Does the assumption and implementation of corporate social responsibility makes businesses more successful - Essay Example

?Does the assumption and implementation of corporate social responsibility makes businesses more successful? Introduction and Background Corporate responsibility in the most comprehensive form is how companies manage their businesses to form a more positive impact on the society. It encompasses two broad views in general. The first one is that the companies share the wealth they create with either the society they operate in or other under privileged societies. The other is managing their activities in a more ethically and morally responsible way. It is the voluntary exceeding of the society's expectations of the business and it is agreed that it is majorly affected by how the company manages its core businesses. (Baker) Corporate Social responsibility is extremely important to a company's business. According to a survey by the Economist Intelligence Unit, Corporate responsibility is affecting the relationship between companies and their various stakeholders, such as investors, customers, vendors, suppliers, employees, communities and governments. (Doebele, 2005) Underlying principles The Corporate responsibility trend is being driven by a large number of factors. Companies which do not engage in social responsibility might be viewed as unethical as peoples trust in large organizations is already waning. The rise in the corporate governance movement, globalization of businesses and the competition presented by rivals all contribute to a firms increasing interest in corporate responsibility. The benefits of corporate responsibility may prove never ending for an organization. They might not necessarily be tangible because of the costs of Corporate responsibility but the intangible benefits include brand enhancement, stronger employee morale and greater investor confidence. Corporate Social responsibility is the basic set of ethical and managerial principles to guide a business enterprise. This is so because it deals with everything from corporate image, public relations, environmental liability, lawsuits, relations with governments and worker morale. These corporate responsibility principles are guided by another set of principles. The first principle is that the company produces raise the quality of life. Three basic types of processes are identified to implement Corporate responsibility principles. They include environmental management, issues management and stake holder's management. There will be times when two or more of these management areas will be integrated to form one areas of concern. Foreg in 1994 BHP Billton's shareholders were concerned about the company causing environmental damage in Papua New Guinea. (Gail Thomas, 2006) There have been multiple arguments in favor of supporting corporate social responsibilities for businesses. It has been said that practicing a business enables many things in the society and businesses are dependent upon a healthy, well-developed and economically sound society for its proper functioning. Improved quality of life for employees and citizens should be one of the top priority for all ethical businesses and this is only fulfilled if they practice giving back to the society or caring capitalism as Niall Fitzgerland, chairman Unilever calls it. Since the main responsibility that the company owes is towards itself, the company has to ensure that fulfilling responsibility is both beneficial to itself and the society, but ensures that the company survives in the long run. People in favor of corporate social responsibility clearly state that CSR enhances the view of the company in the eyes of the customers and generates a loyal customer base. Others state that fulfilling CSR also provides unmatched promotion and publicity for the company which is again very necessary for the success of the company. Last but not the least practicing social responsibility raises the morale and self esteem of the employees of the company and they feel good about the contributions and are more likely to work efficiently and develop into diligent workers. Boyle and Boguslaw (Boyle, 2007, pp. 101-120) have indirectly associated poverty reduction with a company’s responsibilities and acknowledged that poverty is an issue which should be framed by company's who should later work to accelerate its reduction. Prahalad and Hammond (Prahalad, 2003, pp. 1-26)have stated that by serving the poor, businesses can gain new sources of revenue and multi-nationals also gain greater efficiencies with cost reduction which directly translates into a higher purchased power for customers leading to the company's betterment. According to Carroll (Carroll, 1979, pp. 497-505), these CSR companies have all economic, legal, ethical and discretionary responsibilities. Thus companies practicing CSR have to address an entire spectrum of obligations. Thus society's expectations from a CSR company are quite high and the company might face a difficulty in fulfilling it and in tight financial times might find it to be an onus. Researchers of CSR have also emphasized the performance oriented analysis of companies is also important along with ethics based analysis and they may not be inter related as CSR might work both as a pro and a con for the company's finances. Research will be made in this regard to reach a final conclusion whether giving back to the society and enhancing the society's living standards also raises tha bar for the company or not. Objectives The objectives of the research are as follows 1) To investigate and analyze performance of companies which practice corporate social responsibility. 2) To explore the different dimensions in which companies practice corporate social responsibility. 3) To form a definite linkage between corporate social responsibility and the financial performance of the company 4) To conclude that which form of corporate social responsibility is the most beneficial for the company. 5) To assess the effectiveness and the impact of CSR programs, their evaluation and using them to help devise future strategies. Research assumptions and limitations The main assumption that the research is making is that practicing CSR has led to a change in the company’s performance. Companies whose performance has taken a sudden twist due to other factors have been eliminated from the research. Another assumption is that the company while performing CSR, fulfills responsibilities towards its main stakeholders as this is the greatest responsibility of the company. Limitations for research include the fact that the data available is extremely large and random selections of companies have been made which may lead to a bit deviational results. All data has not and cannot been included in the research and the research can give an idea about but cannot lead to definite conclusions Research strategy and methodology The research will use secondary data which will primarily consist of annual financial reports of companies which do and do not practice corporate social responsibility. Analyzing the financial performances of companies and relating it to CSR practiced can give an insight on the effects of CSR on business performance. All available information will be pinned out from the selected annual reports of two consecutive years, one in which the company was not practicing CSR and the next in which the company was performing CSR. Other secondary source of data will be all literature available on corporate social responsibility and theoretical underpinnings will be made possible because of that. (Krass, 2000) Primary sources of data will include surveys and questionnaires which will be sent to around 50 different international companies. The questionnaires will include questions about the ethics code, CSR initiatives, decision making processes, their implementation strategies and their consequent assessment and effectiveness. Depending upon the data generated, it is possible that a detailed case study of some wal-marts of CSR and some other selected companies might also be made. (Cannon, 1994). These detailed surveys will include interviews and discussions with top management, ethics officers, directors, employee leaders and other stakeholders about what they feel is the impact of practicing CSR. The independent variable in this case will be the amount of money and other efforts invested in the CSR program whereas the dependent variable will be the financial performance of the company and the reviews of the company by stakeholders. Proposed timetable The timeframe for this research is considerably short as main research will be done from secondary data and will come from the analysis of financial statements. The amount of primary data to be gathered is fairly less so its gathering and the analysis of the complete data sets will take up to 3 months. The breakdown is as follows. Day 1-15 Planning and gathering of secondary data Day15-60 Gathering of primary data Day 60-90 Data analysis, forming definite trends and conclusions/production of report Conclusion Thus the research being undertaken will result in a conclusion that whether CSR leaves a positive impact on a firm or not. It is a leading principle of entrepreneurs and companies all over the world. CSR is often carefully integrated into the business strategies of businesses globally and often leaves a positive impact both on the stakeholders and the society. it increases the company's efficiency and often promises a brighter future. (Alessia D’Amato, 2009). The question of how and how much does CSR contribute will be explored and hopefully answered by this research. References Alessia D’Amato, S. H. (2009). Corporate social responsibility and sustainable business . North Carolina: Center for Creative Leadership Greensboro,. Baker, M. (n.d.). Definitions of Corporate social responsibility. Retrieved October 24, 2010, from http://www.mallenbaker.net/csr/definition.php Boyle, M. &. (2007). Business, poverty and corporate citizen¬ship: Naming the issues and framing solutions. Journal of Corporate Citizenship , 101–120. Cannon, T. (1994). Corporate Social Responsibility - A Textbook on Business Ethics,Governance & Environment. London: Pitman Publishing. Carroll, A. B. (1979). A Three-Dimension Conceptual Model of Corporate Performance. Academy of management review , 497-505. Doebele, J. (2005). The importance of Corporate social responsibility. Economic Intelligence Unit . Gail Thomas, M. N. (2006). Corporate Social Responsibility: A definition. Perth: Graduate School of Business, Curtin University of Technology. Krass, P. (2000). Conference Board - Corporate Citizenship Brings Success, in Challenges to Business,. Prahalad, C. K. (2003). Serving the world’s poor, profitably. Harvard Business Review , 1–26. . Read More