Generally, a company’s actions are governed by its adherence to laws and compliance with business regulations. Historically, it has been assumed that corporate leaders are guided by their own moral compass; values and ethics influence decisions and legislation is not required to govern morality and behavior. However, certain corporations have sullied the reputation of business in general. As a result, recently we have seen a rise in legislation, fines, and litigation surrounding corporate responsibility. To be in compliance with current laws, avoid penalties and litigation, adopting a philosophy of CSR makes good business sense.
Avoidance of litigation is another motivator for companies to adopt socially responsible practices. Increasingly, activist and non-governmental organization groups are using litigation in an attempt to change corporate behavior. Previously, efforts by these groups included shaming a company to change behavior through adverse media and filing shareholder resolutions to demand change. These same groups are now filing lawsuits in their attempts to force companies to embrace socially responsible practices.