Innovative Decisions for the Benefit of Business - Literature review Example

Corporate Social Responsibility Corporate social responsibility is the concept of making innovative decisions for the benefit of business through theintegration of social, environmental and economic considerations. The following discussion substantiates this contention. Introduction Corporate social responsibility is a concept, whereby companies merge environmental and social considerations with their business activities. This definition is to be found in the Green Book, which is the first documentation regarding corporate social responsibility to be published in accordance with the European Union’s initiative. From this definition it becomes obvious that companies consider social and environmental issues at the time of planning and implementing their activities. However, this entire exercise is conducted on a voluntary basis. The fundamental rules of conduct for companies are enshrined in the individual laws and regulations. However, the core of social responsibility rests on the fact that companies deliberate upon these issues in much greater detail and that their conduct is at a higher level than that enjoined by legislation (Kornfeldová & Myšková, 2012, p. 90). Moreover, corporate social responsibility is best viewed in terms of its pillars. These are the social, environmental and economic pillars. The last of these, namely the economic pillar affects the local, national and global economies. It can be termed the fight against corruption, the support and development of employment, and the endeavour to mitigate unemployment (Kornfeldová & Myšková, 2012, p. 91). The environmental pillar relates to company activities that are focused upon the environment. It denotes reduction in the adverse influence of company activities on the environment, the protection of natural resources, employment of environment friendly technologies, and reduction in emissions and other pollutants. The social pillar relates to education and the development of human capital, employment, benefits, equal opportunities and employment policies (Kornfeldová & Myšková, 2012, p. 91). Furthermore, organisations and companies can distinguish themselves from other entities by employing the device of corporate social responsibility. With regard to this device it is essential to realise that compliance is voluntary, as there is no legislative imperative. The ethics codes, statements or policies relating to the responsibilities of a company declare whether it adheres to the principles of corporate social responsibility (Kornfeldová, 2011, p. 107). As these documents are displayed on the Internet, it becomes a simple matter for any individual to determine whether a company is compliant with these principles. The promotion of equal opportunities is a major feature of corporate social responsibility. Such information is of considerable significance for the employees, business partners, and potential future employees of a company (Kornfeldová, 2011, p. 107). As such, corporate social responsibility is a notion regarding the obligation of corporations towards the constituent groups of society. These groups do not include stockholders, and the obligation is over and above the requirements under the law and contract with the trade unions (Crane, 2008, p. 34). The critical features of this definition are, first such obligation has to be voluntary. In this regard it is to be noted that conduct enforced by the law or union contract is involuntary. Second, this obligation extends beyond the duty towards the shareholders. It pertains to a wide section of society, such as customers, employees, neighbouring communities and suppliers (Crane, 2008, p. 34). The crucial groups relating to a company are, first, its shareholders, who expect and insist upon a reasonable return on their investments. Second, its employees who seek reliable and equitably salaried jobs. Third, its customers who demand products of good quality that are priced fairly (Crane & Matten, 2007, p. 49). As such, corporate social responsibility is beneficial to all the stakeholders of a business. Consequently, the primary responsibility of a business enterprise is to continue in business as a properly functioning economic entity. This is the first layer of corporate social responsibility, which is also the basis for the rest of the responsibilities (Crane & Matten, 2007, p. 49). Therefore, every corporation has to fulfil its economic obligations. However, a critical device for promoting sustainable development is provided by corporate social responsibility. Irrespective of whether the economy in question is developed or developing the management and operation of the corporate sector is crucial for the development of the economy and social progress. In addition, the accountability and efficiency of the corporate sector has become the subject matter of good corporate governance and public interest (Effiong, et al., 2012, p. 111). Therefore, the objective of good corporate governance is to ensure that corporations are effective, sustainable, responsive, accountable and legitimate. The appraisal and reporting of information related to the influence of an entity and its activities upon society, has been described as social responsibility accounting. The latter could also be defined as a means of illustrating the degree to which an organisation lives up to its declared social and ethical objectives (Effiong, et al., 2012, p. 112). As such, the fundamental goals of social responsibility accounting are; first, detecting and measuring the periodic net social contributions of a business concern. This includes the benefits and social costs internalised to the firm, and the external factors that influence various social segments (Effiong, et al., 2012, p. 112). Second, assessing the strategies and practices of a firm that have a direct effect upon the relative resources and power status of individuals. Such assessment is aimed at discerning whether these strategies and practices are consistent with the legitimate aspirations of individuals and the social priorities that are widely shared. Third, furnishing relevant information regarding a firm’s objectives, policies, programmes, performances and contributions to social goals (Effiong, et al., 2012, p. 112). Such provision of information has to be accomplished in an optimal manner. The third objective is dependent upon the first two goals, which are measurement goals. Thus, social responsibility accounting provides an insight into the corporate social image of a company (Effiong, et al., 2012, p. 112). Consequently, any intervention that furnishes information, which alerts a firm to its social responsibility, constitutes a measure for inducing good corporate governance. An example of a medium for achieving this is provided by social responsibility accounting. The momentum generated by good corporate governance has propelled the business enterprises to adopt social responsibility accounting (Effiong, et al., 2012, p. 114). In addition, it is possible to define corporate social responsibility as the commitment of business enterprises, in the context of their contribution. This contribution has to pertain to sustainable economic development. Moreover, it should involve businesses with their employees, their families, the local community and society. The objective of this involvement should be to effect improvement to their life, in a manner that promotes business and development (den Hond, et al., 2007, p. 11). As such, corporate social responsibility has spawned a vast array of corporate practices. Several of these practices have emerged in the context of acts of responsibility. From the perspective of a high level of abstraction there are two diametrically opposed stances. The first declares that the corporate sector should eschew such responsibilities and should focus upon maximising profits. This is based upon the perception that the fundamental social responsibility of a business concern is to enhance profits. In the words of Friedman, the business of business is business, which implies disregard towards any social responsibility (den Hond, et al., 2007, p. 2). This point of view has been expanded upon by Jensen who declares that two centuries of effort in economics and finance indicate that there is a maximisation of social welfare, when every firm of the economy endeavours to maximise the total form value. From this perspective, any investment in corporate social responsibility will constitute a theft of shareholders money (den Hond, et al., 2007, p. 3). The second position states that business has to act in a manner that is socially responsible. This is the consequence of their influence upon society. The requirement of companies that they should act in a socially responsible manner is founded upon the underlying position that corporate decisions lead to moral outcomes (den Hond, et al., 2007, p. 3). As a result, it is indispensable for the corporate decision makers to seriously consider the moral consequences of the decisions that they take. Moreover, an alternative marketing approach is provided by fair trade approval schemes to the small scale producers and cooperative groups of growers. This alternative approach enables them to sell their produce on trading terms that are by and large equitable. During the 1980s and 1990s, several Fairtrade labelling initiatives had been introduced in Europe. These initiatives were subsequently harmonised under Fairtrade Labelling (Robinson, 2009, p. 1016). The situation obtaining in the contemporary global supply chains can be chiefly attributed to the market led strategies of the business enterprises. Another contributing factor is the compulsion to achieve competitive advantage, which has a major bearing upon the design of production systems. Any system that relies on voluntary initiatives by the global supply chains, in order to promote fair and ethical trade, relies to a significant extent upon the self – governance of corporations. To a certain extent, the retail sector can influence the global supply chains and the life of the developing countries’ workers. However, the major influence on these supply chains is exerted by the corporate sector. (Robinson, 2009, p. 1023). It is in this milieu that corporate compliance assumes tremendous importance. Corporate social responsibility gained importance in the context of containing the problem of domination by the corporate sector. Nevertheless, the Corporate Manslaughter and Corporate Homicide Act 2007, burgeoning awareness of the environment, and moral values have served to induce the corporate sector to incorporate social responsibility as a major feature of their business strategies. During the incipient stages, business had accepted corporate social responsibility in a casual manner. However, realisation has now dawned upon these entities that neglecting corporate social responsibility could adversely affect their brand names and share value (Travel Trade Gazette UK & Ireland, 2008, p. 21). Furthermore, a very strong empirical tool has been provided by the stakeholder approach to assessing the firm in its environment. This device is aimed at widening the perspective of the management, with regard to its functions and duties. The clear intention is to go beyond considerations of profit maximisation and to include the claims and interests of the non – stockholding groups (Mitchell, et al., 1997, p. 855). On the other hand, the theory of stakeholders endeavours to express a fundamental query in a methodical manner, namely which of the groups can be deemed to be stakeholders worthy or requiring the attention of the management. There is considerable agreement regarding the entities that can be stakeholders (Mitchell, et al., 1997, p. 855). Thus, individuals, groups, institutions, organisations and the natural environment can be regarded as actual or potential stakeholders. In addition, Jones had described corporate social responsibility as the notion that corporations have an obligation towards the constituent groups of a society other than the stockholders. Moreover, this obligation extends beyond what has been stipulated by a union contract or the law (Mitchell, et al., 1997, p. 856). This illustrates the fact that a stake can unfold beyond ordinary possession. However, profit maximisation is a doctrine of classical economics, which constitutes the strongest argument against the assumption of social responsibility by business. From this vaunted perspective, the function of business is purely economic. Consequently, the true measures of success are provided by economic values. As the agent of the stockholders, the decisions of a manager are governed by the unswerving goal to maximise profits for the stockholders (Davis, 1973, p. 318). Additionally, environmental responsibility is intricate and involves several aspects. It brings under its ambit, a number of corporate practices, the management of natural resources, issues related to waste generation and disposal, recycling, marketing environmentally friendly products, and the prevention and control of pollution. There is significant diversity between the corporate impact upon the environment and the efforts made by firms to reduce the harm caused (Vogel, 2006, p. 110). This implies that any discussion related to corporate environmental responsibility must perforce be extremely selective. The influence of private labour policies are chiefly restricted to the business practices in vogue in the developing nations. On the other hand, corporate environmental responsibility primarily influences the business practices of the developed nations. In the developed countries, there is either extensive regulation by the government or possibility of the imposition of further controls by the government. This situation makes it an onerous task to differentiate between the function of public policy and corporate virtue, with regard to engendering improvements in the corporate environmental performance (Vogel, 2006, p. 110). Conclusion In accordance with the above discussion, it can be concluded that corporate social responsibility provides good governance, which is beneficial for business, and the stakeholders. Moreover, it can be surmised that social responsibility accounting has substantially influenced corporate governance and the corporate image. Therefore, stakeholder relations are accorded greater importance, and there is a greater investment of resources into the environment and human capital. The result of these investments is improved company image, enhanced competitiveness, better productivity and higher profits. References Corporate Manslaughter and Corporate Homicide Act (c. 19), 2007. London, United Kingdom: Her Majestys Stationery Office. Crane, A., 2008. The Oxford Handbook of Corporate Social Responsibility. Oxford, United Kingdom: Oxford Handbooks Online. Crane, A. & Matten, D., 2007. Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. 2 ed. Oxford, United Kingdom: Oxford University Press. Davis, K., 1973. The Case for and Against Business Assumption of Social Responsibilities. Academy of Management Journal, 16(2), pp. 312 – 322. den Hond, F., de Bakker, F. G. & Neergaard, P., 2007. Managing Corporate Social Responsibility in Action: Talking, Doing and Measuring. Hampshire, United Kingdom: Ashgate Publishing, Ltd. Effiong, S. A., Akpan, E. I. & Oti, P. A., 2012. Corporate Governance, Wealth Creation and Social Responsibility Accounting. Management Science and Engineering, 6(4), pp. 110 – 114. Kornfeldová, M., 2011. Equal Opportunities in the Concept of Corporate Social Responsibility. Scientific Papers of the University of Pardubice. Series D, Faculty of Economics & Administration, 16(21), pp. 102 – 109. Kornfeldová, M. & Myšková, R., 2012. Health and Safety at Work--Part of Corporate Social Responsibility. Scientific Papers of the University of Pardubice. Series D, Faculty of Economics & Administration, 18(25), pp. 90 – 99. Mitchell, R. K., Agle, B. R. & Wood, D. J., 1997. Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts. The Academy of Management Review, 22(4), pp. 853 – 886 . Robinson, P. K., 2009. Responsible retailing: Regulating fair and ethical trade. Journal of International Development, 21(7), pp. 1015 – 1026. Travel Trade Gazette UK & Ireland, 2008. Best practice: helping businesses get to grips with all aspects of CSR. 25 January, p. 1. Vogel, D., 2006. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Washington, D.C. United States of America: The Brookings Institution. Read More