Benefits of Corporate Social Responsibility - Essay Example

Introduction Ethics in simplest terms means to be able to discriminate between the right and the wrong and have the courage to stick to the right nomatter what temptations may arise. Managers justify that the definition of ethics changes with the situation. According to Robinson (2002), ethics is a set of moral principles held by an individual or a group, encompassing individual behaviour, environmental policy, staff policy, and corporate social responsibility, which has gained importance recently. Maintaining ethics and discharging social responsibility are interrelated. The area of social responsibility extends not to the society in general but it is now focused on the workers, the investors, customers, and suppliers. Corporate social responsibility or CSR is an industry in itself. Over the past decade, this has grown exponentially. The employee volunteering has now emerged as the CSR. Companies like Accenture and Whitbread term this as Corporate Citizenship (Carrington, 2005) where they take up working with the sick children and the local schools. Most of the staff gets involved in some voluntary service or donation. The tourism and hospitality companies bring about a transformation in the area they operate but all of the changes may not be desirable. They need to maintain ethics and discharge social responsibility but the question remains whether they should always demonstrate corporate social responsibility. Importance of ethics in business Today ethics determine the success of an organization. Demands of the shareholders, stakeholders and investors are forcing industries to maintain a high morality in how companies conduct business. Any deviation can adversely affect the brand image, customer retention, and overall business. A certain group of investors in Europe have decided to invest only in companies who are conscious of their social responsibility. Post (2000) contends that an organization’s global corporate citizenship is shaped by internal and external factors. How a company deals with past public issues, stakeholder issues and community concerns determines the employees’ perception of the importance of citizenship matters. Many are of the opinion that since the goal of the public corporation is to maximize shareholder wealth, management should take any action necessary to achieve this goal so long as no law is violated. The rationale for ethics in business stems from the fact that when corporations collapse the society in general loses – the shareholders lose, the customers, the employees, the community, the creditors, the family – all lose. Hooker (2003) argues that ethics exist because ethical behavior does not always pay. If ethical behavior were always rewarded, there would be no need for ethics. In the long run, however, morality pays. Unethical people do run into trouble even if they have reaped profits for some time. Ethical companies develop a brand image; investors come forward and support it in times of trouble. Above all, it brings financial rewards with it. Profits at the cost of ethics may pay rich dividends today but these are more often than not short-lived. Executives may be under pressure to achieve targets and find no discomfort in either engaging child labour to cut costs or conceal product information. They derive their bonus and move on to ‘better prospects’ for a better ‘pay packet’ leaving the company to ‘face the music’ (Hooker, 2003). This is at the individual level but there are instances even at the corporate level. Importance of CSR Financial Times recently reported that ‘not only do people in different countries have a different perception of what constitutes good corporate responsibility, but that their perception is dynamic and changes according to agendas’ (Slepian, 2005). CSR is not incorporated into an organizational strategy and hence can be dispensed off whenever the going gets tough. This makes the employees feel that they work for an insincere and uncaring company. There is no consensus, no standards and there are different expectations of what CSR is designed to do. Most annual reports now include not just the financial statements but also the company’s social commitments. There is an increasing attention on a company’s commitment to ethical and socially responsible behaviour. Grants, ratings, and rewards are also being awarded for good corporate citizenship. Debates are held and surveys conducted to determine whether CSR improves an organization’s image or profits. Hospitality Industry – introduction Ethical standards are important and necessary in the hospitality industry. The hospitality industry comprises of hotels, motels, contract catering, restaurants, pubs, clubs and bars apart from hospitality services. Each of these sectors requires licensing and the licensed retail sector of pubs, clubs, and bars alone is worth 20 billion pounds (AGCAS, 2005). There are about 64000 licensed units operating in UK and includes city nightclubs. The question that arises is even though it is a licensed sector and efficiently managed, how ethical is it to conduct business of this type? Are each of these units aware of their social responsibilities towards the staff and the customers? The pubs mostly employ students due to which many staff works part-time. Ethics in the hospitality industry In the hospitality environment, ethical issues surround guest rights, empowerment, sexual harassment, equal opportunity, departmental relations, vendor relationships, yield management, community and public relations, and the balance of personal and organizational values (cited by Upchurch, 1998). In a service-based setting like the hospitality sector, it is the management’s role to resolve ethical issues. It has been found that management in this sector base their ethical decisions on self-interest, care and concern for others and on the importance of adherence of internal and external rules and regulations. In the hotel industry, managerial ethical standard (MES) is the process in which the management is responsible to mould the hotels’ ethical environment. Hotel employees face ethical challenges and temptations at their workplace every moment. A guest may offer tips for room upgradation, or seek assistance in theft of hotel property or ask for some services, which are not part of the routine services. In the absence of code of conduct, the employee has to take instant decisions. Business ethics should not be merely a corporate code but should be implemented as a corporate philosophy (Yamaji, cited by Svensson & Wood, 2004). Virtue does not guarantee success but it is essential for success otherwise the firm can only enjoy short-lived benefits. Tung & Miller (1990) emphasize that in international business relations managers face uncertain situations and tend to fall back on their own values to make decisions (cited by Wong & Chung, 2003). Ethics is very important in attracting customers to the hotel. In this industry, the ethical behaviour and standards of the direct service providers (staff) are critical components (Wong, 1998). Kim & Olsen emphasize that no industry can exist free of its external environment (Ingram, 1995). The hospitality industry, which includes tourism and hotels, influences the environment and is influenced by the environment. These influences may be both positive and negative. Environmental pollution, child labor, and sex abuse is rampant in this industry, which is a responsibility of the industry or the players in this field. Hospitality organizations exist in a social, political, and economic environment and they cannot afford to ignore this. Tony Allen of Hospitality Action says that the staff feels pride in working for companies that make them feel socially responsible (Hashmi, 2002). The owner of 16-roomed hotel feels that if you treat your customers, suppliers and staff properly they stand by you through difficult times. Freidman (1989) argues that it is not the business of businesses to be socially responsible (cited by Chryssides & Kaler, 2001). He emphasizes that there is just one social responsibility in business which is to engage in activities to increase profits. A renowned hotel in South Pacific (Chryssides & Kaler, 2001) employs over 250 people and the owner takes personal interest in their welfare. Since it is a closely held property, she can afford to give them more wages than the prevailing rates and generously help not only their families but also contribute to the national fund raising efforts. This no doubt reinforces relations with the employees but had there been stakeholders they would have to play within the parameters laid down. However, profits remain the prime concern. If CSR does not make a difference to the business, why one should get into it at all, questions Jerry Marston of Whitbread. While big businesses have the resources, it may be too much paper work for the small businesses, warns Bob Cotton of the British Hospitality Association (Jackson, 2002). The fast food industry tries to make its presence felt in the sector of social responsibility with McDonalds (2002) describing how the company is creating a positive impact upon the community, the environment, and the global market (Strategic Direction, 2002). They attempt to project the brand image rather than any actual work done. The Weizhi group (Strategic Direction, 2002) is a living example that principles and profit can abide side by side. They stuck to their principles of honesty, sincerity, diligence, and hard work and managed to get the desired returns by sheer dedication. The market today is customer oriented and the demands of the society are ever increasing. People look for products and services that satisfy their moral and ethical values. This calls for enhanced performance to fulfill their responsibility as corporate citizens. Pubs and their responsibility towards the society The pubs have led to the development of late evening culture, which is frequented by the youth in the age group of 18-30. Consumption of alcohol is the major attraction. Pratten & Greig (2005) cite a recent study which showed that on a weekend Norwich will have about 15,000 people; Newcastle upon Tynes city centre is registered to allow 30,000. Croydon expects to attract 25,000 visitors on Saturday evening, and Cheltenham welcomes 20,000. With these figures, the advantages in economic terms are clear both for the nightclubs and for the region concerned. What is being ignored is the environmental and noise pollution that nightclubs bring. Alcohol encourages violence, rowdy behavior and criminal acts. Cleaning the debris and arresting the criminals has a cost, which the administration has to bear. Insurance companies too are burdened. Boffey (2003) reported that the Daily Telegraph announced that alcohol abuse was “costing Britain £55m a day” (cited by Pratten & Greig). Girls drink and make themselves vulnerable to attack. Surveys have revealed that alcohol misuse is directly related to crime. There were around 1.2m incidents of alcohol-related violence in 1999 and half of such incidents took place around the pubs and nightclubs. It becomes imperative that the drink manufacturers and the club management jointly devise and take of the customers after they are drunk. Their responsibility does not end by providing entertainment and reaping economic benefits. The government too should take responsibility while granting license to such outfits. Concerns and implications of not following code of ethics Environmental concerns like energy conservation, sewage discharge and air and noise pollution have been a major issue in the hotel industry. Customers today prefer hotels which show concern for the environment. Environmental management Systems (EMS) has become recognized in the hotel industry. Due to resource limitations, hotels do not go beyond water-saving campaigns, energy-efficient lighting and reuse of paper (Chan & Ho, 2006). Studies demonstrate that most organizations lack the knowledge, expertise and experience to develop an EMS. In 2001, only 40 percent of the large hotel groups in Europe had a formal EMS despite the hotel industry recognizing the value of EMS. Various associations like Green Globe 21 assist in environmental work but lack of training resource is a major concern in hotel management curricula. Smoking was permitted in the UK in the pubs and bars but the UK Government’s Department of Health reported that environmental tobacco smoke (ETS) exposure was a cause of lung cancer, ischemic heart disease, serious respiratory illness and asthma (Carrington, Watson and Gee (2003). While it is necessary to accommodate smokers, the customers should not have to breathe other people’s smoke in the pub or restaurant environment, which can be detrimental to their health. Since it is essential to provide service to both smokers and non-smokers, a balance has to be maintained. Non-smoking signs in the designated areas were found to be ineffective as the smokers were confused and better communication is felt necessary. Despite segregation and adequate ventilation, the non-smokers are still exposed to ETS. This is an area of great concern in the hospitality sector as customer satisfaction is vital to the industry. Benefits of CSR The cost to a company for being unethical stretches beyond the monetary sums and damages many areas. The cost of corruption can be much higher than people can perceive and it takes different forms (Vogl, 2007). The scandals weaken the public confidence in the company. They do not give credence to information released by the executives of the company. As scarce resources are wasted and stolen economic growth of the company suffers a setback. Corruption undermines the efforts to build democratic institutions. According to Immanuel Kant duties cannot be associated with self-interest like rewards and pay-offs (Carrigan, Marinova & Szmigin, 2006). Firms exist for the society and have a moral obligation to satisfy the needs and deliver benefits to the society. Such an approach would result in richer dividends for a firm because consumers will perceive its operations as ethical. Very often companies are not willing to place the interest and welfare of the society before its self-interest. Mascarenhas states that marketers should behave in an ethical manner as because information about a firm’s ethical behaviors influences product sales and the consumers’ image of the company (Carrigan & Attalla, 2001). Conclusion Thus, the study concludes that hospitality and tourism companies should always demonstrate corporate social responsibility. Profits at the cost of ethics do not reap dividends in the long-run. Firms can enjoy short-term benefits but today even the right employees can be attracted to a firm that not only has a code of ethics laid down but actually implements it. This enhances the brand image of the firm. It is very easy to be lured by attractions in the hospitality industry but it pays to demonstrate social responsibility ultimately. The benefits of maintaining corporate social responsibility is reaped by all the stakeholders which include the shareholders, the owners, the employees, and the customers. References: AGCAS (2005), Hospitality: As it is, 22 Jan 2008 Carrigan, M., Marinova, S., & Szmigin, I., (2006), Ethics and international marketing, International Marketing Review Vol. 22 No. 5, 2005 pp. 481-493 Carrington, J. Watson, A. F. R & Gee, I. L. (2003), The effects of smoking status and ventilation on environmental tobacco smoke concentrations in public areas of UK pubs and bars, Atmospheric Environment 37 (2003) 3255–3266 Carrington L, (2005), Call to Arms, People Management, 23 December 2004 Chan, W. W. & Ho, K. (2006), Hotels’ environmental management systems (ISO 14001): creative financing strategy, International Journal of Contemporary Hospitality Management Vol. 18 No. 4, 2006 pp. 302-316 Chryssides, G., & Kaler, J., (2001), Why do it? 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