Stages of Corporate Citizenship: Meaning, Examples & Development

What Is Corporate Citizenship?

Corporate citizenship means businesses are socially responsible and meet legal, ethical, and economic duties set by shareholders. Corporate citizenship is growing more important as investors seek companies with responsible environmental, social, and governance (ESG) practices.

Businesses tend to evolve through five stages of corporate citizenship: elementary, engaged, innovative, integrated, and transforming. There are mutual benefits of corporate social responsibility (CSR) for both society and corporations, including enhanced brand loyalty and employee engagement. Starbucks is an example of a company that grounds its company ethos in corporate citizenship.

The Role and Impact of Corporate Citizenship

Corporate citizenship refers to a company’s responsibilities toward society. The goal is to produce higher standards of living and quality of life for the communities that surround them and still maintain profitability for stakeholders.

Demand for responsible companies is growing, prompting investors, consumers, and employees to push management to align with their values or face negative impacts.

All businesses have basic ethical and legal responsibilities; however, the most successful businesses establish a strong foundation of corporate citizenship, showing a commitment to ethical behavior by creating a balance between the needs of shareholders and the needs of the community and environment in the surrounding area. These practices help bring in consumers and establish brand and company loyalty.

Companies progress through stages of corporate citizenship based on their support for community activities, understanding community needs, and integrating citizenship into their culture and structure.

The Stages of Corporate Citizenship Development

The five stages of corporate citizenship are defined as:

1. Elementary
2. Engaged
3. Innovative
4. Integrated
5. Transforming

In the elementary stage, a company's citizenship efforts are basic due to low corporate awareness and little management involvement. Small businesses often stay in this stage, complying with standard laws but lacking the resources for deeper community involvement.

In the engagement stage, companies will often develop policies that promote the involvement of employees and managers in activities that exceed rudimentary compliance to basic laws. Citizenship policies become more comprehensive in the innovative stage, with increased meetings and consultations with shareholders and through participation in forums and other outlets that promote innovative corporate citizenship policies.

In the integrated stage, citizenship activities are formalized and blend in fluidly with the company’s regular operations. Performance in community activities is monitored, and these activities are driven into the lines of business.

In the transforming stage, corporate citizenship becomes a key strategy for companies. It drives sales growth, market expansion, and talent acquisition, while reducing capital costs and building brand loyalty. Economic and social involvement is intertwined with daily operations.

Understanding Corporate Social Responsibility (CSR)

Corporate social responsibility (CSR) is a broad concept of corporate citizenship that can take various forms depending on the company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their own brands.

 CSR is valuable for both communities and companies. It strengthens employee-corporation bonds, boosts morale, and helps them feel more connected to the world.

To be socially responsible, a company must first be accountable to itself and its shareholders. Firms often adopt CSR after reaching a business stage where they can give back to society. Thus, CSR is primarily a strategy of large corporations. Also, the more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry.

Corporate Citizenship in Action: The Starbucks Example

Even before its 1992 IPO, Starbucks was recognized for its strong corporate social responsibility and commitment to sustainability and community welfare. Starbucks has achieved corporate citizenship milestones including:

• Reaching 99% ethically sourced coffee
• Creating a global network of farmers
• Pioneering green building throughout its stores
• Contributing millions of hours of community service
• Creating a groundbreaking college program for its partner/employees

Starbucks’ goals include hiring 10,000 refugees across 75 countries, reducing the environmental impact of its cups, and engaging its employees in environmental leadership.