Corporate Social Responsibility: Broad Contours and Concept - Coursework Example

Corporate Social Responsibility and Competitive Advantage By Author Date Table of Contents Table of Contents 2 Works Cited 12 Introduction In the post-industrial age of today wherein the world is witnessing a mushroom growth of corporations all seemingly striving only to ensure maximizing their profits while the critics of capitalism tirelessly criticize this dehumanizing consumerism corporate social responsibility is an essential element companies need to incorporate so as to stay relevant in a world increasingly becoming concerned about the need for humanizing the reign of capitalism. Corporate social responsibility comprises the vital ethical aspect of doing business keeping in view the prevalent scheme of things across the globalized world of today where it has become all the more important for the corporations to contribute something to the society within which they aim at accruing huge profits (Cavusgil et al, 2014). This assignment aims at highlighting the importance of implementation of corporate social responsibility practices by companies and corporations as a means of getting competitive advantage over the rival companies. This will begin by first bringing into light the basic concept of corporate social responsibility and competitive advantage. Afterwards it will analyze the relation between the two in the light of a few studies done. This assignment will also share concrete examples from the corporate world so as to show the dynamics of the actual relationship of the two. Towards the end the assignment will conclude again highlighting the need for incorporation of corporate social responsibility not only as a means to earn good will among the potential markets by contributing towards socially- important causes so as to gain competitive edge but also to humanize the otherwise increasingly dehumanizing consumerism. Corporate Social Responsibility: Broad Contours and Concept Considered largely to be a post-World War II phenomenon the notion of corporate social responsibility is gaining an ever-increasing significance and is expanding in terms of its appeal and awareness of its necessity in the modern global corporate world of today. Its proliferation was initially limited to the developed and industrialized countries alone but now it is also witnessing an upsurge in the developing countries (Carroll & Shabana, 2010). As far as the basic origins of the notion of corporate social responsibility is concerned it is traced back to 1946 lectures of Dean Donald K. David to his MBA class wherein he drew the attention of his students, potential future business leaders, towards the responsibilities of the businesses towards the communities they thrive in (Spector, 2008). However as far as the probable motives of the initiation of the concept of CSR is concerned Spector (2008) is of the view that it originated as a defense of free-market capitalism in the backdrop of the need to check or at least counter the growing appeal of Soviet Communism. Later on in the 1950’s Frank Adams, a New Jersey- based business executive , brought into limelight the necessity of the focus not merely on profit-making but also on contributing towards socially-substantial causes aiming at improving the lives of their workers, potential customers and the common public in general (Abrams, 1951). Yet another advance towards the prevalent concept of corporate social responsibility was registered by Howard R. Bowen’s famous and groundbreaking work Social Responsibilities of the Businessman published in 1853. As for the other words used for the activities coming within the domain of corporate social responsibility terms such as corporate philanthropy and business for social responsibility are also in vogue (Carroll and Shabana, 2010) but essentially CSR stands for giving back to the society from within which businesses accrue huge profits so as to stay true to the concept of businesses being also public trustees with genuine concern towards socially important causes (Frederick, 2006). The appeal of and demand for inclusion of corporate social responsibility practices only continued to grow in the backdrop of other human rights movements (Carroll and Shabana, 2010) despite the expression of various premonitions and reservations as regards CSR activities (Levitt, 1958). Therefore academic literature exploring the various dimensions and applications of CSR continued to expand. The very first expounded debate was related to the contours of the very idea of social responsibility of businesses. Keith Davis propounded that all those activities conducted by businesses wherein their primary motive was something beyond bagging in only financial profits for their companies come within the domains of social responsibility of the businesses (Davis, 1960). Similar ideas were advocated by other academics too such that business profits should also be directed towards or invested in fulfillment of social goals (Frederick, 2006) and that corporations owe it to the communities to adopt a socially responsible posture (Frederick, 1978) and to extend their activities to the social welfare domain too much beyond their financial or legal obligations (McGuire, 1963). Yet some other scholars associated the concept of corporate social responsibility not to the obligatory taking on of responsibility by the businesses to contribute towards betterment of the society at large but to the thoroughly functional perspective of only responding to and adapting to the needs of the social environment (Murray, 1976). Midway between the concepts of corporate social responsibility described henceforth lies the modern contemporary notion of CSR according to which it includes all such activities whereby companies voluntarily interact with the broader domain of stakeholders to add something socially important to the society at large thus contributing towards the global goal of attaining sustainable development (Mullerat,2011 ). As far the range of activities coming within the purview of CSR is concerned it involves the interactions of corporations with different government and non-government agencies and civil society members or the common public itself (Mullerat, 2011). According to others CSR encompasses all those activities which aim at enhancing or improving the image of corporations or businesses in the eyes of their existing and potential customers and other stakeholders of the enterprise or the ones which tend to tone down the negative impression of organizations or corporations among the relevant stakeholders (Porter and Kramer, 2006). Some Reservations Regarding Corporate Social Responsibility As is the case with most of the phenomena the notion of corporate social responsibility has its share among its ardent supporters or advocates and the ones who oppose the extension of businesses beyond financial concerns. Therefore much heated debate is still in progress as regards the possible utility or futility of corporate social responsibility. The very first faction from whom come the negative views about corporate social responsibility is the one comprising the champions of free market economy based on the classical economic argument that the only thing corporations or businesses need to take care of is their financial profits (Friedman, 1962). According to Friedman profit-making alone was its social responsibility too. Similar position is held also by certain contemporary business academics too, for example, Porter and Kramer (2006) are of the view that although activities associated with corporate social responsibility tend to improve or mend the relations between corporations and those social actors who can be rightfully considered the stakeholders in the respective enterprise but it is really against the very core of business activities whose primary and foremost aim is to secure as much monetary profit as possible therefore the corporations should focus merely on ensuring continued financial profits for themselves rather than engaging in activities not otherwise coming under the direct zone of relevance of their business activities. Another reservation regarding the incorporation of corporate social responsibility practices in business activities is that the work force within corporations be it investors, managers or financiers do not possess the necessary social skills or expertise to carry out activities otherwise considered to be a part of corporate social responsibility (Davis, 1973). Yet another reservation that is expressed in the context of negating the importance being attached to corporate social responsibility is that expending resources be it human capita or money on so-called socially-important activities only exhausts and distracts the focus of businesses from their core function which is to accrue monetary gains and to multiply the already-accrued financial profits by directing all their resources towards consolidation of financial gains (Hayek, 1969). Another reservation expressed against increasing the domain of corporate social responsibility hints towards the threat of concentrating too much power in the hand of corporate sector since it already wields substantial power in the modern global world of today. Proponents of this reservation believe that reinforcing and promoting the notion of corporate engagement in social domain will only add social power too to the already multifaceted powers enjoyed by corporations today (Davis, 1973). Although all the afore-mentioned reservations against CSR make some sense they seem to be taking too narrow a view of the way businesses thrive in the actual increasingly globalized and globalized world. Why is ethical behavior good for business? As far as the positive views or arguments supporting the idea of corporate social responsibility is concerned there is no dearth of academics supporting rather advocating the implementation of corporate social responsibility as means of thriving of businesses in the modern global world we are living in. All those viewpoints favoring the practices of corporate social responsibility are based on the core idea that being socially aware and responsive is nothing but vital to the very survival of corporations in the contemporary scenario since all activities manifesting corporate social responsibility on the part of businesses will win for them long-term good will among their existing and potential customers in a way consolidating the financial future too of those corporations by expanding the likelihood of increasing trust of the common public on those very corporations expending their resources on socially-important activities as global citizens in partnership with the communities themselves in ensuring sustainable development (Carroll and Shabana, 2010). As against the viewpoint of those who regard businesses as being thoroughly incapable of performing social functions arguments exist proclaiming that corporations do have a dynamic and socially-intelligent workforce capable of directing resources towards substantially important social causes and thus multiplying manifold the relevance of their respective corporations among the general masses. Yet another argument in favor of putting into practice activities aiming at registering performance of corporate social responsibility is that as much as the companies engage with the civil society and nongovernmental agencies or the common public they can avoid otherwise increasing interference on part of the governments just as much and can therefore ensure more freedom in execution of all of their business plans those too aiming solely at multiplying monetary gains for them (Carroll and Shabana, 2010). Other advocates express their favor of corporate social responsibility practices by pointing out the logical assumption that proactive handling of social issues that is planning and implementation of corrective measures after due prognostication of social problems is more socially and financially viable for the corporations than to rise up to action only in reaction to the flaring up of social issues which can have a direct detrimental impact on the very survival and future of corporations working in such contexts (Carroll and Buchholtz, 2009). Most important and the strongest argument in favor of working towards proliferation of corporate social responsibility activities is that given the nature of the global world today wherein winning the trust of the relevant stakeholders has become all the more important adoption of a socially responsive posture by the corporations is all but indispensably important also because the corporations are not impersonal entities rather owe it to their workers, customers and other stakeholders to take at least some responsibility for their betterment (Bernstein, 2000). How is CSR linked to Competitive Advantage? Competitive advantage is generally described as better financial performance of one corporation in comparison with its competitors through provision of greater value to the customers. In other words competitive advantage is the ability of one corporation or company to outcompete its competitors. In order to draw the link between corporate social responsibility and competitive advantage it seems necessary to explore the various dimensions of corporate social responsibility in addition to its broad contours highlighted henceforth. Carroll (1991) propounded that CSR has four specific dimensions: economic, legal, ethical and voluntary. Economic dimension of CSR pertains to the production of economic value not only for the investors but also for the employees of that corporation through generation of jobs and provision of good remunerations. Legal aspect of CSR makes it necessary for a corporation to keep its business activities in compliance with the rules and regulations of the state it is working in. Ethical dimension of CSR highlights the importance of contribution of corporations towards humanitarian causes whereas voluntary dimension of CSR includes deliberate activities conducted by corporation to produce social value or social capital that is to work towards the welfare of the society (Saeed and Arshad, 2012). Since competitive advantage is all about ensuring an overall better performance than the competitor corporations taking care of the afore-mentioned four dimensions of CSR will have better growth not only in terms of apparent financial gains but also in terms of sustained growth since their productivity will not be hampered by declining trust of the consumers, or reservations of the governments of the states they are operating in or the sheer employment-related dissatisfaction among its workers. There's yet another way of analyzing the link between CSR and competitive advantage but that would be discernible only after the reviewing of the concept of CSR from yet another perspective. From the perspective of social capital and strategic human resource management CSR can be viewed as having both an external dimension and an internal one (Saeed and Arshad, 2012). Social capital refers to the sum total of social relationships networks a corporation wins for itself through its positive contribution towards the society (Coleman, 1998) thus generating trust among the people of the society (Saeed and Arshad, 2012) and this too has its external (relationship of the corporation with the society in general) and internal (relationship of the corporation with its own employees) dimension. Numerous studies have shown a positive correspondence between CSR and social capital which ultimately translates into better and sustainable growth of the corporations engaging in social capital-generation CSR activities. Putnam (1993) has found that CSR activities work towards giving competitive edge to the companies implementing CSR practices by promoting strong internetwork relationships and fostering collective action and this has a direct role in promoting organizational objectives of knowledge transfer and innovation which then further translates into increased efficiency of the corporation and enhanced capacity of its workers to mobilize resources to ensure the success of different ventures of that corporation (Moon 2007). Another study in Jordan exploring the link between internal CSR practices of a corporation and its productivity found out that all internal CSR practices aiming at ensuring the development, both intellectual and technical, of the workforce and taking care of their occupational health etc reinforced the bonding between the employees and the company they were working for which in turn translated into "affective and normative commitment “of the employees towards the company (Ali, Nasruddin and Lin, 2010) thus giving it further competitive edge over its competitors. Case Studies Showing Successful and Failed CSR Practices: As is the case with other business-related activities the CSR practices adopted by companies and corporations across the world yield different results. In order to understand this variable nature of the actual results of CSR practices and the underlying causes behind the success of a few CSR campaigns and the failure of others two case studies would provide the requisite insight. The first case study this assignment will mention is that of Starbucks Company whose use of CSR practices to gain competitive edge over its competitors has already manifested itself in the form of the its ever-increasing popularity. The other case where a CSR campaign backfired instead of benefitting the company itself is that of Nike whose CSR campaign pushed the company into the troubling arena of controversies. A- Case Study of Starbucks Company Founded in 1971 with only one retail store in Seattle USA Starbuck Coffee Company continuously grew not only in terms of its reach and number of franchises but also in terms of the social capital that it accrued for itself as is evident also from its numerous CSR related reviews available on its website expounding the way in which this company integrated its CSR activities with other objectives. The way Starbucks Company carries out its CSR activities has three dimensions: social, environmental and economic which in terms of the mission statement of the company itself is reflected in its “ethical sourcing, environmental stewardship and community involvement"(Starbuck 2010e). While staying true to its promise of bringing the best coffee to its customers through its selection of the finest coffee beans the company has ensure ethical sourcing whereby it ensures the buying of coffee beans from the farmers at a fair price and also arranges for the capacity building of its suppliers as in helping them grow good quality coffee beans in an efficient manner (Starbucks 2010). In the domain of environmental stewardship the company practices recycling and sticks to use environment friendly material (Starbuck 2010g). For example, it offers around 10% discount to the customers bringing in their own coffee mugs so as to reduce environmental impact of cups. Moreover according to estimates the company served over 4.4 million more reusable cups to its customers in 2009 than in 2008 (Fiscal CSR Annual Report 2009). In order to ensure company's continued role in community involvement it supports various community activities and runs programs like Starbucks foundation, Ethos water fund, Starbucks RED etc. (Starbuck 2010h). Out of the afore-mentioned community-service oriented programs of Starbucks company the most impressive one is the Starbucks RED project whereby every time a customer buys its exclusive RED beverage at its stores in Canada and U.S the company contributes five cents to Global Fund (). A cursory glance at the immensely increased fiscal profits of the company with each passing year testifies to the success of its CSR initiatives. For example the company's net earnings in 2006 were around $564.25 million which increased to $672.63 million in 2007. (Starbucks Annual Report 2006, 2007). B- A Case Study of Nike Nike a leading athletics’' shoes and clothing company which began its business sojourn in 1964 with the name Blue Ribbon Sports grew to be the biggest manufacturer of athletics' goods (Parloff, 2002). As soon as the company grew in it appeal and demand it started outsourcing to countries such as Southeast Asian countries with cheaper labor so as to maximize its profits. But in 1996 a New York Times ‘op-ed piece launched a scathing criticism of the company regarding the breach of labor laws by Nike at its outsourced manufacturing sites with rampant human right abuses, violence, and unbearable working conditions. In order to counter the consequent negative image and for damage control the company initiated what it termed to be its CSR activities but which only brought increased criticism for the company because the way it "advertized" its so-called CSR role raised ethical concerns. It incepted its counter-campaign to neutralize the negativity accrued by it owing to the allegations of breach of labor laws by the company by launching what became known as CSR crusade. It began by releasing its assertive labor report based on the survey of working conditions in its 20 factories in 6 Asian countries wherein it claimed that the wages Nike was giving to its workers were twice the local pay rate. The next CSR disclosure tactic it opted for was release of a statement of corporate social responsibility which added 6 new standards to the company's commitment towards its manufacturing facilities: "factory monitoring, minimum age requirements, environmental safety standards, employee education programs, expansion of its microloan program and greater transparency of CSR practices" (Nike, 2004). Other measures included writing hundreds of personal letters to the most important existing and potential clients of Nike, displaying of a virtual tour of Nike's manufacturing sites in the Southeast Asian countries, campus visits and rampant press releases and advertorials all aiming at dissolving the negative image of the company among the relevant stakeholders. This seemingly multipronged CSR but de facto more of a PR campaign failed to bring any positive dividends for the company because it somewhat became a crude advertising campaign rather than a genuine effort at removing the concerns of the stakeholders and improving the conditions on ground for its workers. This was laid bare an independent report showing that Nike's CSR crusade didn't translate into better working conditions for its employees in its Southeast Asian factories so much so that a Vietnamese facility didn't even have drinking water facility and had witnessed multiple episodes of human rights abuses (Parloff, 2002). Therefore this CSR campaign badly failed. Conclusion As the afore-discussed case studies depict that in terms of relation between CSR and competitive advantage only those CSR activities yield positive dividends for the corporations which genuinely bring aim at bringing positive social change and producing social value while those only so-called CSR proclamations which never translate into genuine positive change in the lives of the various partners or stakeholders of the enterprise automatically get reduced to mere crude propaganda means to mislead the general public about the practices of a corporation. Moreover as the assignment henceforth shows the inherently positive link between CSR and competitive advantage can be translated into reality only if and when the CSR practices are integrated also with the organizational objectives of the corporations focusing both on the internal and external dimensions of the CSR activities. In the absence of genuine focus on either of these two dimensions of CSR will bring only criticism and negative dividends for the corporation as also unraveled by the CSR disaster of Nike. In short, the contemporary global world of today corporations do need to engage in activities depicting their genuine corporate social responsibility without which the corporations will start losing relevance in the competitive corporate world of today. Works Cited Abrams, F.K. (1951). Management’s responsibilities in a complex world. Harvard Business Review. XXIX, PP. 29-34. Ali, A.A., Nasruddin, E. and Lin, S.K. 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