Credit Union Australia - Corporate Social Responsibility for the 21st Century - Term Paper Example

Credit Union Australia Corporate Social Responsibility for the 21st Century Purpose Credit Union Australia (CUA) firmly believes that social and environmental sustainability that will last for the 21st Century has never been more relevant. Thus, this paper presents to the board how a corporate social responsibility (CSR) effort will become an effective strategy to better serve our stakeholders. By this we mean, we will extend our commitment to the public by investing in causes, people and organisations that champion social and environmental sustainability. As projected, our CSR strategy will boost our organisation’s standing in the market, that in turn, could help improve our long-term profitability and brand value. Background For several years now, Corporate Social Responsibility have been highly pursued by organisations to improve one's reputation and boost the public image that the corporation wants to project to the public. The ultimate goal through which CSR is enacted is sustainability, according to some experts. As defined by Milne and Gray (2007), sustainability as a systems concept, it is by far, concerned with the provision to render equitable and just social services to the community. As a concept, corporate social responsibility contemplates the role that organisations play in the community through programmes that promote human and social development and social justice themes. It is said that when adopted, CSR – that is, it suggests organisations like credit union to have a societal duty geared at promoting social justices – would balance any corporation's capitalist impulses of only making of profit and being competitive. Now by adopting a CSR strategy, however, we can heighten our brand value by appealing to our urban, educated stakeholders who more and more are looking to be affiliated with an ethical organisation. There are numerous ways through which CSR may be undertaken such as investing in advocacies relevant to our corporate mantra. There are oppositions to the adoption of a CSR strategy, citing that investments is best spent on ways that will boost profitability and market share. According to Cavett-Goodwin (2007), CSR investments would mean scaling down of investments to broaden market share. As for the positives, one example is that companies who are perceived socially and environmentally-concerned are growing to be more attractive to investors, and therefore perform better financially. Discussion To the corporate banking institutions, however, we are apart in terms of the nature of banking services we offer. Although like corporate banks, we offer many of the same financial services that banks do (e.g., savings and cheque accounts, loans and insurance), however our concentration is on serving the community in which we operate (WOCCU, 2007). It is this community role and focus that differentiates credit unions from commercial banks. Our customers are called mutuals who are also the owners and the emphasis is not towards generating income for our external shareholders. This explains why any earnings in excess of operational costs are returned to the credit union members either through increased interest on savings, decreased rates on loans, and the like. Now comes the question for our organisation to be socially responsible at the height of global financial crises and enacting measures to be sustainable in the next Century: how ready are we to adapt to the changes and would the implementation of CSR as a corporate strategy allay fears that we are only concerned with profitability and being competitive. To address these issues, we will first look into several factors concerning our current situation: Change in Competition. With its highly-concentrated banking industry, Australia's so-called 'big four' holds about 80 per cent of the banking sector. It is seen that consolidation or mergers/acquisitions in the banking market may continue to cause the diminishing competition. And CUA, being the biggest in the mutuals industry, is receiving criticisms that it operates as an oligarchy that makes competition difficult to go by among small and new entrants in the market. New entrant. With its leading position in the mutuals industry of Australia, CUA has the first-mover advantage over new entrants. As the country's largest customer-owned financial company, CUA currently serves up to 400,000 customers in an industry with over 4.5 million members. New entrants can also not pose big threats to CUA because of the nature of the industry, the banking regulations and laws, and the state of competition. Changes in Regulation. As part of the banking sector, CUA is part of an industry that is being regulated by the Australian Prudential and Regulatory Authority and covered by the Banking Act 1959. There are, however, regulatory and market restrictions to the mutuals industry that further complicates its ability to compete among commercial banks. One is the policy the restricts credit union organisations from giving profits to customers, which are its owners, and as a result limits our organisations from effectively competing for market share. Mutuals industry are also not endorsed by the APRA to be classified under banking category despite having to adhere to the same regulations imposed for 'banks' and its core function is banking.The impact of these regulations to the mutuals industry put CUA among others in its sector at a disadvantage. It also make an impression that credit unions are not as secure or stable as banks. Stakeholders. Credit unions are not shareholder based organisations, which restricts its external stakeholders to government and the community it serves. Most of its internal stakeholders are its own customers. Support Strategy of the Company. In order to support its competitiveness and profitability, CUA is dependent on changes that its regulator, APRA, may need to overhaul such as reclassifying the mutuals industry to reinforce its core function, which is banking, and policies to take advantage of other sources of funding such as securitisation. CUA also stands to benefit from promoting greater awareness about viable and competitive alternative banking options that the consumers may opt into than what are traditionally offered by major players in the commercial banking sector. Through the facilitating functions of banks, Decker (2004) said these institutions are already playing “important role in sustainable economic and social development.” In other words, it is aware of its social obligations which it does through the management, saving and investment of funds. Meanwhile, it is necessary o take into account the interest of the community within which CUA and its members reside if it will adopt CSR. In other words, it is necessary for the organisation to consider not only how much the organisation will invest in efforts to achieve long-term growths and profitability, but also in ways that will improve the credit union's reputation in its sector and the banking industry. CUA may consider investing in campaigns that will promote the empowerment young and innovative Australian entrepreneurs. If the World Bank and the International Finance Corporation are to be believed, Australia is ranked among the top ten out of 183 economies on starting a business, which is not bad. Small or startups are currently getting small support from government because most regulatory and government policies are geared towards big or large business. By helping promote entrepreneurship and innovation among young businessmen, CUA could draw strong support for championing small businesses which is now considered by many as engine room of the economy. In fact, like Australia, small business has a big impact on the economy of the United States, registering 29.6 million small businesses as of February 2011 which employ half of the private sector workforce (Chandler, 2011). By investing in resources to the effort, CUA would best serve the community, especially through replicating community-based entrepreneur programs, expanding education and trainings on entrepreneurship, and the like. It is still worth noting, notwithstanding the benefits of pursuing CSR strategies, that there may be those who are opposed to the systems change. Some of these arguments include claims that results may not always lead to the results that we might expect, there is no sure things in life, and that businesses should remain as is so charities must be left to those who are experienced and expert in this, and many more. There are also the economy to be factored in in deciding whether the pursuit of the CSR strategy will suit corporate goals such as income targets and profitability projections. Recommendations After considering all the factors that will be used in deciding whether the proposed CSR effort bodes well to the mantra of CUA, it would be for the best interest of the board to still pursue the strategy. By simply starting, even not going full steam ahead, we can help fulfil our commitments to society. After all, the advantages and benefits far outweigh the negatives. The selection of the campaign to promote entrepreneurship, CUA is guaranteed to earn from the following: As more Australian entrepreneurs are empowered, we will expect more jobs to be created; More innovative startups and businesses could create entirely new industries, thus, increasing banking activities such as lending and other transactions. Removal of unnecessary regulatory barriers for small businesses. References Chandler, N., 2011. Obama launches Startup America initiative: Should Australia follow suit? Australian Anthill Online, [online] 15th February. Available at: Credit Union Australia, 2011. Submission to the Senate Economics Committee Inquiry: Competition within the Australian banking sector. 25th January 2011. [online] Available at: [Accessed 10 May 2011]. Decker, O. S., 2004. Corporate social responsibility and structural change in financial services. Managerial Auditing Journal, 19(6), 712-728. McGrath, D., 2010. CSR in Australian Credit Unions' Decision-Making Process. [online] Available at: [Accessed 10 May 2011]. Milne, M. J., & Gray, R., 2007. Future prospects for sustainability reporting. In J. Unerman, J. Bebbington & B. O'Dwyer (Eds.), Sustainability Accounting and Accountability. London: Routledge. WOCCU., 2007. World Council of Credit Unions Inc. 10 January 2007 [online] Accessed 10 May 2011. Read More