The Evolution of the Corporate Social Performance Model - Essay Example

Business law Legally, companies are established to increase more zeros in the bank accounts of their shareholders. In the same direction, companies are only accountable for their actions to their principles-shareholders as they own shareholding in the companies. But, corporate social responsibility does not directly satisfy the interests of the shareholders, rather it would not be incorrect to say that the corporate social responsibility is a contradiction in terms. Many organizations such as Seventh Generation, British Petroleum (BP), and Wal-Mart have added some pages of corporate responsibility in their annual financial statements, showing their concerns of stakeholders other than shareholders. In these reports, they show their financial, social and environmental investment to mitigate the losses and harms caused by their corporate activities. These few pages provides a way to these companies to marketize their public image, avoid regulation, access to markets and gaining legitimacy for their corporate objectives. In this paper, corporate social responsibility is defined with emphasis on innovation, and subsequently companies publishing CSR are critically analyzed and discussed in a way to reach at a reasonable conclusion. Corporate Social Responsibility Corporate Social Responsibility (CSR) is a concept whereby companies integrate environmental and social concerns in their business operations and in their interaction with their stakeholders on a voluntary basis (European Commission). Additionally, CSR has various definitions (Margolis and Walsh, 2003). Also, Wood (1991) provides that CSR is also called as corporate social performance, sustainable responsible business (SRB), corporate responsibility, corporate citizenship or responsible business. This definition highlights that CSR is not a regulatory requirement for the companies; nor is legal obligation that require companies to take into account the impacts of business activities over social and environmental issues. Additionally, this definition points out that the companies to integrate environmental and social concerns in their business operations. This means, there is no exact and prescribed method or mechanism provided by this definition that can be used to identify the level of social or environmental care in their business activities. The definition of CSR describes a wide range of stakeholders. Interestingly, each stakeholder does not have the same kind of interests in a company rather different. And these interests vary, as the currency of environmental and social issues revolves over a period of time ((Clarkson, 1995; Davis, 1973; Moskowitz, 1975; Wartick &Cochran, 1985). In the CSR reports, the companies incorporate their current corporate activities that harm environment and society. Besides, such reports contain the positive and negative effects of commercial activities. And, in such reports, the companies mention their current level of financial and non-financial investment in order to minimize the impacts of their commercial activities. As employees, suppliers, creditors, customers, social and environmental groups, governments, local communities can be stakeholders; the companies prepare their CSR reports with regard to the concerns of the related stakeholders. As a result, mostly they are identified as the stakeholders. However, some companies have been publishing CSR for many years. And, their websites are filled with the material showing their policy to tackle the environmental and social concerns. For example, on the Seventh Generation website, it is mentioned they have been environmentally and socially playing their role and working with innovations to live better life. Environmentally, the company provides its Greenhouse Gas Accounting, carbon footprint reports and their strategies to minimize them. Socially, the website maintains that it has Seventh Generation supports the Ovarian Cancer Research Fund (OCRF) (7genreport, web). Additionally, Wal-Mart also publishes its sustainability reporting with its annual financial reports. Wal-Mart is a U.S. based multi-national company, having more than 8,400 retail units doing business under 55 different banners in more than 15 countries (Wal-Mart-Web). In its global sustainability reporting of 2010, Wal-Mart vows to be a socially and environmentally friendly entity with its description of sustainability goals, such as creating zero waste, using innovation in ways to reduce waste, using renewable energy resources. In its sustainability reporting, Wal-Mart provides its carbon footprint by measuring the level of Greenhouse Gases (GHG) emissions. It emphasizes that it monitors its footprint and has put in place financial investment to reduce its impact. However, such claims are of no use when in the same report it is written that despite reductions in GHG intensity, which is determined by GHG emissions per million dollar sales, Wal-Mart’s absolute GHG carbon footprint is constantly increasing, exposing the real commitment of Wal-Mart towards its environmental issues! Also, the sustainability reporting also accounts for recycling of waste and waste management. The report mentions that during the period from February 2009 to January 2010, the company recycled more than 64 percent of the waste generated by Sam’s Club and other retail stores. In 2009, aluminum, cardboard, mixed paper and plastics of 1.3million pounds, 4.6 million pounds, 11.6 million pounds, and 120 million pounds respectively were recycled. Interestingly, this huge magnitude of waste was recycled in US stores, which is mentioned in the report, however, nothing much is discussed in the report regarding waste generated by the Wal-Mart’s other operational business units in other countries. Various reasons have provided importance to the concept of CSR. And various authors on the topic do not disagree that there exists a strong relationship between the perception of a company in the minds of its stakeholders and the company’s sales and profitability. If the shareholders and stakeholders think that the company is a socially and environmentally responsible entity and is responsibly playing its role, the shareholders and stakeholders prefer to remain with the company with good terms and continue to be having the same direction. If they found out the company has seriously violated its commitment and found guilty damaging and endangering social or environmental stakeholders, the possible repercussions cannot be avoided. For example, in the recent history, BP totally mismanaged its oil spill in Gulf of Mexico, endangering the entire sea life and pushing it to face the threat of extinction. After a long investigation, BP was fined for its mismanagement of oil spill. Here, it is important to highlight that various questions are still unanswered by that environmental disaster at the hands of BP. Can the sea life be resumed to the pre-oil spill? Can the fine charged on BP bring back the same sort of life to the sea creatures ever? What about the impacts of oil, which are im-measureable till this point of time not only on sea life but also on humans living in nearby areas? Companies are only to serve their shareholders. Social responsibilities are not the basic objectives of the organizations, nor the environmental ones. Shareholders are owners of the companies and they invest in them for the purpose of earning wealth and fill their bank accounts. They have completely commercial interests in them; shareholders would never allow the social or environmental objectives should be carried out the at the cost of commercial corporate objectives. Even if the companies may have sympathy with society or environment and put some social or environmental objectives in the list of company objectives, the moment shareholders receive this information, they would prefer to fire such management. In the words of Friedman (2004), a company is the property of shareholders; consequently, CSR can only be insincere. Additionally, if a company works for society or environment, it will be only carried out when its fundamental corporate objectives are severed, in the vice versa situation, they cannot be made part of corporate objectives. Also, Campbell et al (2005) argues that by cherry-picking which sort of stakeholders they want to engage in, the companies deliberately use terms like ‘responsibility’ to serve their objectives of business. in that way, the companies become successful to show a social and environmental friendly image with their brand names. Furthermore, a sufficient number of authors do not disagree with the notion that the companies use CSR as a tool to hide their unethical and inhumane corporate activities. For example, BP, McDonald and British American Tobacco, use the notion of CSR to distract the public from the ethical questions surfaced by the core businesses (Friends of Earth). Kelly (2004), explains that BP and BAT that claims to be champions of CSR, are far from being socially or environmentally responsible, rather she contends that the companies, which claim to be socially responsible, actually they are financially improving and are increasing their profits. Additionally, Andrew (2004) further explains the real faces of large companies who proudly boast of their CSR report and claim to be socially and environmentally accountable and responsible. How Shell, which is also known for its role in the developing the concept of CSR and its importance, becomes financially and operationally insufficient to clean up the oil spills in the delta region of Niger and at the same time running welfare and community development programs, which are also far from serving the interests of local community. The same sort of unethical practice is also provided by the British American Tobacco when it finds no way to save Brazilian and Kenyan farmers from the serious diseases appeared and generated by the cultivation of tobacco by the company on the land of Brazil and Kenya! Coca Cola is no exception here! How it contaminates water supplies in India, creating a possible life threatening condition for the local population of the area. Conclusion Corporate social responsibility and innovations to build better future for the coming generations are basically nothing more than attractive slogans. The main and ultimate purpose of such campaigns is to do business in a smart way rather than playing a responsible role for the society and the environment. On the face of it, CSR can be a best way towards aggregate growth, here aggregate growth means without damaging any of the stakeholders or hurting the interests of any stakeholders, and obtaining corporate objectives. Since customers, suppliers, creditors, physical local and geographic environment, and local communities have much resemblance in today’s business environment, use of CSR may serve a better and effective channel of communication between and among them. There can be no way to do an ethical and responsible business without taking such stakeholders into account and hearing and incorporating their appropriate and legitimate concerns in the business objectives. By realizing the importance of CSR, Wal-Mart, Seventh Generation, and certain other organizations are regularly preparing and publishing their CSR reports with their annual financial statements. In these reports, they mention their current policy towards social and environmental issue. And they also account for its positive and negative effects in their CSR reports. Additionally, they also mention their financial and non-financial investment is also highlighted to reduce the possible impacts of their business activities over society and environment. They not only include their current financial expenditure but also define how they are going to further increase their financial contribution towards such environmental and social issues. By doing so, they realize that they are and they play a responsible role towards society and environment. And in their resolve, they have a comprehensive plan to further carry out their social and environmental commitments. However, such environmental and social commitments are less convincing to the critics. The critics contend that the companies are created to generate wealth for the shareholders. For them, wealth generation and keep increasing such wealth are the fundamental corporate objectives. Under no circumstance they can go against such corporate objectives, the moment they decide to work for the society or environment, they find it difficult to keep doing business. Assuming that the companies can do better socially or environmentally would be equal to making mistake! Furthermore, critics say that CSR is not a legal requirement rather it is a self-assumed responsibility. Complying with the requirements of CSR would directly or indirectly put more burden on the cost side of the companies. The recent financial crisis and rising cost of doing business have tightened the nose of many business concerns. Every attempt would be carried out to decrease a possibility of new cost. Hence, companies, in these days, are under more stress financially and economically than they used to be. The recent mismanagement of BP over the oil spill in the Gulf of Mexico is a clear example without needing further explanation over the intentions of companies towards their CSR role. In this single environmental disaster, the entire sea life of Gulf of Mexico was put to the threat of extinction, endangering the entire sea life structure not only inside the Gulf of Mexico but also the physical environmental aspect of it. The subsequent fine on the BP was not capable enough to take away the dangerous impacts that were left by the oil spill, nor was it sufficient enough to bring back the same sort of life to the sea life that was there before this environmental disaster. Even if, for the sake of argument, we assume that the companies are ethically and environmentally sustainable, that can be only possible when their corporate objectives are served in a way they want them to be served. It is rare that a company work for society or environment issue at its business cost, the companies are commercial and they prefer to remain commercial rather than social or charity organizations. So, they cannot be such charity or social organizations, as a result, they would be commercial and the commercial organizations only prefer to serve their commercial interests rather than doing serving society or environment. Works Cited European Commission, ‘Sustainable and responsible business’ 2011, web. 24 April, 2011. Margolis, JD, & Walsh, JP, ‘People and Profits? The Search for a Link Between a Company’s Social and Financial Performance. Mahwah, NJ: Lawrence Erlbaum, 2001 Wood, DJ, ‘Corporate social performance revisited’, Academy of Management Review, 1991:,16(4): 691-718. Davis, K, ‘The case for and against business assumption of social responsibilities’, Academy of Management Journal, 1973: 16: 312-322. Clarkson, MBE, ‘A stakeholder framework for analyzing and evaluating corporate social performance, Academy of Management Review, 1995,:20: 92-117. Moskowitz, M, Profiles in corporate responsibility: The ten worst, the ten best. Business and Society Review, 197513:28-42. 7genreport, conversions with our customers, 2011, web< http://www.7genreport.com/engagement/index.php> 24 April,2011 Wal-Mart, sustainability reporting,2010, web. http://walmartstores.com/ 24 April, 2011 Campbell ,J, Martin, Rene T, B, ,’For Business Ethics: A Critical Approach, 2005: Rutledge Kelly, M, 'Holy Grail Found: Absolute, positive, definitive proof CSR pays off financially', Business Ethics Volume 18 #4, 2004 Andrew P, 'Behind the Mask: The Real Face of Corporate Social Responsibility', 2004 Christian Aid 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 Friedman, ‘The Corporation (Joel Bakan, The Corporation The Pathological Pursuit of Profit and Power, 2004Constable, 2004) Wartick, SL, & Cochran, PL, ’The evolution of the corporate social performance model’ Academy of Management Review, 198510: 758-769 Read More