Corporate Social Responsibility Theories in the Case of Coca-Cola - Assignment Example

? The Business of water 05/23 The Business of water Introduction Ever since the beginning of second half of twentieth century, corporate social responsibility has been a debatable issue. The arena of Corporate Social Responsibility has considerably grown and in today’s world, an explosion of approaches, terminologies, and theories are conquering the surface of the world. Business and society, management of social issues, stakeholder management, public policy and business, and corporate social responsibility are some of the prominent terms used to explain the phenomena of social responsibility in society. In the recent past, growing interest for alternative concepts and corporate social responsibilities has been idealized, relating to corporate sustainability and corporate citizenship (Sacconi, 2011) What actually is Corporate Social Responsibility? Investopedia defines it as a corporate proposal to both assess and take blame for effect of company’s activities on social welfare and environment. This term usually applies to the efforts made by a company that steer away further and may be needed by environment protection groups and regulators. The Corporate social responsibility may also be known as “corporate citizenship” and can take into account sustaining short-term costs that do not give a direct financial gain to company but foster positive environmental and social change (Investopedia, 2013). Most of the companies enjoy immense power in community and national economy. They organize many of their assets and have billions of dollars at their disposal for social investments for the purpose of corporate social responsibility. Some companies may hold ‘greenwashing’ or faking to show interest in corporate social responsibility activities but huge conglomerates are devoting genuine time and money to sustainability plans, various social welfare initiatives and alternative cleantech/energy to give edge to customers and employees and be advantageous for society as a whole (Sacconi, 2011) Investopedia defines Business Ethics as a structured, critical examination of how institutions and people should act in world of commerce. Particularly, it takes into account probing suitable constraints on pursuit of one’s self interest or profits for the firms when actions of one firm affects individuals or society. The aims of this assignment are to critically assess various theories pertaining corporate social responsibility based on CSR four part model in accordance with Business of water case; and to critically evaluate the affect of demand and supply of water on corporate social responsibility initiatives such as Partnership agreements as mentioned in the case (Investopedia, 2013). Task 1 In 1979, Carroll classified Corporate Social Responsibility in a paper on performance of corporate culture in which he gave out four theories of corporate social responsibility: legal, ethical, discretionary, and economic. These four layers show that business history gives a premature emphasis on legal and economic aspects first and then on discretionary and ethical aspects of CSR. In 1991, he first presented this model of CSR in the form of a pyramid as the following figure represents. It was proposed that even though all the components are not found to be mutually exclusive, it assists the manager to visualize the varying kinds of duties which are in relevance to each other (CSRQuest, 2013). (CSRQuest, 2013) In 2004, Carroll tried to take into consideration the stakeholders’ viewpoint. Economic responsibility holds the idea that one should do what global capitalism asks him to go. Legal responsibilities contain that company’s usually only do what global stakeholders want them to do. Ethical responsibility says that do what global stakeholders expect you to do. The philanthropic responsibility however believes that do what global stakeholders require you to do. This was the overall emphasis by Carroll (CSRQuest, 2013). This four-part model of CSR has been immensely cited and used in literature. Some reasons which might be behind this premise can be that twenty years since Carroll wrote it, it was reproduced in many CSR journals most of the part by Carroll. It is an easy to comprehend, simple model with pleasing logic. Also, this model prioritizes economic responsibility as an important part of Corporate Social Responsibility which may endear practitioners and business scholars (Hunnicutt, 2009). In 1985, Aupperte, Carroll and Hatfield carried out their first practical test on this four-part CSR model by doing surveys in two hundred and forty one Forbes listed CEO’s by utilizing the statements about Corporate Social Responsibility. The statistical evidence advocated the model in variety of ways. It gives provisional sustainability to relative weighing which was assigned by Carroll in the beginning to all of his elements. It also confirms that these four components are interrelated empirically but are theoretically independent elements of CSR. However, it is worth mentioning that in this conceptualization, the framework of Carroll imitates perceptions of business leaders about present relative eminence of these four categories of CSR model, rather than giving out a dependence or historical perspective (Kristoffersen, 2005). The first theory or group of Economic Responsibilities empowers corporations with creation of wealth with affluence being it’s only CSR. The economic aspect of these interactions between society and business is addressed only here. So, for instance if a social activity is established, and it is persistent with creation of wealth then these theories are known as instrumental theories because they comprehend CSR as a simple means to profits’ end. The second group of theories known as legal responsibilities considers the social power a corporation holds. It specifies on company’s association with society and its duties which it holds on a political platform. This directs the corporation to recognize social rights and duties in a certain social way. These theories thus are also called Political Theories (National Institutes of Health (U.S., 1996). The Ethical responsibilities group is the third group which considers that most of the businesses need to incorporate social demands. They frequently argue that most businesses depend on society for their growth and continuity and even for their existence. These theories are also called Integrative theories. The Philanthropist responsibilities are the forth group which comprehends relationship between business and society. These theorists believe that society functions with ethical notions. This guides to CSR vision from an ethical point of view and as an outcome, firms ought to agree to social responsibilities as an ethical responsibility above any other concern. These theories are also known as Ethical Theories (Moon, 2001). Integrative theories are applicable to this case as the case of Coca Cola depended on society for its survival. Coca Cola Corporation’s factory in a village in Kerala, Southern India needed water for manufacture of their fizzy drinks but they were not fulfilling their political responsibilities, which are the reason that people of India lobbied against Coca Cola and made the company close its operations. As a result of this closure, Coca Cola untied the rope of its corporate social responsibility in ethical arena and begin to get water from other parts of India. Businesses are so much engrossed in supply and demand of water, either for their usage as raw materials or supplying water to the people that it is becoming difficult to incorporate water business into globalized arena. Privatized water supplying companies have violated the ethical and legal responsibilities they hold to some extent. They enter the market to break even first and then to earn as much profits as they need to make ‘full recovery’ of their initial cost. When Government privatizes water, impoverished members of the society could afford this water anymore. To resolve the issue of water shortage, World Bank gives loans to countries to enhance their water system and in most of the cases, Bank demands privatization of water system. The water system was taken over by a US multinational Bechtel subsidiary which found it difficult in the starting to recoup their investments because system they were initiating was in a gloomy state. Thus Economic responsibilities are not easy to follow. Law 2029 granted private water companies monopoly rights in the ridings they work in. This lay out that people were no longer allowed to use water free out of their wells or collect rainwater. Was this really an ethical responsibility? I believe no. Companies always want to maximize their profits and this law gives them amnesty. However, this led to turmoil in La Paz and ignited political movement which terminated the Government in 2006. Thus, privatization was reversed and terminated in the same year. Not only developing nations, but developed countries too do not follow the ethical responsibilities they should. Large water companies in France over the last couple of years faced multiple accusations and convictions for bribery of the officials of municipal government, and several other related cases are of corruption are reported from other European nations. This is clearly showing that companies do not follow the model of CSR and only do so when they are made to do (Hunnicutt, 2009). Task 2 The Instrumental theories lay down Economic responsibilities of the corporation towards the society. These responsibilities ensure that companies are run in an economically healthy manner. It takes into account aspects as in return on investment for shareholders, fair salaries of the employees, and quality products which must be supplied to customers at just prices, al mandated by society. The Legal responsibilities say that companies must act in harmony with existing regulatory supplies and legislation. The legal structure propagates with the ethical view of society and all companies trying to be socially responsible are thus mandated by society to follow this law (Soule, 2009). The Ethical responsibilities relates to the responsibilities that a corporation holds which is not covered by economical or legal requirements, but on the other hand with what is considered as ‘fair’ or ‘right’ for society. Therefore, the society wants firms to act in an ethical manner towards all stakeholders of the firm. The Philanthropist responsibilities as laid down by Ethical theorists engages the willingness of a corporation to improve quality of life of its stakeholders, for instance local community, employees, and society via donations and support from the organization. The decisions of the corporation are wholly voluntary, and these responsibilities are of less significance than the previous three and are only needed by society (Soule, 2009). The path by which multinationals distinguish their duty with what they perceive as socially responsible. Many firms have formal statements where they state their principles and beliefs for both external and internal objectives. Most firm dwell in partnership agreements over water recycling and water conservation issues when it comes to corporate social responsibility. There are certain stages which a corporation has to go through for its CSR renewal. The first stage is the Amoral Multinational Stage which does not have ethical statements; and these corporations view ethical infringement as business costs merely, and risk taking culture is practiced widely (Garriga, 2013). The Second stage is Legalistic which says whatever is legal is accepted. The Stage three talks about a responsive Multinational according to its legal obligations, increasing balance between ethics and profits. This MNC plays the role of a responsible citizen. Stage four is Emerging MNC which focuses on ethical consequences and ethical values believing in policy statements, and guide behavior. The final and the fifth stage is the Ethical Multinational which balances ethical and economic results. All the ethical considerations are integrated into the strategic planning and system, and ethical values run the culture of the organization here (Garriga, 2013). Businesses are profoundly involved in water business either on the supply side or on the demand side of the coin. On the supply side, the increase in privatization of water utilities over the last forty years have revolutionized the way water is thought of today. Water is perceived as a commodity in the hands of some monopolies such as Vivendi and Suez. These corporations and some other are involved in water business in developing nations. Privatization began because municipal water companies were mostly bureaucratic and inefficient in most developing countries. Privatization brings in efficient and enhances the levels of service and helps to address the issues of poor people of the world. But, most privatized companies only consider the issue of Economic responsibility and pay little or no heed to Philanthropic or Ethical responsibilities. As the case says: “In 2006, Thames Water, the private company that service London and the South East of England, was find for the second time for missing the government target for cutting down leakages in it is drinking-water supply network – still a whopping 894m liters a day at the time. This did not, however, prevent the company from declaring a 31% rise in pre-tax profits of 347m, while customers saw prices rising by 20% from 2005 to 2009.” The case further talks about demand side: “Slightly different set of issues enters the corporate agenda on the demand side of the story. As with privatization, these issues are particularly acute in the developing world, where Western MNCs can be seen as competing with local business and the indigenous population for the use of often-scarce water resources. The issue is particularly salient for industries with high usage of water, such as mining and of course, the drinks industry”. The case of Coca-Cola was the best reported incident in Kerala, Southern India. As a recent expansion of the company, Coca-Cola is estimated to have invested over one billion in Indian business over the time period of 1993 to 2004, thus accounting to a fifth of entire foreign direct investment in the country. Against this foreign investment, in 2004 high Court in Southern province of India ordered Coca Cola to close down its operations in palchimada village. This was due to three campaign years by villagers, national NGOs and research institutions. These were casted as human chains, sit-ins at plant gate to ten days marches between various plants in Coke, nationwide Quit Cola Indian campaigns in India and also by legal protocol. Company did not follow the legal responsibility and thus its products were banned in Indian parliament as well. Firm answered by recycling water for its use to make beverages and mitigating the amount of water it utilizes to make these beverages. This was done by a thirty million ‘Replenish Africa Initiative’ that focused at providing drinking water to villages and towns where the company has bottling units. Thus the issue of water demand was resolved by water supply. Conclusion From this assignment, we can conclude that many Corporate Social Responsibility theories are pertinent to meeting aims that give long term profits as in the case of Coca-Cola. Providing water to indigenous population gave edge to Coca-Cola on supply side. Also, the authority of a business can be used in a socially responsible manner as Coca-Cola did. The social demands of the people therefore be integrated leading to a good society by doing only what is ethically permissible. This leads us to classify ethical concepts into four areas such as political, integrative, instrumental, and value theories as described earlier. Most of the theories which were considered in this assignment did not follow the exact approach for aspects which were important to other theories. However, the relevance of these theories was considered and their limitations which most corporations are faced with. Many corporations do not contribute as much as they should for corporate social responsibility. What is challenging in today’s world is to come up with a theory which will replenish the blanks left by these four theories to the world of water business (Coombs, 2012). Bibliography Coombs, W. T., & Holladay, S. J (2012). Managing corporate social responsibility: A communication approach. Malden, MA: Wiley-Blackwell. CSRQuest.(2013).Carroll’s csr pyramid. Retrieved from http://www.csrquest.net/default.aspx?articleID=12770&heading Garriga, E., & Mele ?, D. `. N. (2013). Corporate social responsibility theories: Mapping the territory. Retrieved from http://www.cs.unitn.it/~andreaus/bs1213/garriga_mele.pdf Hunnicutt, S. (2009). Corporate social responsibility. Detroit, MI: Greenhaven Press. Investopedia. (2013). Investopedia. Retrieved from http://www.investopedia.com Kristoffersen, I N.G.A., Gerransffersen, P.A.U. L., & Clark-Murphysffersen, M A. R I L Y N. (2005, October). The corporate social responsibility and the theory of the firm. Retrieved from http://www.ecu.edu.au/__data/assets/pdf_file/0020/40736/wp0505ik.pdf Moon, C. (2001). Business ethics. London: Economist. National Institutes of Health (U.S.). (1996). CSR. Bethesda, MD: National Institutes of Health. Sacconi, L. (2011). Corporate social responsibility and corporate governance: The contribution of economic theory and related disciplines. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan. Soule, S. A. (2009). Contention and corporate social responsibility. New York: Cambridge University Press. Read More