The Increasing Competition in Corporate Social Responsibility Among Businesses - Essay Example

 Corporate Social Responsibility as defined by Kotler & Lee (2005, pp.3) is a commitment of organisations to develop the well-being of community through discretionary business activities and contributions of business assets. The three pillars of sustainable development are economic growth, ecological balance and corporate social responsibility and Business for Social Responsibility (BSR) defines corporate social responsibility as a manner through which a business operates to meet or exceed the legal, ethical, commercial and public expectations regarding a business (Boeger, Murray, Villiers, 2008, pp.92). The growing investments of large corporations in social programs and their environment related scandals in the developing economies create a question mark. The aim of this essay is to determine whether these corporations use corporate social responsibility as a masquerade or not. If yes, then should it be like that? The green practices of businesses have significantly increased and companies are significantly investing in social activities. In order to analyse the attitude of business executives towards corporate social responsibility, a survey was conducted in October 2004, in which 136 executives and 65 investors participated. The findings of the survey reveal that 85 percent of the executives and investors believe that corporate responsibility is “central” to investment decisions, 84 percent believe that corporate social responsibility practices help the companies to achieve its bottom line and 42 percent consider cost implications and 40 percent consider unproven benefits as the two major obstacles when it comes to implement social practices (The Economist Intelligence Unit, 2005). Various other such surveys have been conducted to analyse the growing importance of corporate social responsibility for businesses. The survey findings reveal the inclination of corporate executives and investors towards their social responsibility; however, their opinions do not reflect their actual practices. It has actually become a debate to determine the extent to which the organisations are pursuing their business activities for social welfare. A significant research has been done to determine whether companies showing off their participation in social welfare programs are aiming to promote their image as socially responsible organisations or they actually intend to pay back the society through welfare activities. The editor of Economists, Daniel Franklin argues that organisations usually pretend that their sustainability development programs are in harmony with the strategy than they actually do because almost all executives claim that corporate social responsibility is the component of their DNA or core of corporate strategy (Werbach, 2009). On the other hand, Atkins (2006) argues that expecting from the organisations that they should pursue their activities in compliance with the law and ethics and transparent to shareholders, is absolutely accurate however, the notion that they should use their assets for social welfare rather than for the profit generation of their owners is illogical. Lee & Park (2010) conducted a research study on airline industry to determine the impact of corporate social responsibility on financial performance of airline industry and they found that corporate social responsibility has a positive and linear relationship with the value performance but not with their accounting performance. The opinions of Atkins, Lee & Park highlight that if the profits of the companies are affected at the cost of corporate social responsibility, then why would these companies make social practices a core part of their DNA. On the other hand, the increasing consumer awareness and increasing concerns of environment protection also pressurise these companies to focus on environment sustainable programs. Therefore, companies may use corporate social responsibility as a mask to improve their image whereas; they may remain unethical in their actual practices. Business executives consider social responsibility as a financial calculation or any other area of business, and if the corporate decisions of these executives are to be influenced then the only way is to implement the unacceptable cost on their socially unacceptable behaviour such as taxes, fines, regulatory mandates and public embarrassment (Karnani, 2010). The point-of-view of Karnani is that companies cannot become socially responsible by compromising on their business objectives and he recommends that government regulations can play a vital role to reduce the unethical practices of the company. On the other hand, in a report of WWF, Kleanthous argues that responsible business practices can become value drivers for the companies and they should be embedded in the DNA of the company (Friedman, 2007). Kleanthous has given this statement on the failure of world’s largest luxury conglomerates to make ethical grades. In 2006, Bvlgari and Tod’s were given Grade F, Gucci achieved Grade D, Hermes, LVMH and L’Oreal were given C+ and none of the biggest luxury brands made above C+ Grade on “Environment, Social and Governance Performance and Reputation”. However, if the example of any one of these biggest names is taken, a huge press and media news can be found where these companies talk about their social responsibility. Just take the example of Bvlgari, which has announced to show off its corporate social responsibility through funding a Save the Children fund raising project “Rewrite the Future”. Through this campaign, Bvlgari has the objective to raise €10 million by 2009 to contribute to the fund of Save the Children. To achieve this aim, company has engraved the logo of Save the Children on their solvers rings which have been sold through company’s website and department stores in the US from 1 February to 31 December 2009 (Mann, 2009). Apparently it seems that company is going to contribute to a project through which new schools will be built and children welfare will be enhanced but the question is where the role of Bvlgari is in this campaign. The money is coming from general public and company is just going to make its brand more prominent by wearing a mask of corporate social responsibility. When these companies are evaluated for their ethical practices they end up by taking lower grades, which reveal that such programs and activities are the masquerades for these organisations. The idea, that corporate social responsibility should be embedded in the DNA of the company, does not favour that companies should consider the interest of the society over their business objectives. The point is that companies which are making huge money can at least think ethically and positively for the society. The founder of New York City-based Justmeans.com, Martin Smith argues that public relations war, that started on Facebook and YouTube to stop Nestle from buying the palm oil from a company that was destroying rain forests, showed that capitalism worked because consumers could not go to the kitchens of the companies (Magder, 2010). The example given by Smith shows that a corporation has the chance to pretend to be socially responsible because of lack of transparency and accountability. Mather (2006 cited in Al-Bayaa, 2009) argues that the concept of corporate social responsibility is different from accountability because accountability can make the firms answerable for its duties whereas, in responsibility company only needs to assume the state for themselves. The argument of Mather gives an idea that companies consider the concept of being socially responsible as a responsibility and not accountability, which further allows them to use it as a masquerade. The socially responsible companies like The Body Shop, Ben & Jerry’s Homemade Incorporation and Tom’s of Maine are recognised at international level for their good works however, these corporations are not conducting socially responsible programs by considering them as generous things to do, rather they find these programs for their best financial interests (Lantos & Cooke). It gives an idea that even the companies which are actually practicing the social welfare programs can see their long term prospects. The founder of Kellogg started the company with the aim “invest my money in people” reflects the foundation of a company based on “society’s interest” (Kellogg). Kellogg has also proved its corporate social responsibility through its community investments, safety and health standards and wellness and nutrition. Today Kellogg has a big name in the world market and it is not because company has developed a well documented corporate social responsibility plan but it is also because the activities of company have been developed in consideration to CSR. Bakan (2004) in his book “The Corporation” argues that companies by the law are supposed to pursue their own interests by exploiting others and without considering the legal and moral limits and corporate social responsibility sometimes yield positive results and most of the times appear as a mask for these corporations to mask their true character. The American and European oil companies are very manipulative when they operate in America and US and they are least concerned in their actions in the countries like Nigeria. These companies in Europe and America, at least pretend to appear as socially responsible companies by sponsoring the sport events and other events and programs. On the other hand, these companies are willing to put the lives of their workers and contractors at risk in the pursuit of profits in the Gulf of Mexico or in Nigeria such as British Petroleum generated a profit of $25 million in 2009 (Adujie, 2010). The example of oil companies show that concerns for the corporations to mask their true characters are increased when they operate in an environment where strict regulations are imposed. The companies which are offering healthier food promote their image as health and social welfare companies. Most of the food companies offer salads and other healthy food options to attract the health-conscious people. For example, Subway offers healthy sandwiches to customers and has built a huge franchise network in the world. The healthy food option provided by Subway is a win-to-win situation both for the customers and the company because social welfare is improved and company ends up by generating profits. Similarly auto manufacturers are pursuing green practices and manufacture fuel-efficient vehicles because they know the demand of these vehicles is significantly high in the market. Healthy food offering companies and fuel-efficient vehicles manufacturers will only pursue these practices if they find them profitable for their businesses. An auto manufacturer will manufacture fuel efficient vehicles, if the prices of fuel go up and the demand of less fuel efficient cars decline. Through manufacturing fuel efficient cars its primary motive will be to keep the demand of its vehicles by offering a better alternative to the consumers. In this way, in the pursuit of their own interests, these companies appear as social activists. There are many companies which intend to do good for the society but they cannot because they may need to sacrifice their own profits. Expecting from an organisation to become a socially responsible organisation by sacrificing its own profits and objectives is really not logical and possible. The primary objective and existence of a for-profit organisation is profit generation. Therefore, most of the companies are pursuing corporate social responsibility to improve their image and to ensure their existence. The recent incidents of British Petroleum’s summer of the spill and toxic sludge in Hungary has further made the companies to realise that global scrutiny upon them is increasing and the companies which best integrate the corporate social responsibility can prosperous because they achieve the consumer confidence (Macleod, 2010). The above analysis and examples of various companies show that corporate social responsibility is more like a mask for pathological corporations to expand into the world markets and to achieve their own interests. It is also important to discuss whether using corporate social responsibility as a masquerade is enough to meet the social welfare needs by these companies. Friedman (1970) characterises a corporation as an artificial personal which has several artificial responsibilities but ‘business’ does not have any responsibility even in the vague term. Therefore, Friedman argues that the only corporate social responsibility of business is to generate profits in without any fraud and deception in a free and open environment. The opinion of Friedman supports that corporations should not wear the mask of social responsibility because they are only responsible to run a profitable business without any fraud and deception. Mackey (2005) opposes the point-of-view of Freidman because he argues that it makes the image of capitalist system and corporations mistrusted and greedy. Mackey argues that just like individuals, businesses can also affect the society and since there is no way to calculate whether money invested in the business has solved the social problems or not, therefore, businesses should consider their contributions only as philanthropic support because a company’s responsibility towards society is neither zero nor infinite. Opinion of Mackey appears more logical as compared to the opinion of Friedman because the businesses which generate profits from the society are also liable to the society. It does not mean that businesses should compromise with their profits to achieve the social interests however; at least they should not use social responsibility just for the sake of improving their image and achieving the consumer confidence. David Vidal (cited in Hopkins, 2007, pp.128) argues that the promise of holding companies to a standard if perfection in corporate social responsibility is a false promise. Rather than pretending to be a socially responsible organisation, companies can at least keep a good balance between profits and social welfare. The corporations which only pretend to appear as socially responsible organisations cannot sustain their image in the long term. Failure of Shell in Nigeria to clean up the oil spills (Vidal, 2010), unhealthy cultivation of tobacco reported by farmers in Kenya and Brazil by large tobacco companies like British American Tobacco (Efroymson, Must & Tanudyaya, 2001) and depletion of village wells by Coca-Cola in India (Ehl) are the few examples which reveal the true characters of corporations. Shell, British American Tobacco and Coca-Cola are three of the pathological corporations which are operating at international level and use corporate social responsibility as a mask in the countries where the environmental rules and regulations are strict and these companies exploit the resources and environment of the developing countries for their own interests. In this way, by sketching a deceptive image, the pathological organisations do not only put the society’s interest at risk but also put their own existence at risk. Based on the above discussion and analysis, it can be concluded that increasing competition in corporate social responsibility among businesses, increasing environment protection regulations and growing confidence of consumers for social activist organisations, insist the corporations to use corporate social responsibility as a masquerade. Rather than pretending to be a social activist, corporations should adopt standard corporate social practices wherever they operate. The development of social programs by businesses should not be a result of competition, regulation and consumer confidence rather they should understand their responsibility towards the society. If organisations understand their role in the society they will surely find the mask of corporate social responsibility as unethical behaviour. Bibliography Adujie, I. P., 2010. American Oil Spills in Gulf of Mexico is a Good Thing! Lessons for Nigerians & Ecuadorians etc. [Online] Available at: http://www.modernghana.com/newsp/276261/1/pagenum2/american-oil-spills-in-gulf-of-mexico-is-a-good-th.html [Accessed on 8 December 2010] Atkins, B., 2006. Is Corporate Social Responsibility Responsible? [Online] Available at: http://www.forbes.com/2006/11/16/leadership-philanthropy-charity-lead-citizen-cx_ba_1128directorship.html [Accessed on 9 December 2010] Al-Bayaa, B. 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