The Role of Corporate Social Responsibility in Business and Community Development - Term Paper Example

The Main Focus of the Report Executive Summary Scholars have noted various reasons, which explain the International firms’ interests in corporate social responsibility (CSR) and corporate governance in the countries they work. CSR has become a common practice in developed and developing nation, but, with emphasis to uplift the living standards of the less fortunate in the society. In essence, the international firms have a duty to fulfill in the community where they operate, and the debate on whether that is self-interest, or community interest could only be established through research. Since the firms have global bargaining power, they are able to influence international and domestic policies and the people in their areas of operation. Often, the collapse of many corporations has created public mistrust, who then, demands for improvement in the way in which such entities are governed. Therefore, the corporations should be governed in a transparent and accountable way, to improve their image on the public domain. Notably, the need for such transparent governance makes the International firms get interested in CSR and corporate governance. Below is the detailed discussion on the factors, which prompts International firms’ interest in CSR and the ways in which the local corporations are run. Table of Contents Title Page 1 Executive Summary 2 Table of Contents 3 Introduction 4 International Firms’ Interests in CSR and Corporate Governance 4 Economic Factors 4 Social Factors 5 Cultural Factors 6 Legal Factors 6 Technological Factors 8 Strategic Issues in Addressing CSR Issues 9 Ethical Leadership 10 Principled Decision-Making 11 Important Research Findings 12 Conclusion 14 Bibliography 15 Appendix 17 Introduction Mostly, creating change in the area of operation becomes the main reason of International firms’ interest in CSR. Factually, there are social obligations that the corporations have to fulfill in the community where they operate. Through integrating the diverse social classes in the community, the corporations might harmonize the coexistence in that area and minimize the inter-class conflicts. The paper addresses some questions on corporate social responsibility with illustration from Unilever Company. International Firms’ Interests in Corporate Social Responsibility and Corporate Governance Notably, several factors account for the International firms’ specific interest in CSR, including economic, social, cultural, legal and technological aspects. Those factors are sometimes compelling, and attracting the attention of the firms, to give the necessary assistance to the needs of the stakeholders. Economic Factors In economic terms, the people who echo the existence of CSR claims that for the world market to function effectively, the business conduct of the International firms have to be responsible economically and socially (Kercher, 2006, p. 2). Economic responsibility is the ability of those firms to allocate part of their financial resources to uplift the economic status of the people in their localities of operation. The increase in International trade is an economic factor that makes the multinational firms to have an interest in CSR, specifically on compelling issues on anti-corruption, environmental protection, to make sure that there is continuity in trade. For example, Unilever Company has made an effort to outline the acceptable norms, which govern corporate conduct. The norms included certain specific measures and standards for business operations, which would ensure sustainability in economic development (Britwum, Enu-Kwesi & Akorsu, 2006, p.31). For example, the management of supply chain, information disclosure, respects to human rights, anti-corruption, proper labor regulations, taxation, environmental conservation, consumer welfare and fair competition among the businesses (Arshad, 2006, p. 45). Notably, CSR strategies cannot lead to economic development where the government is corrupt, because all the funds channeled to the programs are either misappropriated or channeled to other non-viable project for the benefit of a few people in the society. This is one of the reasons prompting the involvement of International firms on corporate governance and CSR. They make sure that the strategies and funds available are prudently used for uplifting the living standards of the poor, not misused for selfish gains. Due to the economic significance of the international firms, their contribution to CSR in less developed countries is centered towards achieving economic accountability and sustainable development (Hart, Mark & Milstein, 2003, p.58). Therefore, it enables the local corporations to run their economic affairs efficiently and with regards to the public interest. Social Factors Sponsoring social activities such as sports, community cleaning among others, are the moral obligations of the corporations, as the law requires, other than perusing the profits only (Britwum, Enu-Kwesi & Akorsu, 2006, p.37). This is an indication that the social responsibility is equally important as making profit. In essence, corporate social responsibility has shaped most of the strategies, which the corporations adopt and the governmental policies being implemented. Cultural Factors In essence, the cultural practices make people’s identification very easy. Mostly, the diverse ethnic affiliation of the world population makes it necessary for a group of people to identify with a particular culture that distinguishes them from the rest. However, due to the threat of extinct of some cultural practices, some of the International firms gets interested in helping such communities to preserve their culture (Dyer & Singh, 1998, p.665). The people’s culture is a rich heritage that could be used as a tourist attraction, within a particular community. For example, traditional dances in full casual attire, traditional houses and other cultural valuables could be displayed in a museum for the visiting tourists. Actually, it forms a resource base for the community that would enjoy the economic gain of the financial exchange that they receive. Therefore, preserving such heritage is a CSR practice that the International firms would have a lot of interest (Maignan, 2001, p.62). Apparently, eroding such cultural attributes and practices, could harm the community and bar the public from enjoying the benefit of the values. Since the International firms are interested in giving back to the people, promoting the culture would be a very important undertaking, during their operation in that place. Legal Factors This is perhaps the central issue prompting the involvement of the International firms in CSR. According to Kim Kercher, there is perceived deficiency in the International and domestic legal remedies on matters dealing with corporate accountability (Kercher, 2006, p. 2). Notably, the available laws might not successfully control the conduct of corporations on matters on jurisdictions in their areas of operation. Legally, the International firms are interested in addressing the human rights abuses where corporate players have failed (Morsing & Schultz, 2006, p.225). Therefore, they are more concerned with the manner, in which the corporations execute their duties and their level of respect to the basic human rights. The International firms are aware that the current legislations and guidelines on CSR and corporate governance are inadequate and some do not have the legal basis, thereby, prompting their interest and involvement in improving the situation (Morsing & Schultz, 2006, p.229). In addition, the corporations were created through enactment of the laws and begin their activities after being given the operation license. Therefore, obeying the law is an ethical requirement of the corporations. International firms only get interested in the operations of the corporations, if they violate the legal provision of the statute that created them. There are many examples showing that the corporations do not act according to the laws, which govern their operations including the following; Nike factories, which operated in Asia had bad working environment that did not favor the workers (Kercher, 2006, p. 3). Similarly, the company employed the under aged children, contrary to the legal provisions. Nestle, exercised unethical marketing. James Hardie did not compensate the workers who were affected by the chemical components of asbestos and other building products (Kercher, 2006, p. 3). Those are just a few examples among many unlawful practices that attract the involvement of International firms in correcting the impacts. Considering the submission, the international law would be central to harmonize corporate governance. Indeed, Kercher asserts that the complex nature of CSR has made it necessary for both the International firms and local corporations to formulate laws and articulate policies, which are acceptable and practical in making sure that the development strategies are respected (2006, p. 5). Technological Factors Technologically, the increase in public knowledge on CSR issues, through access to media and other specific information, necessitates the International firms’ interests on matters on CSR and corporate governance (Chang, 2006, p.239). Ideally, they understand that there would be adequate public contribution to meet the task. Through access to online information, the international firm would assess the ability of other local corporations to discuss the opportunities and risks environment, cultural, social and legal issues (Chang, 2006, p. 245). As a result, they might develop specific interest in offering solution in areas where the local corporations have shown weakness. Another technological development that prompted the International interest in CSR was the need to make nuclear power less harmful to the current and future generations. The table bellow shows how to communicate CSR efforts. Publicity Mode Denmark 2005 (%) Sweden 2005 (%) Norway 2005 (%) Press Release and Corporate advertising 30 47 42 Annual reports 59 46 49 Not Publicize 11 8 9 Source: Morsing and Schultz, 2006, p.330 Graphically, it can be represented as below; According to the graph, issuing annual reports is the best way of communicating CSR efforts. Moreover, the company might use press release or/and corporate advertising. Notably, failure to publish the CSR efforts would not make the company recognized. Strategic Issues in Addressing Corporate Social Responsibility Issues In addressing the issues on corporate social responsibility, the international firms and the corporations use unique strategies, to make sure that their missions are fulfilled. Some of the strategies, which Unilever used in addressing CSR include, ethical leadership and principled decision-making. Ethical Leadership Perhaps, ethical leadership is the widely used strategy in CSR and corporate governance (Cooil, et al., 2007, p.69). Notably, ethical principles including fair-trade, non-discrimination and respect to human rights are the core foundation to organizational success. The leadership of Unilever Company is of high ethical standards, in that the leaders value their stakeholders and the consumers as much as their primary duty of making profits (Britwum, Enu-Kwesi & Akorsu, 2006, p.41). In addition, the ethical considerations in the company extend to sound management, service quality and financial accountability. There are several examples to show that the company is managed in an ethical way, such as, fair-trade, the expressed ability to deal with the negative impacts of globalization, involvement in sustainable projects, employee ownership practices and their well-being, among others. The diverse nature and explanation of company ethics encompasses the broad aspect of achieving the company obligations and catering for the workers’ welfare. Despite the non-existence of universal ethics, the companies do not have a fixed reference point; neither do they have controls nor absolute standards of measuring the ethical practices, Unilever being one of them. Therefore, it means that the company sets its own target on the ethical values it should pursue that would mount to the success of its operations, generate profit and enhance its public image. Unilever, for instance adopted sustainable projects, employee ownership practices and their well-being, as part of the CSR strategy (Britwum, Enu-Kwesi & Akorsu, 2006, p.42). The company believed that being morally correct entails the ability of the company to satisfy its primary objective and enhance the welfare of the customers and the community of operation. They achieved this by producing high quality products and upholding the concept of ethos (Webb & Deborah, 2005, p.132). Essentially, the concept explains the company’s relationship with the workers, which enabled them to make sure that the working environment was safe and clean, respect the workers, and contribute to community development among other undertakings. Principled Decision Making For a company to achieve success in its operations and corporate social responsibilities, they have to make sure that the best principles guide their process of decision-making (Webb & Deborah, 2005, p.132). Through ethically guided decision-making, the company only initiated projects, which guaranteed public benefit for the majority. Furthermore, their activities are regarded as socially responsible, without regards to the amount of profit they would make. Notably, the main idea behind their involvement in CSR was to uplift the standards of living for the majority and establish a good public reputation. As a result, the good public image of the company has ensured increase in the people’s attitude towards their products. In turn, this would make sure that the company’s sales increase as more people identify with the firm. For Principled decision-making, in CSR issues, the concept of Psychological Contract is applicable. Under the concept, the people involved are psychologically prepared, through education and media, to enable them understand the benefits of the intended projects and encouraged to prepare for full use of the projects. Important Research Findings The contribution of the company to the public, in terms of CSR, is through increased information to the people, thereby, enabling them make informed decisions and choices (Kercher, 2006, p. 6). Notably, active public participation on the projects ensures that the people gain proper understanding of their environment, thus, increasing their capacity to engage in sustainable projects, which would not have any severe consequences to the future generation. In addition, it is through active participation that the people acquire and develop practical leadership skills, to enable them enhance their skills and abilities (Kercher, 2006, p. 11). Consequently, they would be able to exploit the available resources for the benefit the community, using the locally obtainable manpower. This is a sign of the necessity of the International and local firms to engage in corporate social responsibility. The other important finding is that CSR activities enhance the democratization of decision- making process because the people would be allowed to decide and prioritize on the projects they believe are important (Kercher, 2006, p. 13). After this, the projects are implemented according to their list of priority. Indeed, this enables the community to utilize the resources in a prudent way, and eliminate biasness in the process of carrying out the projects. The table below shows the things, which could make a company responsible; Table 1 Opinion Denmark 2005 (%) Sweden 2005 (%) Norway 2005 (%) Generate Profit especially to shareholders 4 4 9 Responsible towards Shareholders, employees and the customers 49 64 56 Shareholders, customers, employees and CSR 45 29 31 Source: Morsing and Schultz, 2006, p.330 Graphically, it can be represented as below; As shown on the graph, a company can only be responsible when it has the shareholders, employees and the all the consumers in mind. In addition, participating in CSR activities also makes the company responsible. Conclusion In summary, corporate social responsibility is very important in community development. Moreover, there are several factors explaining the International firms’ interest in CSR issues, including economic, social, cultural, legal and technological aspects. Notably, the factors differ from one region to another, depending on the specific need of that area. In addition, some of the strategies, which Unilever used in addressing CSR issues include, ethical leadership and principled decision-making. As well it is important to note that, active public participation in development projects ensures that the people understand their environment. Therefore, it increases their capacity to engage in sustainable ventures, which would not have any severe consequences to the current and future generation. Bibliography Arshad, H. (2006). Corporate Social Responsibility: Retrieved from Britwum, A., Enu-Kwesi, F. & Akorsu, A. (2006). Unilever Ghana. Chang, H. H. (2006). “Technical and management perceptions of enterprise information systems importance, implementation and benefits.” Inf. Systems J. 16 (3), 236-292. Cooil, B., et al., (2007). “A longitudinal analysis of customer satisfaction and share of wallet.” Market Journal. 71 (1): 67-83. Dyer, J.H. & Singh, H. (1998). “Corporative strategy and sources of inter-organizational competitive advantage.” Strategic Management Journal, 23:4, 660–679. Guo, J., Sun, L., & Li, X. (2009). “Corporate social responsibility assessment of Chinese corporation.” International Journal of Business Management, 4 (4): 54-57. Hart, S. L., Mark, B., & Milstein, C. (2003). Creating Sustainable Value. Academy of Management Executive. 17 (2): 56-69. Kercher, K. (2007). “Corporate Social Responsibility” Impact of Globalisation and International Business. Retrieved from Maignan I. (2001). Consumers' Perceptions of Corporate Social Responsibilities. Journal of Business Ethics, 30 (1):57-72. Morsing, M. & Schultz, M. (2006). Corporate Social Responsibility Communication. European Review, 15 (4): 323-338. Webb, D. & Deborah, J. (2005). “The effects of corporate Social Responsibility and Price on Consumer Responses.” Journal of Consumer Affairs. 39(1): 121-147. Appendix Graphical representation of the ways to communicate CSR efforts: Graphical representation of the things, which could make a company responsible: Read More