directive, passed in 2024 and set to take effect in 2026, creating a mixed global governance environment with greatly diverging standards for multinationals to follow.

The Four Pillars of CSR

While there are many different ways of defining CSR, most begin with four main pillars:

Environmental Responsibility

Environmental responsibility involves minimizing negative ecological impacts through sustainable practices like reducing waste, conserving energy, and transitioning to renewable energy sources. While this pillar remains foundational to CSR, its implementation has become increasingly complex.

Ethical Responsibility

Ethical responsibility in this context encompasses the fair and transparent treatment of all stakeholders, including employees, customers, and the broader community. In today’s polarized political environment, the definition of “ethical” business practices is very much contested. Companies face scrutiny from different stakeholders with competing expectations—some demanding aggressive diversity, equity, and inclusion (DEI) initiatives while others oppose them as “woke capitalism.”

These tensions have led many organizations to focus on universally accepted ethical practices, such as data protection and informed consent, while quietly managing more politically charged initiatives.

Philanthropic Responsibility

Philanthropic responsibility emphasizes the contribution to societal betterment through charitable activities and community engagement. Companies can partner with nonprofits or initiate programs that address critical issues such as education, health care, and poverty alleviation.

Economic Responsibility

Economic responsibility requires balancing profit-making with positive societal impact—a concept once viewed as contradictory by Friedman. Today’s companies often integrate social and environmental considerations into their core business strategies, recognizing that long-term financial success depends on addressing broader stakeholder concerns.

Benefits of Embracing CSR

• Improved brand reputation: Businesses that actively engage in CSR initiatives often gain positive publicity, which can translate into increased trust and long-term brand equity.
• Increased customer loyalty: CSR has long been found to foster customer loyalty.
• More employee satisfaction: CSR initiatives tend to boost employee morale.
• Long-term business sustainability: The problems of climate change and other societal issues affect corporations as well as individuals, posing new challenges that have to be addressed for the business to survive long-term.

Challenges in Implementing CSR

• Lack of clarity on CSR goals: Many businesses struggle to define clear objectives for their CSR initiatives.
• Budget constraints: Implementing impactful CSR programs often requires significant financial resources, which can disproportionately affect small or growing businesses.
• Difficulties measuring impact: The long-term nature of many CSR initiatives makes it challenging to assess their effectiveness.

CSR Trends

With Donald Trump’s return to the White House in 2025 and other shifts afoot, there have been significant changes in the CSR landscape:

1. Regulatory pullback: Trump’s second administration has been implementing a major pullback in federal rulemaking regarding ESG matters.
2. Corporate response: Many companies are scaling back their public ESG commitments in response to the shifting political landscape.
3. SEC changes: In addition to the regulatory changes referenced above, the SEC’s climate-related disclosure rules, adopted in March 2024 under the Biden administration, were abandoned after Trump took office. “The goal…is to cease the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules,” SEC Acting Chair Mark T. Uyeda said after the agency voted in March 2025 to stop defending the rules in court.
4. Regional divergence: While federal support for ESG initiatives is diminishing in the U.S., Europe continues to strengthen its ESG regulations. European companies are preparing for the Corporate Sustainability Due Diligence Directive, which mandates human rights and environmental due diligence.

The Bottom Line

CSR has evolved significantly from its early days as an optional philanthropic gesture to become an integral part of business strategy across various industries. Generally depicted as founded on four pillars—economic, philanthropic, ethical, and environmental responsibility—it is facing crosswinds between the Trump administration’s deregulatory efforts and related corporate changes, as well as new laws in the EU and elsewhere in the world.

Despite regulatory uncertainty at the federal level, forces advancing CSR still include multiple U.S. states, the E.U. and other global regions, the shareholders behind many corporate resolutions in the 2020s, and consumers choosing companies that support such initiatives.