Why Operating in a Socially Responsible Manner Is Vital to the Success of Any Organization - Case Study Example

Corporate social responsibility A firm is a part of the society and is, therefore, responsible towards maintaining the quality of the business environment in which it operates. The corporate social responsibilities (CSR) of a firm broadly encompasses aspects such as responsible use of resources procured from the external environment, controlling and preventing ecosystem degradation, sustainability factors, reporting business activities accurately to stakeholders and providing goods and services which increase the value of the society as a whole (Basil and Weber, 2006). CSR initiatives facilitate making an organization socially responsible and ensure that the present and future generations are not impacted negatively by the activities of the company. This is clearly defined by (MallenBaker,2004), as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large” Many organizations avoid meeting their CSR initiatives in a proper manner as it is considered that they increase the cost of operations. In order to operate in the most sustainable and in a cautious manner, companies are now required to invest in superior and clean technologies. Such technologies are cost intensive that causes a firm to incur greater capital expenditure. However, such expenses do not lead to losses as the end products manufactured by the company are considered to be less hazardous and of high quality. The costs incurred for manufacturing such sustainable products are transferred to the consumers by charging higher prices (Turker, 2009). Therefore, CSR can provide greater opportunities to achieve higher profit margins, for example. Robbins, R (2011) states, “Most executives believe that CSR can improve profits. They understand that CSR can promote respect for their company in the marketplace which can result in higher sales, enhance employee loyalty and attract better personnel to the firm. Also, CSR activities focusing on sustainability issues may lower costs and improve efficiencies as well”. A suitable example in respect of the notion that CSR leads to cost advantages can be understood from the case of Apple Inc. The company incurs a high expense for procuring materials from suppliers who use clean technologies. This ultimately impacts on the final costs of the products. Products are then sold at an enhanced price, but due to the high goodwill and brand image of Apple, consumers are seen to accept the prices. Hence it can be stated that if the brand image and position of a company in the market due to compliance with CSR is adequate, the costs incurred in respect of clean technologies and raw materials gets covered through enhanced profits. However, it becomes essential that companies inform their stakeholders regarding the manner in which they carry out production. This enables consumers to choose wisely those brands who manufacture products in the most sustainable way (Frost and Burnett, 2007). For example, a survey conducted by Forbes Online (2010) found, “More than 88% of consumers think companies should try to achieve their business goals while improving society and the environment and 83% of consumers think companies should support charities and non-profits with financial donations”. In the example of Starbucks, it can similarly be seen due to the use of clean technologies and a sustainable supply chain system, Starbucks cost of operations are considerably high. Hence, the end products of the company are highly priced. However the fact that Starbucks operates in a highly environment conscious manner and taking up many initiatives to improve the conditions existing in the society is well known to consumers. This has led to the high brand image that facilitates the company to achieve higher profits (Kolk, 2005). However incorporating CSR, which thereby leads to a price rise must be controlled so that consumers are not heavily charged. For example, in the recent times Apple Inc. was drawn into a controversy whereby the consumers in the U.S claimed that the company was charging very high prices by which other firms were also getting influenced. Although Apple has a huge brand name, its CSR initiatives are often criticised and the prices of their products are not accepted by many, as outlined in an article by Business Insider (2013), “Now, Apple may still have an edge in product quality (this is debatable and a matter of personal preference), but in most countries, its gadgets are considerably more expensive than the alternatives”. Not only is it possible for companies to attract consumers and earn higher profits by achieving CSR goals, it also facilitates firms to procure higher investments, as investors are seen to opt for those companies which fulfil CSR related norms effectively. Therefore, to enhance investment opportunities companies such as Apple and Starbucks are seen to even more keen on fulfilling their CSR-related initiatives. Investors also consider that firms who possess sound CSR and sustainable initiatives are more ethical and act responsibly. Investors are then assured of the fact that firms with CSR initiatives would not indulge in fraudulent practices, and hence their investors are likely to remain secure. (Frederiksen and Nielsen, 2015). As a result of increased globalization and the existence of strong competition in most types of industries, it has become increasingly important for organizations to be able to remain ethical and responsible in their business practices and CSR initiatives are seen to remain directly or indirectly associated with other objectives. As a result it can be stated the objectives set by a company in respect of its CSR are crucial to the success of the business. For example the Royal Dutch Shell Plc set almost all their operational plans keeping in mind the needs related to sustainability. They implement a careful and synchronized effort so that the carbon emissions occurred during their extraction and energy production phase remain minimum. Shell understands that major climate changes threaten the world at present and therefore it is essential to produce energy that not only focusses on economic development, but also ensures a low negative impact on the environment. Hence, every effort relating to sustainability, at every stage of production of energy fuels is taken up by Shell, who understands that CSR is a process that involves meeting the expectations of the society. The company also believes that it is essential to building trust with their stakeholders as their interests play an essential role in the organization’s success. The company has taken critical measures to reduce CO2 emissions during the flaming process. Integrated efforts had also been taken to use water in the most sustainable way possible, to facilitate the development of environment conscious energy. In addition, Shell works with a number of oil companies to develop innovative clean technologies. Emphasis is also given to encourage industries and households to use energy efficient and less carbon emitting fuels (Ite, 2004). However, not all companies can manage their overall corporate goals alongside their CSR goals. Oil spills and a lack of operational efficiency had led British Petroleum into a number of controversies and had created a negative reputation as stated in a report by Oil Spill Solutions (2015) “When BP spilt 4.9 million barrels of oil into the Gulf of Mexico in 2010, the whole world took notice”. The company was claimed to remain incapable of aligning all types of corporate responsibilities with their long term visions and operations. Nevertheless, they continue to add a number of corrective measures and expansion plans have been taken up by the company to improve their goodwill in the market. This has enabled Shell’s reporting team to achieve success in acquiring a large amount of investments which has made them to invest more in innovation related activities and enhance the dynamics of their production related activities, also produce products that are of high quality (Polonsky and Jevons, 2009). Therefore, the manner in which a firm determines their CSR initiatives depends hugely on how they operate. For instance in the case of firms that operate in the financial sector, reporting financial related activities are more crucial. However, most organizations set their CSR principles on the basis of the needs of their stakeholders and their target market segments. As an example, Microsoft in the year 2012 was ranked as the company with the best CSR policies and it was fundamentally due to the fact that their “CSR policies were framed in a manner such that the interests of all stakeholders are met duly” (Jamali and Mirshak, 2007). Microsoft’s CSR initiatives can be broadly divided into three categories, which are discussed as follows: Their investors and shareholders. The company takes integrated efforts towards involving their major shareholders while taking important business decisions. The governance procedures of Microsoft also involve ensuring that their suppliers follow ethical business practices. Additionally, Microsoft also takes into consideration the needs and the policies The extent to which a firm is fulfiled their CSR related responsibilities depends on a number of factors. They mainly include the efficiency of the management, compliance with laws and the legal framework and whether the firm is a private or public institution. Starbucks, for instance, is seen to go beyond minimum legal requirements to act in a manner such that the society is benefitted in diverse ways. The company has developed innovative ways by which carbon emissions can be reduced beyond the measures which the government suggests, where such a responsible attitude indicates the environment consciousness that the organization possess and does not limit itself to only fulfilling the minimum requirements. It is also believed that the responsiveness towards CSR initiative also depends on whether a firm is public or private. Public institutions have an inborn sense of remaining accountable towards the society and consistently working towards the benefit of the society keeping aside their profitability needs. However, private firms are seen to possess less importance to act for the benefit of the society and do the same only in a profitable manner. Starbucks, although is not a public firm is seen to act highly responsibly towards social development. This is mainly due to the existence of skilled and highly knowledgeable workforce who considers that their actions not only impact the organization, but the society as a whole. Hence, it can be stated that when the employees and managers of a firm act responsibly and ethically, CSR initiatives can be easily be fulfilled. Another crucial aspect which impacts CSR activities is the influence of the actions of competitors. Starbucks management had identified that smaller retail coffee chains were seen to do well in many regions due to their highly responsible manner of operations. This encouraged Starbucks team and developed the understanding that when organizations remain dedicated towards firm commitments to the society, it is highly likely that consumers would identify the company as ethical and develop attachment to the brand with greater ease (CEO, 2004). In the context of identifying the needs of stakeholders and accordingly setting the CSR initiatives, has not been effectively been practiced at Apple. The company’s objectives have remained more concentrated on earning profits and towards research and innovation. The company at numerous instances failed to meet the needs of their stakeholders such as adequate reporting and meeting environmental goals due to a greater emphasis upon profit earning. Business ethics in modern day organizations are seen to provide numerous benefits. When organizations fulfill the requirements that are associated with social reporting effectively they are seen to be able to acquire greater investments and also attract better suppliers and develop strong ties with consumers. When social reporting related norms are fulfilled in an adequate manner, it is seen that stakeholders perceive the organization with greater values. This impacts the goodwill of the firm and ultimately causes an increase in their share values. Fulfilling the social reporting related needs also leads to achievement of economies of scale. The additional revenue saved through achievement of economies of scale can be used for innovating new products and services and provide end products to consumers at cheaper rates (Basil and Weber, 2006). However, meeting the social reporting needs is costly for a firm. Additional initiatives of reporting, acquiring clean technologies and developing products that are sustainable are required firms to invest in equipment that is costly. It is also essential to acquire employees who are highly knowledgeable and can be retained for long. Hence, higher payments are required to be made to employees and workers so that the organizational value continues to increase. Social reporting is also a widespread task. A firm is required to report its activities to wide number of stakeholders involving creditors, suppliers, government, consumers, employees and the society. In order to develop a CSR plan that covers the need so of all these interest groups, investments must also be made in the extensive strategic analysis (Turker, 2009). The role of the government is seen to be important in most nations for framing the CSR policies of organizations. Government bodies must encourage corporate firms to undertake rapidly CSR-related initiatives considering the rate at which the quality of the environment is getting deteriorated. Additionally as business organizations grow more and more complex, it becomes essential to report activities more transparently so that resources can be utilized more efficiently (Basil and Weber, 2006). In conclusion, it is very evident that operating in a socially responsible manner is very vital to the success of any organization. In order to comply with corporate responsibility, organizations are required to invest highly upon procuring those types of technologies and systems for operations that facilitate meeting the CSR initiatives. CSR initiatives not only benefit the stakeholders of a business, but also provide a number of benefits to the organization itself such as increased brand image, better relationship with consumers and suppliers and enhanced strategic position in the market which facilitates overcoming competition. It is however seen that modern organizations perceive CSR as a tool for gaining profits rather than doing things for the betterment of the society. Such a notion is required to be changed so that economic, as well as environmental conditions, can be improved. Works Cited Basil, D. Z. and Weber, D. 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Corporate Social Responsibility in the Coffee Sector: The Dynamics of MNC Responses and Code Development. European Management Journal, 23(2), 2005: pp. 228-236. Print. Polonsky, M. and Jevons, C. Global branding and strategic CSR: an overview of three types of complexity. International Marketing Review, 26(3), 2009: pp. 327-347. Print. Robbins R. (2011). Does Corporate Social Responsibility Increase Profits? Available at: http://investingforthesoul.com/Editorials/does-corporate-social-responsibility-increase-profits.htm Accessed: 20/04/15. Turker, D. How corporate social responsibility influences organizational commitment. Journal of Business Ethics, 89(2), 2009: pp. 189-204. Print. Read More