CSR and Corporations - Essay Example

 CSR and Corporations Introduction Kotler and Lee (2004) defined Corporate Social responsibility or CSR as the “commitment to improve community well-being through discretionary business practices and contributions of the corporate resources” (p.3). CSR and sustainable development are two of the most popular topics in the corporate world at present. CSR is a commitment or a pledge taken by corporate companies to behave ethically and contribute to the wellbeing of people. Corporations in the past were interested only in increasing their profits. They were not much bothered about the importance of environmental protection or the necessities of helping the communities in which they operate. It should be noted that natural resources are exploiting heavily by the big corporates. Moreover, corporate companies are causing big damages to the environment and nature. Hawkins, (2006) pointed out that it is “the society which provides both customers and resources to fulfil the business objectives of the corporate companies” (p.2). Under such circumstances, it is the duty of the corporate companies not only to contribute to the protection of the environment but also to help the communities in which they operate. “The society has already accepted the tension between corporate rationality and social responsibility as an inescapable condition of living prosperously” (Steven et al, 2007, p.17). The natural resources in this world are getting reduced as time goes on because of the uncontrolled exploitation by corporate companies. It is impossible for the governments or people to allow big companies to function in this manner. Global organizations such as United Nations have already formulated some norms for the functioning of big companies. Even though some companies are sincere in demonstrating social responsibility, majority of the corporate companies are still neglecting it. CSR and sustainable development are accepted in principle by majority of the companies; however in practice, they show little sincerity in demonstrating it. “Even though, companies publish huge volumes of literatures with respect to their works for the wellbeing of the society, in practice many companies define their obligations in a much more limited” (Geoffrey, 2008, p.2). This paper analyses the sincerity of corporations in showing their social responsibility for the development of society. Does the evidence to date suggest that CSR is a useful way to enable corporations to make meaningful contributions to social development? Companies with good record of showing CSR Plenty of companies have showed sincerity in demonstrating social responsibility in recent times. For example, Acer is a socially committed organization which has engaged in a conscious effort to make environment friendly products. “Acer focuses on developing an effective corporate governance mechanism of CSR and sustainability issues, improving efficiency among working groups, initiating stakeholder engagement, and building for better internal and external communications”(CSR within Acer, n. d). It should be noted that the disposal of computers and peripherals is a big problem nowadays. Injudicious disposal of computers and peripherals may cause immense damage to the environment. Acer has strong waste management and recycling mechanisms which help them to collect the e-waste generated by them and recycle it properly. Moreover, CFC cleaners have been completely eliminated from the Acer circuit board production. In short, Acer is not only interested in accumulating profits, but also in protecting the environment. British Petroleum or BP is another company which showed good examples of social responsibility in recent times. They faced stiff challenges because of the Gulf of Mexico oil spill recently. More than 4.9 million barrels ^ of crude oil spilled over the water as a result of Mexico oil spill. It caused huge damages to the marine and wild life near the Gulf of Mexico. BP never tried to wash their hands and stay away from the responsibilities of this accident. They agreed to pay $20 billion to compensate the victims of the Gulf of Mexico oil spill (Blum & Snyder, 2010). As a result of such a huge amount of compensation, BP is currently facing bankruptcy. However, they are not staying away from taking the responsibility helping the victims of this accident. Citibank, PepsiCo and Chiquita are some other companies which have good records of showing social responsibility. Citibank, along with other major financial institutions has developed criteria for assessing the environmental impacts of its lending decisions in developing countries. PepsiCo along with more than a dozen oil companies and consumer goods manufacturers has withdrawn its investments from Burma because of human right concerns. Chiquita has implemented stringent environmental practices for its suppliers of banana in Central America (Vogel, 2006, p.2). Bill Gates and Warren Buffet have started a campaign recently to help the poor communities. Warren Buffet agreed to contribute around 90% of his assets to the charity purposes. Same way, plenty of other business people also agreed to contribute to the charity works of Bill Gates and Warren Buffet. In short, commitment to the society is accepted as a responsibility by plenty of prominent companies and business people. However, majority of the companies still showing reluctance in servicing the communities in which they operate. Companies with poor record of CSR One of the known examples of water depletion is in Plachimada, Kerala. In 2000, Coca Cola built a bottling plant to manufacture 1,224,000 bottles of Coke a day and also was given a licence to install a motor driven water pump. They started to extract millions of clean water and consequently the water levels began to drop from 150 to 500 feet. According to the locals Coca Cola was extracting 1.5 million liters a day (Coca Cola, 2007) Coca Cola is one company which is facing severe problems in India because of its failure in operating in accordance with the needs of the people. They tried to exploit the underwater resources of Kerala and caused drinking water shortage near its plant located at Plachimada, Kerala. Coke forced to close down their plant at Plachimada because of the public agitation against over-exploitation of under/ground water resources (EMJ, 2010). Apple is another company accused for poor CSR records. “Apple is an innovative brand with a cult following. It's edgy and sleek; it's got buzz all the time; it's expensive; it defines modern design; it has cool advertising. And yet, Apple is rotten when it comes to sustainability reporting” (Why is Apple Dodging CSR Reporting?, 2010). It should be noted that Apple is the second largest company in the world in terms of market capitalization. Moreover, they are considered to be the most valuable technology company in the world at present. However, they are not much interested in publishing sustainability reports. Union Carbide is another company which caught the newspaper headlines in 1980’s. The handling of 1984 Bhopal gas tragedy by Union Carbide generated many controversies. Even though this tragedy was accounted for the loss of thousands of innocent people, the American company tried to wash their hands from taking responsibilities of this tragedy. Its CEO Warren Anderson escaped to America and argued that Indian courts do not have the power to prosecute him. The company failed to provide enough compensation to the victims. In short, Union Carbide has showed little respect towards its social responsibility (Bhopal gas tragedy: Accused awarded only 2 yrs in jail, get bail, 2010). BAT is another company which shows little respect towards CSR. They often say something and deliver other things. For example, they talk volumes about the necessities of providing local tobacco farmers with the necessary training and protective clothing. But BAT’s contract farmers in Kenya and Brazil are suffering from chronic ill-heath related to tobacco cultivation and the company is silent on this issue (Behind the mask The real face of CSR, N.d. p.2) Shell is another company which showed disrespect towards social responsibility recently. Shell tried to cheat the public and the shareholders with the help or fabricated or exaggerated financial data to increase its share value. “Royal Dutch/Shell said that it would pay around $120m to the US Securities and Exchange Commission (SEC) for breaches of SEC rules, and 17m UK pounds to the Financial Services Authority to settle action over its misreporting of proven oil reserves” (Baker, 2004). Satyam computers is an Indian software company which tried to imitate Shell in 2009. Indian police arrested plenty of top executives including the CEO Ramalinga Raju of Satyam computers because of this massive fraud scandal. “The scandal broke when Satyam's founder and former chairman, B. Ramalinga Raju, confessed to filling the company's balance sheets with "fictitious" assets and "nonexistent" cash in an extraordinary letter to the company's board (Dolnik, 2009). It is believed that this scandal was accounted for more than Rupees 7000 crores. Even though China is ruled by the iron fist of communism, corporate corruption cases are not less there. Mallen Baker (2006) mentioned that Chinese search engine Baidu, Google's biggest home grown competitor in China, has been accused of generating revenue through generating fraudulent traffic for advertisers (Baker, 2006). Baidu has published manipulated data about the website traffic, to increase the advertising revenue. It should not be forgotten that advertising is the major revenue source of search engine business. According to Visser (2008) four babies were killed and 60000 were sickened in China due to the usage of baby milk produced by the once-prestigious Sanlu Group. The milk, which had been laced with the industrial chemical melamine, used in plastics and glue, gave children kidney stones (Visser 2008). Melamine helps children to gain weight and look stronger. Parents always look for baby foods which help their children to look stronger. Sanlu Group tried to exploit such thoughts of the parents. They have shown no mercy towards the children while adding melamine in their baby food. American insurance company, UnitedHealth Group (UHG) also faced charges of fraud in recent times. UnitedHealth Group (UHG) is the nation’s second largest private health insurer, with 70 million clients or about one in four Americans. The stock price appreciation climbed an estimated 8,500% over McGuire’s 15-year leadership. Recently, McGuire resigned after a $1.6 billion lawsuit in stock options. UHG reports a total of $286 million in losses as a direct payment to deal with the scandal and restate earnings back to 1994(The Lens, 2007, p.3). Some of minimum standards that could be used to assess the commitments of corporations towards CSR Global Compact “The United Nations Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption” (What is the Global Compact?, n. d.). The formation of The United Nations Global Compact (UNGC) was announced in 1999 by former UN secretary general Kofi Anan and it was officially launched on July 26, 2000. The primary objective behind the formation of this organization is to educate organizations about the necessities of sustainable business practices. The ten corporate social responsibility (CSR) principles given by UNGC to businesses are with respect to; human right protection, avoiding human right abusing, freedom of association and collective bargaining, elimination of all kinds of forced labor, abolition of child labor, elimination of discrimination at workplace, approaches to protect the environment, promotion of environmental protection activities, development of environment friendly technologies and abolition of corruption and bribery (What is the Global Compact?, n. d.). Human right violations are going on in many of the organizations. Organizations are exploiting employees in one way or another without providing enough returns to their hard work. Child labor and forced labor are some of the human right violation activities taking place in the corporate world. In a heavily globalized business world, majority of the organizations may have a diverse workforce. Many of these organizations have the habit of employment discrimination. They may treat the local employees in one way and the immigrant employees in another way. Such business practices are unacceptable to UNGC. UNGC asks the corporate world to account for the true spirit of globalization and treat all employees fairly well. UNGC urges companies to reduce the emission level as much as possible. It encourages companies to develop more environmental friendly technologies so that the human life on earth could be made easy as much as possible. Bribery and corruption are unethical business practices as per the norms of UNGC. UNGC asks organizations to conduct business in an ethical manner to provide justice to all. UNGC helped many private companies to enhance or improve their corporate social responsibility. Sasol; the South African-based multinational petrochemicals company is one best example for this. Sasol recognized that as it expands its operations into countries that have been the subject of criticism for their human rights records, and in light of the increasingly blurred dividing line between the responsibilities of companies and the responsibilities of host country governments, there is a need for more systematic management of human rights within the company (Hanks, n.d., p.2). Global Reporting Initiative “The Global Reporting Initiative (GRI) is a non-profit organization that works towards a sustainable global economy by providing sustainability reporting guidance”(What is GRI, n.d). Global Reporting Initiative (GRI) is responsible for developing sustainability standards time to time. It provides reports about the sustainable business practices implemented by organizations. GRI was formed by United States in 1997 under the instructions and guidelines of United Nations Environment Program (UNEP). GRI encourages organizations to follow sustainable business practices and thereby exhibit their social responsibility. “The goal of the GRI’s Sustainable Development Strategy is to contribute to poverty alleviation and sustainable economic development from an economic, social, and environmental point of view” (Sustainable Development, n. d). Economic and social injustices are prevailing everywhere in this world. Only a few percentages of people (Corporate world) control more than 90% of global wealth. “MNC’s could radically improve the lives of millions of people and help bring into being a more stable and less dangerous world” (Prahlad & Porter, 2003, p.3). All the people; irrespective of rich or poor, have equal claims on environment. Therefore CSR should be visualized not as a liability but as a responsibility by the big companies. “CSR cannot serve as a tool for development, because it is a micro solution to a macro problem” (Amparo & Carmen, 2011, p.164). However, so many micro solutions may solve a macro problem. Therefore corporates cannot stay away from the responsibilities of serving the poor communities. Nobody is taking birth in this world as rich or poor. Only the circumstances are making the people rich or poor. Corporates are controlling the majority of the global wealth not because of their legal ownership on it, but because of their superior abilities in exploiting it. American and European models of CSR In the United States, CSR has been defined in terms of a philanphropic model in which the companies make profits, unhindered except by fulfilling their duty to pay taxes and donate a certain share of the profits to charitable causes. In European model, CSR focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons (Baker, n. d). European model of CSR seems to be more acceptable than American model. It is illogical and impractical to ask the companies to pay something in return to the communities, after allowing them to make as much profits with the help of uncontrolled exploitation of community resources. On the other hand, it is better to force the companies to work in a particular manner so that community resources may not be exploited and damages to the environment may not take place. For example genetically modified crops (GM crops) are suggested by many people as an answer to poverty. American model of CSR encourages the cultivation of GM crops. However, European model rejects this idea because of the concerns about the environmental damages caused by it. Behrooz (2012) pointed out that “Technical fixes, such as GM crops, do not adequately address the complex challenges of social relations in agriculture that often exacerbate social and environmental harm” (Behrooz, 2012, p.1199). Even though multinational corporations such as Monsanto, Bayer and other GM companies attempting to introduce GM crops into Europe, their attempts were not succeeded yet(Behrooz M. 2012, p.1205). “When business is booming and the bottom line comfortable, corporate responsibility seems an achievable goal.  But in difficult times, “responsibility” and “accountability” are – surprise, surprise – much trickier terms to define and employ” (Connor, 2009). Companies show social responsibility only when they make enormous amount of profits. On all other occasions, they show little respect towards CSR. In fact they may try to exploit the community resources more during difficult times. There is no point in allowing the corporates to exploit the nature more during difficult times and less during good times. Ultimately, nature or the environment has nothing to do with the corporate profits and losses. Since majority of the natural resources are nonrenewable, future generation may face lot of difficulties, if uncontrolled exploitation of natural resources take place now. Conclusions Corporate social responsibility is a good concept in principle, but it is difficult to implement it in practice. Corporate world is controlled mostly by the profit making motives. In fact, profit making is accepted as the major objective of doing business by many of the corporate companies. Since profit making is difficult without the exploitation of community resources, these companies are still showing reluctance in practicing CSR. They may show some gimmicks to put dust in the eyes of the people when the business is booming. On all other occasions they may show a blind eye towards this principle. The awareness about the necessities of social responsibility is growing in the corporate world since current consumers are interested more in dealing with socially committed companies. Plenty of companies have already started to take CSR as an important topic in their business strategies. However, majority of the corporate companies are still not doing anything seriously to fulfil their commitments towards the people and the environment. PepsiCo, Chiquita, Citi Bank etc are some of the companies with good records of showing CSR whereas Apple Inc., Shell, Satyam computers, Union Carbide, etc are some other companies which have less respect towards the demonstration of CSR. In short, corporates should consider CSR as a responsibility rather than a liability. They should realize that this world is not for the existing population alone. Future generation may struggle a lot if corporates exploit the natural resources without any mission or vision. References Amparo M & Carmen V 2011. The potential of Corporate Social Responsibility to eradicate poverty: an ongoing debate, Development in Practice, 21:2, 157-167 Behrooz M. 2012. 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