Corporate social responsibility

What it means

CSR, corporate social responsibility, covers voluntary activities beyond legal requirements for the benefit of employees, the community and the environment. It includes staff volunteering, donations to non-profits, ethical sourcing, support for local projects and more sustainable operations.

It began mainly as philanthropy and reputation building. Today CSR is gradually being replaced by more systematic ESG management and reporting, in which impacts are measured, compared and, for large companies, published compulsorily under the CSRD.

For a small business CSR need not mean big programmes. A clear code of ethics, fair conditions for staff, paying suppliers on time and a few meaningful activities the firm can honestly talk about to customers and job applicants are enough.

How it works in practice

For tax purposes, sponsorship and a gift are treated differently. Sponsorship in return for advertising can be a deductible expense, whereas a donation with nothing in return usually is not. With gifts of goods, a VAT payer must also consider VAT on a gratuitous supply.

Companies can use tax assignation to direct part of the income tax they paid to selected non-profit organisations. It is a simple way to give support at no cost of their own, claimed directly in the tax return.

A staff volunteering day is paid working time and an ordinary payroll cost. Health and safety and insurance must be considered, especially when the work takes place off site, for example cleaning up a park or building a playground.

What to watch out for

CSR communication must be truthful. Exaggerated or unsupported environmental claims count as greenwashing, which can be an unfair commercial practice, and new EU rules on environmental claims restrict them even more strictly.

Donations and sponsorship should be based on written agreements and clear rules so there is no appearance of influencing public officials or business partners. Company anti-corruption rules should state who decides on donations and how they are recorded.