Theory of Corporate Responsibility - Coursework Example

How Corporate Responsibility is Being Adopted by Companies in Relation to the Current Market Environment. The purpose of this paper is to provide arguments as to how corporate responsibility/corporate social responsibility is being either adopted or modified to the current market environment. The format that this paper will utilize is to first provide a definition of corporate responsibility as well as providing some arguments as to the overall importance in the current business environment as well as some of the main theories behind corporate responsibility. Secondly this paper will provide examples of several companies that are committed to corporate responsibility as well as providing some reasoning as to why they are behaving in this manner and why this can be considered a positive move. Thirdly this paper will provide examples of companies that are not behaving in what can be considered a socially responsible manner, following this argument the case will be presented on a few companies that have not fully adopted a corporate responsibility approach to conducting business. Building on this last point some suggestions will be presented for how these aforementioned companies can in fact improve their business model to incorporate some aspects of corporate responsibility. To answer the question of what is corporate responsibility one must take into consideration the broadness of its definition. According to Industry Canada (2010) there is no universal definition of corporate responsibility, but in its broadest sense it is a business activity that incorporates economic, social as well as environmental imperatives as part of their activities. So by extension we could conclude that corporate responsibility is any business model that emphasizes social as well as environmental imperatives on par with legal and financial obligations. Furthermore, Industry Canada also postulated that corporate social responsibility also should incorporate policies that encourage innovation to combat societal and environmental challenges through the collaboration of internal and external stakeholders. Why this might be important in our current economic climate is if we take into consideration the sub prime mortgage market as well as the credit default swap market and how that seriously negatively affected the economy. In the case of credit default swaps it was argued by Phillips (2008) that the mere presence of these financial instruments and the near total lack of regulation on there use helped make the financial crisis worse by slowing down the collapse of major firms such as Lehman Brothers. In this circumstance one finds a double blow towards corporate irresponsibility insofar as by using a questionable financial tool not only had negative social consequences but also had long term financial repercussions. The next major part of this essay will focus on a range of major corporate social responsibility models and hope to explain the method of corporate responsibility. Firstly it is the case that according to Redman (2005) there are three major theories that back corporate social responsibility. The first theory postulates that there is simply a tradeoff between environmental and social goals with profits, as such when firms make production decisions they should (In theory) not take into consideration the associated environmental and social costs in order to maximize shareholder value. In many respects this was the stance taken for a long time by many different producers ad is often criticized as recognizing shareholder wealth as being mutually exclusive from environmental and social tradeoffs. Furthermore as there are a number of governments mandated requirements for certain industries and as such can act as a form of ‘externality’ in the market. For example it can be that in an energy sector a government body can restrict the use of certain fuels to diminish the environmental impact from their use, and as such the energy producer can technically qualify as acting in a corporatly responsibly manor however manner, however it should be noted that this is not a personal reflection of the business model. The second major theory of corporate responsibility as proposed by Redman (2005) is that by behaving in a responsible manner can bring in additional revenue. For any variety of profit driven reasons a company may choose to implement a corporately responsibly policy in order to either attract new revenue or attract revenue from sources that are directly linked to some sort of ‘responsible initiative’. For example if a business is seen as offering products that are free of child labour, or are health and safety compliant, or does not use MSG for example it reflects positively in the minds of some consumers and as such can theoretically attract a new client base. It should be noted that this client base may not be consumers in the traditional sense but could also include business-to-business transactions with companies that also have some sort of corporate social responsibility mandate. The last major theory proposed as a potential source for a corporately responsible business model from Redmond (2005) would be the ‘multiple firms goals’ model in which postulates that social and environmental initiatives should be pursued for altruistic reasons. The reasoning behind this model postulates that as such companies (And individuals within the company) should be pursuing this option not because it brings about any material wealth but because this option incorporates the ‘right thing to do’. An example of this would be a company that utilizes a recycling program, not because it bring about financial rewards or a positive image from consumers but because recycling is a good policy for any individual or company to pursue. What this theory also implies is that we in society measure success by GDP (Gross Domestic Product) however it ca be the case that companies and people can view their success not in monetary terms but in responsible terms as well. The next major section of this paper will seek to highlight examples of companies that have taken into consideration serious CSR policies and the benefits that they have recognized from these activities. While it should be noted that a company can theoretically be considered socially responsible in one respect and irresponsible in another respect. So for the purposes of this paper the focus will be on companies that have an overall corporate socially responsible model in the opinion of the author. The first example that comes to mind would be in the nation of Sweden. According to Sweden.se (2010) it is the case that the nation has the highest proportion of companies that are environmentally certified to meet ISO 14001 which in the European context is used as a benchmark for environmentally certified companies. As such the Swedish based company of Volvo Trucks (Volvo Lastvagnar) a subsidiary of Volvo Group – AB Volvo. This organization has been certified as being ISO 14001 because it has implemented policies that strive to achieve continuous improvement in the recycling of paper, cardboard, batteries, plastic and electronic waste in addition to the reduction of usage of harmful chemicals whilst implementing new technologies that reduce the fuel consumption and exhaust from their manufactured products. Te current market condition that may have prompted this move would be the increasingly higher cost of fuels which makes Volvo trucks not only more affordable but also less hazardous to the environment. From a more social standpoint it is the case that one could consider the government of Canada as being a socially responsible organization. It is the case that according to the Canadian Human Rights Commission (2010) the government of Canada operates a policy of employment equity in which the government actively seeks to recruit potential employees from the four designated groups which are women; Aboriginal peoples; persons with disabilities; and members of visible minorities. What this policy implicates is that in terms of a hiring policy the government of Canada is trying to be more socially responsible by hiring people from traditionally underrepresented groups with the intention of making the workplace more diverse and representative of the makeup of the Canadian people. The last example of a corporately responsible organization would be Starbucks. It is the case that in the past, the company fell under heavy scrutiny for having morally questionable policies towards the use of non fair trade beans however since 2000 according to the company website, Starbucks has become one of the largest purchasers ad retailers of fair-trade coffee (2010). The concept behind fair trade implies that there are inequalities down the supply line. IF a company can support growers that pay a living wage, produce coffee beans in an environmentally responsible manner and invest heavily in social programs than by extension Starbucks is acting in a socially responsible manner by supporting these suppliers. Te next section of this paper will focus on companies that do not enforce a socially responsible approach t business. Boddy (2005) presented a case of Ryanair and how the company pursued polices that substantially reduced their costs in order to be able to provide cheaper airfares to their customers. It could be argued that many of these policies may ultimately put the clients at a risk because of more lax safety standard but this is yet to be proven. Another case that comes to mind is ALDI which is a German based discount grocery retailer with operations mainly in Europe but with significant operations in the United States. Aldi has pursued policies that have driven down the cost of their goods by reducing their overheads by for example paying lower wages to their employees. According to CIAO (2010) it is the case that in the British context the company pays out different wages according to the amount of activity and as such employees can recognize a wage that is generally lower than that of other grocery retailers on average. What this amounts to is poor opportunities for advancement within the firm if one is starting from a lower level position, and the possibility of not making a ‘living wage’. The way that ALDI can combat this poor business practice is to simply offer more opportunities for advancement within its organization, and as such making the possibility for gaining work competencies a real possibility for many employees. The next major concern of a company that is not behaving in a socially responsible manner would be a company that tests their products on animals. According to Astro Star (2010), Arm and Hammer which is a major manufacturer of household products still conducts a number of tests on animals. The implication of this is that perhaps it is okay to test on animals if there would be a serious positive repercussion for humanity. However in the case of arm and hammer the company most likely tests its products on animals test for skin irritations. The company could improve their corporate social responsibility by simply ceasing to test its products on animals and finding alternative ways of testing their products. As a Final example one could examine the case of Wal-Mart which is a company that uses a low price model to take on its competition. By implementing policies that drive down suppler prices, Wal-Mart effectively can be unrivaled in some smaller communities. In this respect they are not considered socially responsible because the company drive out of business a number of smaller retail operations. By picking on the ‘little guy’ the company not only gets a poor public image but also receives a great deal of criticism for having predatory policies. Wal-Mart could perhaps act I a more socially responsible manner by simply offering locally produced products for sale within their operations. This would secure a great deal of local business ensuring the survival of many local parties. References Astro Star (2010) Companies That Do Test on Animals. [online] Available at http://www.astrostar.com/DO-Test.htm Accessed on February 20th 2010. Boddy D. 2008. Management: An Introduction. 4th edition. London: Prentice Hall. Canadian Human Right Commission (2010) Employment Equity Publication. CIAO (2010) Review Aldi. [online] Available at http://www.ciao.co.uk/Aldi_Shop__Review_5619916 Accessed on February 20th 2010. Industry Canada (2010) Business Tools and Resources [online] Available at http://www.ic.gc.ca/eic/site/csr-rse.nsf/eng/home Accessed on February 19th 2010. Matthew, P. (Oct, 6th 2008) The Monster That Ate Wall Street. Newsweek. Redman, E. (2005) Three Models of Corporate Social Responsibility: Implications for Public Policy. Roosevelt Review [online] Available at http://docs.google.com/viewer?a=v&q=cache:a6fB6hdfv_EJ:www.basisboekmvo.nl/files/Three%2520models%2520of%2520corporate%2520social%2520responsibility%2520-%2520implications%2520for%2520public%2520policy.pdf+major+corporate+social+responsibility+models&hl=en&gl=ca&pid=bl&srcid=ADGEESg5s9KW9UrLxxHJrDFOikk8kBlWs0XYodOJVEH8NIQhkqF7rr6qPlhCmJirni415GrBDBnuVNHWUMrog3A2DFvFod6HQW4715S8G_YPE9_Hs8p6YCfPdgpIq4IbVD65JZ405-1x&sig=AHIEtbThWdWGA1WnSrBCEodVbf5BhZPVqg Accessed on February 20th 2010. Starbucks Coffee Company (2010) Socially Responsible [online] Available at http://www.starbucks.ca/en-ca/_Social+Responsibility/_Social+Responsibilities/Fair+Trade+in+Our+Stores.htm Accessed on February 20th 2010. Sweden.se (2010) Sweden Leads by Example in CSR. [Online] Available at http://www.sweden.se/eng/Home/Business/CSR/Facts/CSR/ Accessed on February 20th 2010. Read More