Corporate Social Responsibility (CSR) is very important to the success of business ventures. Although, CSR is not required when conducting business, it is much more beneficial to adopt values and morals than to abandon ethical responsibilities. The concept of social responsibility does not just include following government laws and regulations or charitable contributions. It includes going above and beyond the bare minimum that the government requires. Businesses should actively participate in the social affairs where the needs of the stakeholders should be considered. These needs could range from economic concerns to societal and environmental issues.
CSR has the ability to strengthen a company by building a loyal consumer following. It can mean the difference between long-term success and failure. A slight miscalculation of key social and economical issues could result in ruined reputations, damaged financial integrity and injured relationships with customers and stockholders. (www.glocom.org) For example, a business may not want to spend money on environmental conservation issues (recycling, using non-aerosol cans) due to high costs. From the CSR perspective, it would be a great investment for a company to spend money on saving the environment if it created new markets for the environment conscious products or if it benefited society as a whole.
Recently, a handful of well-known entities such as Enron and WorldCom have fallen short in morals and ethics in their business practices. If Enron could have established (or adhered to) a view of social responsibility, Martha Stewart would not be making license plates. Some problems arise within a company not because they have broken the law, but because they misjudged the perception of their external environment. Society plays a large factor in what is socially acceptable in practice (www.pwc.com).
Pressure is often applied to businesses by interest groups, governments, employees and consumers to demonstrate higher standards of accountability and communication. Even cigarette companies are attempting to run advertisements informing potential customers of the dangers of smoking. In fact, Philip Morris offers links to help keep kids from smoking and to assist smokers in quitting. Their mission statement is “to be the most responsible, effective and respected developer, manufacturer and marketer of consumer products, especially products intended for adults. Our core business is manufacturing and marketing the best quality tobacco products to adults who use them.” (Philip Morris USA homepage)
CSR is a commitment from a business to exceed federal and legal standards and to go above and beyond law to establish voluntary codes of conduct and self-regulation. Businesses often try to hide their profit margins and markups on their products. When using CSR, businesses should be more transparent with their financial and corporate information when communicating to the stakeholders. There are three major benefits to running a business with a CSR approach. First of all, a firm that is socially responsible builds trust with its employees and stakeholders. Many widely respected magazines and publications, such as Fortune, conduct surveys that evaluate the reputations of companies based on various facets
such as social responsibility. Other publications list companies that are great to work for and businesses that really help out in the community. Studies have shown that there is a connection between a firm’s reputation and its share price. The second reason to be socially responsible is because firms do not want to attract bad publicity or to appear irresponsible. Oil companies, for example, fear oil spills not just because they are losing money, but also because it damages their reputation which results in more loss of money. The third reason an entity might be socially responsible is due to upper management or influential figures within the company. For instance, Ben Cohen and Jerry Greenfield created Ben and Jerry’s Ice Cream. Ben and Jerry’s Ice Cream has adopted social responsibility as an integral part of the organization’s values. The Ben and Jerry’s homepage offers links to many social and environmental reports and concerns. (Ben and Jerry’s homepage)
Managers might be concerned if they are socially responsible, whether or not their customers will be willing to pay more for products or will investors pay more for stock. There are incurred costs to being socially responsible, such as spending money on philanthropic activities within the community. The benefits of social responsibility might be hard to see at first, but over time, loyalty and commitment are created within the organization, among employees, with customers, and within the local community.
CSR is especially important as technological advancement is rapidly affecting business practices. Many consumers spend money on the Internet as an alternative to leaving the home and shopping elsewhere. I would be hesitant to purchase items online that require credit card and personal information if the company did not have a good reputation within the community. I believe that if a firm is committed to society and their employees, the employees will return that commitment to the firm and society will embrace the business.
To compete successfully, companies must do more than just produce the facts and financial statements at the end of the period. The consumers, employees, shareholders and even the general public demand quality products, superior services, sound ethical standards, sustainable management of resources and community interaction. Today’s society requires businesses to be held accountable for their actions and to be more transparent instead of withholding information. (World’s Most Respected Companies 1998)
When a community sees a business actively participating in community functions, using ethical practices, minimizing environmental impact, or working with charities, brand confidence increases. It is possible that a business might adopt CSR practices out of self-interests to pursue societal rewards as well as imitate the success of others. Many firms only begin using CSR practices after negative press surfaces.
Coca-Cola in India created a CSR advisory board after negative press over fatal gas leaks and contaminated water. In other words, some companies only use CSR as a publicity tool to cover up problems that were apparent within an organization. In the same way that Coca-Cola used CSR to strengthen risk management, fast food restaurants are now offering “carb-conscious” alternatives to their otherwise unhealthy products. This gives the consumer the feeling that a fast food company does not only have unhealthy food items, but also offers a variety of tasty salads and
health foods. Regardless of the motivation being for genuine concern or self-interests, the result is the same. There is going to be a more balanced partnership between the internal and external environment of the corporation. I believe that as the business world progresses, companies will be held to higher standards and the companies that rise to meet or exceed societal expectations will be the ones to have long lasting success. In addition, the concept of corporate social responsibility will be integrated into more visions and mission statements of the businesses that understand how important the community really is. (Moazzem)
Critically evaluate the arguments for Corporate Social Responsibility and isolate whether you think it is a sensible business strategy. The debate over business’s role in society is based around two opposing arguments. On one side, it is argued that social issues are peripheral to corporate agenda. This perspective maintains that corporations and society pursue different goals, and that the objectives of one can only be achieved at the expense of the other.
Companies are profit maximisers, and the sole purpose of business is to generate shareholder value. On the other hand, social responsibility proposes the contrary; companies which participate in activities that positively contribute to society will see the benefits to their reputation and subsequently their bottom line. In other words, there is an implicit social contract between business and society, with responsibilities, opportunities and mutual advantages. This essay will critically evaluate the supporting and opposing arguments surrounding the Corporate Social Responsibility (CSR) debate.
I will define CSR and explore the positive aspects of adopting it in an organisation, as endorsed by CSR advocates such as Dick Hubbard and based on research from various sources and business case studies such as McDonalds and Timberland Co. I will cover the positive arguments for CSR such as its ability to enhance a company’s reputation and brand name, to expose market opportunities and to attract and maintain valuable staff.
The second part of this essay shall voice the CSR-critic’s opinion, such as the views of economist Milton Friedman of America, David Henderson of Britain and Roger Kerr of the New Zealand Business Round Table. Arguments against are that CSR increases costs, mishandles shareholder’s money, is difficult to measure and account for and for most firms is merely a public relations ploy. Thirdly, I will evaluate the discussion and draw an informed opinion as to whether I think it is a sensible business strategy. The conclusion will summarize my observations.