Corporate Social Responsibility (CSR) - Essay Example

 Introduction Commercial interests are always valued over the social interests. Without any doubt, corporations are only established to serve the wishes of their masters-shareholders- by amassing wealth for them. Other responsibilities, values, ethics, norms come later or even sometime these values are unable to get attention from the senior heads of giant corporations. The heads of corporations are under a legal contract; they are legally bound to serve shareholders. If they start giving more importance to the social responsibilities, they would not be allowed to continue doing work. Under the legal terms of the contract, the heads of corporations have to put their best efforts to ensure the achievement and retention of corporate objectives. It is their legal duty to serve shareholders. Shareholders and heads of corporations may slightly change their attitude towards social interests when the natural environment is being damaged because of their corporate objectives. The Exxon Valdez Oil Spill took place in the early 1990s in which approximately 10.9 million gallons had severely damaged the coastline of Alaska (eoearth). In this single environmental disaster, the whole sea life faced the risk of extinction; the entire ecological system of natural environment was severely hit and this environmental disaster left devastating impacts for the generations to come. In India, the Bhopal factory explosion further unmasked the inhumane face of the corporations towards handling the environmental issues and their subsequent impacts on the entire natural environment. Forget the past! What about the latest same sort of incident in the Gulf of Mexico where British Petroleum (BP) carelessly handled the problem of oil spill and left the entire sea life at the mercy of oil spill. Soon after that, BP was heavily fined over the mishandling of the issue. But, that action was not sufficient enough to bring back the normalcy inside the sea life and in the natural environment which was there before the incident in the Gulf of Mexico. After these horrible natural disasters at the hands of these corporations, can these corporations be called as socially responsible entities? For many, it would be difficult to agree with. Majority would find it difficult to applaud the role of corporations towards their corporate responsibility. In order to justify with the requirements of this paper, first, a corporation, Wal-Mart, and its CSR role has been included in this paper. Afterwards, the contribution of CSR towards corporate strategy is highlighted. Subsequent to that, the importance of CSR is discussed; and a critical evaluation of CSR comes before the part of conclusion. Wal-Mart and CSR Before going to understand the contribution and role of Wal-Mart towards the CSR, it is utterly significant to clearly define and understand the entire concept of CSR. This understanding would clearly help critically evaluate the role and commitment of Wal-Mart and other corporations towards the CSR. Corporate Social Responsibility has a wide variety of definitions (Margolis & Walsh, 2003). However, one particular definition has been given to understand the term: corporate social responsibility defines to be as voluntary actions of corporations, these actions are designed to improve social or environmental conditions (Davis, 1973; Wood, 1991; Wood & Jones, 1995; Waddock, 2004). Additionally, corporate social responsibility is also called as corporate social performance, sustainable responsible business (SRB), responsible business, corporate responsibility or corporate citizenship (Wood, 1991). Undoubtedly, this broader definition with a wider range of stakeholders may have distinct preferences for the socially responsibly activities they would prefer to see a corporation invest in. In addition, these preferences do not remain the same; they vary as the currency of social and environmental issues evolves over period of time (Clarkson, 1995; Davis, 1973; Moskowitz, 1975; Wartick &Cochran, 1985; Wood, 1991a). More clearly, CSR involves extending corporate accountability to other stakeholders, who are either directly or indirectly affected by the corporate activities of corporations. Under the framework of CSR, corporations are required to publish their corporate activities that put either negative or positive effects on the other stakeholders. Normally, corporations add an additional portion to their annual reports. The additional portion defines and explains the aggregate bearing of a corporation towards the CSR. Sometimes, the corporations separately publish CSR reports to clearly highlight their current contribution towards the CSR. These CSR reports are mostly read by the stakeholders. Employees, customers, suppliers, social and environmental groups, communities, governments, current and potential creditors, suppliers, and those other groups whose interests are directly or indirectly affected by corporate activities of corporations, are defined as the stakeholders. Wal-Mart annually publishes its sustainability reporting. Wal-Mart came into existence in 1962 with the visions of Sam Walton. Wal-Mart serves more than 200 million times each week at more than 8,400 retail units working under different 55 banners in 15 countries across the world including America (Wal-Mart, web). In its global sustainability reporting 2010, Wal-Mart has clearly explained its so-called responsible role towards environment, and social aspects of corporate social responsibility. The sustainability goals such as creating zero waste, selling products that sustain people and the environment and constantly using renewable energy are those sustainability goals that are mentioned in its annual sustainability report of 2010. In its sustainability reports, Wal-Mart vows to address the issue of greenhouse gases (GHG) emissions by monitoring its carbon footprint. However, this monitoring is of no use when in the same report it is mentioned that despite reductions in GHG intensity, which is measured by GHG emissions per million dollar sales, Wal-Mart’s absolute GHG footprint is continually rising. As a result, after realizing the gravity of the issue, Wal-Mart has made new goal to eliminate 20 million metric tons of GHG emissions from their global supply chain by the end of year of 2015. Waste and recycling are also significantly discussed in the sustainability report. From February 2009 till January 2010, the report claims that Wal-Mart redirected and recycled more than 64 percent of the waste generated by Sam’s Club and different stores. Additionally, in 2009 alone, 120 million pounds, 11.6 million pounds, 4.6 million pounds and 1.3 million pounds of plastics, mixed paper, cardboard and aluminium respectively are redirected and recycled. These are only figures representing U.S. market alone; a huge waste material is being generated by Wal-Mart across its other operational business units in other countries. Corporate Strategy and Corporate Social Responsibility Corporate strategy is a way to achieve and retain corporate objectives. The senior management of a corporation determines the contents of corporate strategy. These components are designed and implemented in a way to attain and retain corporate objectives. Since corporations are created to serve the commercial interests and earn maximum possible profits for their shareholders, there are fewer chances that other social objectives could be served in a required way. Corporate social responsibility is a voluntary action taken by some corporations. Still, there are no strict rules either from a government side or from a regulator side to serve the interests of social and environmental stakeholders. However, there are certain corporations who have made commitment regarding their positive role towards corporate social responsibility, and many corporations have made it as a part of their corporate strategy. To highlight some of their positive effects on society and the natural environment, corporations include CSR into their corporate strategy. To achieve this end, they declare their corporate strategy with some pages consisting of CSR information; also those steps which a corporation intends to take in future, are also highlighted. This display is taken to content the critics and other stakeholders regarding their seriousness towards the interests of social and environmental stakeholders. Despite, spending so much money and time over publishing CSR reports, many critics do not agree and they term it as lip service. To cement their claim, critics point out the Corporate Social Responsibility reports published by Enron, which collapsed as it did not exist ever! Even if a corporation incorporates its obligations towards corporate social responsibility in its corporate strategy, there are more chances of compromises on its commitment than the chances of fulfilling its commitment towards corporate social responsibility. Importance of Corporate Social Responsibility Corporate social responsibility entails huge importance in its application. There are various authors on the topic who do not disagree that there is a close relationship between a corporation’s perception in the minds of its stakeholders and the corporation’s aggregate volume of sales and profits. If stakeholders of the corporation think that the corporation is socially responsible and it plays its role responsibly towards the natural environment and other social aspects, then, shareholders and stakeholders do not de-attach their link with the corporation; rather they continue to maintain their relationship for a longer period of time. If a corporation is found to hugely contributing in GHG emissions, and constantly the corporation is polluting the natural environment, then, this tantamount to be an unethical business practice. The subsequent implications cannot be avoided. Here the BP’s latest mishandling of oil spill in the Gulf of Mexico authenticates the fact that socially irresponsible corporations are heavily socially, and commercially downgraded and heavy fines are charged on them. Additionally, BP has been heavily charged over its irresponsible role towards the oil spill. Internationally, BP’s perception has significantly declined; many suppliers have preferred to avoid doing business with BP over its irresponsible role. Critical evaluation of Corporate Social Responsibility Social responsibilities are not the prime objectives of the corporations. The corporations are the property of shareholders who establish and invest into the corporations to serve their personal interests and to earn a lot of profits. Shareholders do not invest their money to give charity or serve social causes or play a responsible role towards society and its different stakeholders. In the words of Friedman (2004), a corporation is the property of its shareholders; as a result, corporate social responsibility only can be insincere. In other words, even if a corporation claims to be a socially responsible entity, it can only be possible for it when the social investment directly or indirectly serves its main corporate objectives. How is it possible that a corporation serves social interests at the cost of its corporate objectives? It is out of question! Corporations cannot grow or satisfy their shareholders if they start serving the social causes at the cost of their prime objectives. Also, a tag of socially responsible corporation is an indirect way to increase their profits as this tag has become necessity for many corporations to gain the social recognition of their corporate actions. Furthermore, Campbell et al (2005), argues that by cherry-picking which type of stakeholders they want to engage in, corporations are deliberately using the term responsibility to serve their business interests. By doing so, corporations earn a positive image and connotations with their brand names. Also, some critics consider the CSR as a tool used by many corporations to hide their dirty corporate practices. For instance, British American Tobacco (BAT), BP and McDonald use the concept of CSR to distract the public from the ethical queries raised by their core businesses (Friends of Earth). Furthermore, Kelly (2004), contends that BP and BAT who claim to be the leaders of CSR, are far from being socially responsible. In fact, she reveals that the businesses which claim to be socially responsible actually performing financially better. Andrew (2004) unmasks some the so-called leaders in the CSR by visiting some of the factual grounds which are directly affected by the irresponsible businesses practices. How Shell, one of the architects of CSR, totally becomes unable to properly clean up oil spills in the delta regions of Niger and at the same time it runs community development programs, which remain ineffective. Additionally, How British American Tobacco; becomes unable to protect Brazilian and Kenyan farmers from the serious chronic diseases generated by the cultivation of tobacco by the company in their land. Also, How Coca Cola contaminates and diminishes water supplies, creating a life threatening situation for innocent communities in India. These situations clearly raise more questions for these corporations who claim to be socially responsible and adhere the norms of the CSR. Conclusion Corporate social responsibility is a communication process in which corporations aware the social stakeholders regarding their social and environmental effects on the society at large. Every corporate activity has social and environmental effects. Most of the time, corporate activities leave negative effects on environment and on society. In order to account for these corporate activities, large corporations publish their sustainability reporting with their annual reports. In the sustainability reporting, they show the existing effects of their activities over the environment and society. At the same time in the report, they describe their policies to minimize the negative impacts of their corporate activities on the environment. Corporate social responsibility is a self-assumed responsibility by the corporations. Corporations use the tool of corporate social responsibility to further their corporate objectives at the cost of other stakeholders. Basically, the concept of corporate social responsibility requires the corporations to understand their social role and behave like a responsible member of society. For this end, corporations must be socially responsible. However, corporations are established to earn profits for the shareholders rather to serve society. Corporations are there to serve the interests of their shareholders by maximising their wealth. So, it would be naïve to expect from corporations to serve the natural environment of society at the cost of their commercial interests. References 1. Andrew P2004, 'Behind the Mask: The Real Face of Corporate Social Responsibility', Christian Aid. 2. Exxon Valdez oil spill, [available at: http://www.eoearth.org/article/Exxon_Valdez_oil_spill?topic=58075] [Accessed 29 March, 2011]. 3. Margolis, JD, & Walsh, JP 2001, ‘People and Profits? The Search for a Link Between a Company’s Social and Financial Performance. Mahwah, NJ: Lawrence Erlbaum. 4. Davis, K 1973, ‘The case for and against business assumption of social responsibilities’, Academy of Management Journal, 16: 312-322. 5. Wood, DJ, 1991, ‘Corporate social performance revisited’, Academy of Management Review, 16(4): 691-718. 6. Wood, DJ, & Jones, RE, 1995, ‘Stakeholder mismatching: A theoretical problem in empirical research on corporate social performance’, International Journal of Organizational Analysis, 3(3):229-67 7. Waddock, SA, & Graves, SB1997, The corporate social performance- financial performance link, Strategic Management Journal, 18: 303-319. 8. Clarkson, MBE, 1995, ‘A stakeholder framework for analyzing and evaluating corporate social performance, Academy of Management Review, 20: 92-117. 9. Moskowitz, M 1975, Profiles in corporate responsibility: The ten worst, the ten best. Business and Society Review, 13:28-42. 10. Wartick, SL, & Cochran, PL1985, ’The evolution of the corporate social performance model’ Academy of Management Review, 10: 758-769. 11. About Us, Wal-Mart data, 2011, Available at: http://walmartstores.com/AboutUs/ ] [Accessed: 30 March, 2011]. 12. Friedman 2004, ‘The Corporation (Joel Bakan, The Corporation The Pathological Pursuit of Profit and Power, Constable, 2004) draws heavily on the example of BP, See also Platform's Carbon Web project www.carbonweb.org, and www.bpamoco.org.uk, a spoof website exposing BP's PR campaign. 13. Campbell ,J, Martin, Rene T, B, 2005,’For Business Ethics: A Critical Approach, Rutledge, 14. Friends of the Earth (2005-04-28). "British American Tobacco Report Shows Truth Behind Greenwash". Press release. http://www.foe.co.uk/resource/press_releases/british_american_tobacco_r_27042005.html 15. Kelly, M 2004, 'Holy Grail Found: Absolute, positive, definitive proof CSR pays off financially', Business Ethics Volume 18 #4, 16. Andrew P2004, 'Behind the Mask: The Real Face of Corporate Social Responsibility', Christian Aid Read More