Factors That Motivate MNEs to Adopt CSR in Their International Business Operations and Strategies - Coursework Example

CORPORATE SOCIAL RESPONSIBILITY By Student’s Name Code + Name of Course Institution City/State Professor Date Introduction In other terms, Corporate Social Responsibility (CSR) can be referred to as sustainable responsible business or corporate conscience (Cadbury 2006, p.1). It is defined as a type of self-regulation by corporate, and is integrated into business models. The policy functions of CSR are a mechanism which is in-built that monitors and regulates business operations by ensuring that the organization complies with the law spirit, international norms and ethical standards (Cadbury 2006, p. 2). Some models of implementation of CSR by some international firms entail actions undertaken that go overboard the mere compliance by corporate through engagements in acts which seemingly appear to provide more of the social good (Husted & David 2006 p, 838). Such acts are usually beyond the jurisdictions of the firm’s interests or the requirements of the law. As a process, CSR aims to embrace the responsibilities of a firm’s actions as well as encourage a positive effect through its initiatives on consumers, employees, suppliers, social groups, the environment, society and other members in the public domain that have stakes in the company’s activities (Lindgreen & Valérie 2010, p.3). Thus, CSR is an obligation by MNEs to the people and communities around them. The activities of a firm should be based on a global culture based on awareness and respect of community’s cultural needs as well as the differences within the communities. CSR activities range from disaster relief, action against poverty, environmental conservation, special needs programs and illiteracy schemes (McWilliams, Donald & Patrick 2006, p.6). CSR comprises an important economic phenomenon, which is strategic in profit maximization. However, CSR is an efficient process that has been proved as a channel for provision of goods and services and is a compliment for the classical government interventions. Development institutions like the World Bank have stressed the importance of the private sectors and MNE’s in their roles of economic development. However, supplying of social, economic, or environmental services is usually by the incumbent governments rather than the drivers in the market of the countries where the MNE’s operate. In the event that rules and governments fail to offer the commodities and services required by the community, the MNEs through CSR initiatives can come in and offer the goods and services better than the governments (Morsing & Majken 2006, p.323). The CSR responsibilities provide that MNE’s operating in given regions have to enjoy the economic benefits derived from business activities. Employment is provided by the host countries while the host countries offer labor in return. This usually leads to better standards of living for the residents of the country in which the MNE operates. The key drivers of CSR are private and public politics as well as consumer markets. The interests for CSR have grown in recent times in the social, political, and economic spheres. The current period is characterized by substantial economic and social changes where there are emerging and new communities around the world. The changing society experiences immense technological changes, globalisation, environmental pressures and social change. CSR brings about new roles for companies in the emerging social and economic environment (Porter & Mark 2002, p. 56). Factors that motivate MNEs to adopt CSR in their International Business Operations and Strategies There are different schools of thoughts, which explain the different reasons why MNEs are motivated to undertake CSR in their international business operations and strategies. These explanations refer to the organizational structures, financial considerations, as well as processes including corporate governance (Vogel 2006, p, 6). Recently there have been suggestions that institutional features exhibited in the company at home and the varieties of capitalism as other likely reasons compel action by MNEs. The institutional theory, suggests that adoption of CSR is driven by elements other than the economic considerations. For example, normative pressures from the community or government in terms of addressing issues, such as pollution (Zerk 2006, p. 12). In the MNEs case, an explanatory framework for the institution in reference to the home country provides that the MNEs constantly face diverse environmental, institutional and stakeholder audiences. These usually impose pressures by articulate claims and demands towards the MNE’s. Therefore, CSR is regarded as a corporate responsibility to a potentially contradictory and complex set of institutions (Sen & Chitra 2001, p.225). A scenario of this complexity lies in the quality of governance, which is diverse and present in the host countries of MNEs subsidiaries. In the event that some elements in the host country; for example, protection of labor rights, are considered as questionable, by either of the stakeholders groups, negative consequences inside and outside the country that hosts the MNE may be created because of undertaking business there (McGuire, Alison & Thomas 1988, p.854). Setting up the production of goods or provision of services in a country with legal prohibitions propagated by union activities can cause controversy resulting in both reputational and financial losses. One likely response to such an outcome is adopting corporate social responsibility strategies to highlight responsible stewardship regardless of the prevailing situations (Husted & David 2006, p. 840). However, only a few companies are prone to such accusations or hold equal value in terms of keeping up good reputations. Thus, not all firms are accorded equal benefits because of undertaking CSR measures. In fact, some would prefer engaging in irresponsible behavior especially if cost savings outweigh benefits (Harrison & Edward 1999, p.480). Moreover, “responsible” corporate behavior is prone to different interpretations in different host communities, changing the benefits and costs of CSR (Doh & Terrence 2006, p.47). The company’s global investment structure is an important aspect, which determines the possible initiatives for CSR. The host country’s laws for example protect labor rights, and this usually controls the activities of the MNEs. The global investment play part in influencing the perceived reputation and the costs gained from CSR for the multinational enterprises because violation of labor rights lies at the center of the debate surrounding CSR. This constitutes a pervasive factor in international trade (Branco & Lúcia 2006, p.111). This is a representation of a crucial issue for putting to the test these institutional hypotheses. Generally, the reputational and financial risks of bringing investments in a host country rise with the worsening of the respective labor rights. This effect is however manageable and can be moderated by subsidiary’s importance in its relationships and size to the firm’s as well as the visibility of the host country, the type of production in the sector , and finally, the legitimacy attached to CSR by the host country. Some MNEs especially banks, undertake CRS initiatives because they receive direct benefits from such initiatives. These initiatives usually graduate into profit motives. This is strengthened by Carroll (1999, p.268) who asserted that firms only contribute completely to the community if it undertakes initiatives which are profitable, socially responsible and efficient. Similarly, the CRS concept is that firms and the community are intermixed. Furthermore, MNEs undertake CRS programs to ensure the society grows better and in promotion of the welfare of the community on moral perspective. In addition to profit making, MNEs assist in finding solutions to social problem regardless of whether the companies take part in the creation of such problems or not. This is also independent of presence of long-run or short-run potential for profit (Herrmann 2004, p.206). Many MNCs engage in programs or activities, which are of benefit to the community. This is because many managers are usually driven by strategic as well as moral considerations. Determination of whether CRS initiatives or programs are directed by moral values or profit motives is difficult (Leonard & Rodney 2003, p.27). Strategic motives usually form the reasons as to why financial services are compelled to ensure engagement in CRS. Such motives comprise of aspects like a company’s profitability, institutional motives, and instrumental motives. The strategic perspective as a factor, which makes MNEs to adopt CSR, provides that managers operating in MNEs globally perceive powerful strategic reasons, which compels them to participate in corporate social responsibility (Harrison & Edward 1999, p.481). The strategic elements are classified into institutional and instrumental motives (McWilliams & Donald 2001, p. 117). The instrumental motives are a belief by the managers that adopting corporate social responsibility by their companies in the host country can lead to profit maximisation through goods production and services provision in line with the community’s demands. In the financial services context, the demands by customers are social responsibility, access to security among others (Porter & Mark 2002, p.60). Managers at the same time are guided by the belief that the value of shareholders can be increased by participating in sustainable responsible business (Lindgreen & Valérie 2010, p.8). Proponents of sustainable responsible business argue that undertaking various corporate social responsibility forms reduces corporate risk for the business’ self-interests (Vogel 2006, p. 14). This means that social initiatives assist in reinforcing the reputation of the corporate of the company. Social goals are a top priority towards the community. Firms, which aim at capturing favourable public images, have to portray that they also support such kinds of social goals. In times of threats or crises, corporate social responsibility offers “reputation insurance” which secures the profitability of financial services. Reputation common in the banking industry is considered as an asset, which is intangible, and this usually increases the demand of products and services as well as in costs reduction (Zerk 2006, p. 18). Thus, the key strategic motive that compels MNEs to adopt CSR is the image and reputation of the organization. Another strategic perspective as to why MNERs engage in CRS is that the business institution exists merely because the business provides valuable services for the community. Businesses wishing to retain their current social power and social roles have an obligation to respond to the needs of the society and in giving the society what is required. This argument means that for the society’s demands to be met, the businesses have to be competitive. MNEs, which engage in financial services, have to adopt corporate social responsibility because of institutional motives. Such motives make it a requirement for such organisations to reinforce their CRSs. The reasons, which force international banks to undertake initiatives geared towards the community, include pressure from stakeholder groups (Blowfield & Jedrzej 2005, p. 500). Managers hold the belief that responding to pressures from institutions is significant in preserving the image of the company or in acquisition of goodwill amongst various stakeholders (Carroll 1999, p.279). The pressure to participate in corporate social responsibility usually comes from the community.MNC are also compelled to engage in corporate social activities in order to match the activities being undertaken by their competitors within their industry. Moral factors or moral motives to participate in corporate conscience of businesses means those firms have ethical duties to giving back to society. Personal moral values as well as the desires to contribute positively to the community for a brighter future can be strong drivers of CRS. Doing the correct thing is seemingly a strong motive that facilitates engagement of firms in CRS. A recent study in New York proved that managers of big companies portrayed that besides the improvements in profits generated from social initiatives, enhanced reputation and motivation of employees, the managers also showed a willingness to making the world in which they thrived a better place (McWilliams & Donald 2001, p. 127). Businesses have an obligation to improve the life of local communities and to work towards the society’s betterment without any personal benefits. How the Country’s Context Influences the Types of CSR Initiatives Undertaken There are different types of CRS and their applications vary from nation to nation. The way a particular CSR is undertaken varies from one country to another in relation to the location of the MNE. Thus, there are different ways in which the social purposes of a company reflect the values and culture of the host state where it operates (Basu & Guido 2008, p.122). Many MNEs claim to be assuming steps aimed at improving their social and environmental performance by using voluntary initiatives like environmental reporting and certification, codes of conduct, fair trading schemes, programs for social investment and social audits (Aupperle, Archie & John 1985, p. 448). The limits and potentials of voluntary initiatives aimed at improving the environmental and social records of big companies and their goals may not face similar marketing opportunities and pressures that allow responsible businesses in industrialized countries. The following include situations, which influence the types of initiatives undertaken by CSR. Domestic Regulation of MNEs Regulation of international companies in the host country can affect the kind of CSR initiatives adopted. In some countries, the process of coming up with frameworks for regulation is lopsided and slow. Whereas some steps have been undertaken in taxation, competition and investment to reinforce the MNEs rights in the host countries, there have been attempts to come up with regimes which are associated with environmental and labour issues. The conditions in a country can facilitate the kind of CSR undertaken depending on the government structures, regimes and institutions. For example, some countries demand that certain employment opportunities within these MNEs be reserved for the local citizens, and the number the company employs. For example, before any company can think of being a corporate citizen, it would need to ensure that it is profitable. Situations in the country like corruption can undermine economic CSR by an MNE.Customary norms of international law related to can influence the CSR initiatives in a certain country (Herrmann 2004, p. 206). Certification and codes of conduct The effectiveness of certification schemes and codes of conduct in promoting businesses, which are socially responsible, is dependent on the nature of the major stakeholders and parties which promote the codes of conduct. For example, trade unions and NGO’s can propagate certain measures, which need to be adhered to by the MNEs. The MNEs therefore offer CSR in line with these requirements. An assessment of certification created by civil Community group’s point that initiatives of such kind are more effective compared to industry-led initiatives. Certification in environmental or social initiatives can be a regulatory process, which would go a long way into compelling MNEs to offer CSR programs in that line (Porter & Mark 2002, p.58). Some kinds of schemes for certification schemes, like ISO 14001 offers have a probability of bringing about social responsibility in taking care of the environment by cutting down on pollution as a CSR measure. These offer management and policy in corporate environmental systems. These are likely to reduce the negative impacts towards the environment. Some other schemes for example, forest certification are effective as CSR initiatives. Civil society’s movements and organizations in different countries play important roles in advocating for implementation codes and certification schemes. It is important to draw the distinction between the agendas and goals of corporate responsibility and corporate accountability as propagated by corporate interests in the host countries. Experiences in Developing Countries Promotion of corporate conscience and environmental responsibility in most developing countries depends on the internal situations experienced in such countries. For example, in Indonesia, concepts like CSR are more fashionable having been introduced from abroad. In the country, there have been incidences of political turmoils, economic crisis, and social deprivation. These have generates priorities among the MNEs in promoting corporate environmental and social responsibility (Herrmann 2004, p.208). These initiatives are restricted to only a few corporations, which are targeted by the Northern consumers. The movement of corporate accountability has ignored a number of the worst corporate who offend labour standards, the environment and human rights, like tobacco companies and hotel chain. This situation stresses the significance of monitoring independently the codes of conduct. However, the monitors are usually engaged by a few companies to assess the safety standards and occupational health in limited capacities. Efforts put in place to promote responsibility by the corporate in environments of two other countries in Asian countries have been highlighted. In Singapore for example, environmental responsibility to some extent has been attained due to the strong capacity waged by the Singaporean government in enforcing legislation as pure voluntary initiatives. Nevertheless, the low awareness levels of the communities in environmental issues coupled with a weak movement for the environment have lessened the pressures mounted on corporations in adopting the voluntary initiatives (Herrmann 2004, p.210). These pressures are apparently more in Malaysia, whereby the corporate environmental responsibility has been constrained by weak enforcement in legislations. In the two countries, the certification of the environment lays under ISO 14001 sequences. This is an important show of commitment to improving the environment by voluntary businesses. The impact is however varied. In Singapore, compliance with legislations towards the environment is relatively high. The ISO 14001 series has not promoted many additional activities. However, in Malaysia, adopting the environmental systems of management has brought about improvements even with the absence of resources that would enforce regulatory compliance (Herrmann 2004, p.210). In Philippines, the scenario is illustrated by the idea CSR is not necessarily driven externally or dependent on laws that have been enacted. A movement which championed for CSR led by the Catholic Church and an alliance of interests for businesses, emerged in attempting to compel the business community to promote a development model. This movement diversified to handle environmental responsibility issues, in response to pressures mounted internationally and civil society activism ongoing in Philippines. In spite of these progresses, environmental corporate social responsibility remained weak because of little commitment by most firms and limited attention to monitoring and auditing (Herrmann 2004, p.211). In South Africa, the relationship between CSR and political and social changes are explored. International pressure made some firms to distance themselves from being associated with the apartheid regime, in order to make better performance in the social context. There has been attention by corporate in dealing with environmental issues by the industry associations, businesses and individual companies. Different international pressures have encouraged corporate environmental and social responsibility in a few developing countries but these appear to be weak in South Africa because of limited extents of production in the world markets (Herrmann 2004, p.208). Conclusion In summary, CSR embraces the responsibilities of the actions of a company as well as promoting a positive effect through its programs on consumers, social groups, and the environment, society and community members that have interests in the company’s activities. The interests for CSR have grown in recent times in the social, political, and economic spheres. The current period is characterized by substantial social and economic changes where there are new communities around the globe. Factors that motivate MNE to adopt CSR in their initiatives include the firm’s global investment structure, host country’s laws e.g. Labor rights protection. The strategic and moral perspectives are a factor, which makes MNEs to adopt CSR, provides that managers operating in MNEs globally perceive powerful strategic reasons. These compel the companies to participate in corporate social responsibility. There are different types of CRS and their applications vary from nation to nation. The way a particular CSR is undertaken varies from one country to another in relation to the location of the MNE. Thus, different ways exist in which the social purposes of a company reflect the values and culture of the host state where it operates. Certification and codes of conduct and domestic regulation as well as experiences in different countries determine the extent to which CSR is undertaken. 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