Corporate Social Responsibility in China - Case Study Example

Research Question Name of Student Institution Affiliation Corporate Social Responsibility Currently, Corporate Social Responsibility (CSR) has gained much attention in the business world. The issue has become so crucial that it has been included in the strategic goals of organizations affecting every aspect of the conduct of business. The issue of CSR has been presented in numerous corporate websites, reports and policies as a way of fulfilling the company’s responsibility to the community, business and customers. Despite this, there has been much criticism and debate on the issue. On one side of the argument, the proponents argue that CSR makes business sense and, in the long run, benefits the company. Others make the case that CSR, and making of profits is the minimum that every business should strive to uphold at all times. In the other side of the argument, the critics argue that is nothing but a distraction to the businesses. The primary view is whether the companies have a responsibility to fulfill to the society. Despite the three main different perspectives of CSR, evidence shows that they have been adaptable and feasible in the current business setups. China has emerged as a model country for CSR and different companies and the government has put measures in place towards this. The companies in China such as Novozymes China and Shell have been using certain aspects of the various views of CSR including classical, social economic and the do good view in the conduct of business, which illustrates that they fulfill social and ethical responsibilities. The conclusion was reached through the study of several companies in the country. The Various Perspectives on CSR Business has a Responsibility to Maximize Profits and Uphold the Law According to Friedman (2007), those that state companies have a responsibility towards the society are misguided and preaching real socialism (p. 173). The author rejects the notion that a corporation can have a responsibility. However, such a notion is incorrect and companies like Nozovynes and many others have practiced it for some time without fronting the socialism views Friedman was referring to. Friedman states that the fundamental responsibility of firms is towards its employees and owners. The classical view in which Friedman is in support holds that the behavior and the objectives of an organization vary from one to the other. Social responsibility must be done by other agencies (Wood, 1991; Albach, 1991). The business must make sure that it generates profit while at the same time conforming to the society' ground rules. The company must ensure that it achieves economic growth and efficiency. Socially responsible activities by the enterprise according to Friedman reduce efficiency. According to the classical theory, in order to get funds for social responsibility, the wages are reduced, prices go up, and the profit decreases. Shell China has been successful for some time now without the prices of the product going up, wages getting reduced and profits going down. In fact, the companies have been doing better than its competitors that do not get involved in CSR. When an executive in a corporation should desire to be involved in a social responsibility acts, they must do so on their accord and not by using the business’ money. Doing that according to Friedman would be like taxing the people and then deciding on how to use the cash (p. 174). Such roles are only to be done by the current government. Despite all that, Friedman suggests that corporations can be involved in social responsibilities such as building of amenities in the community, actions that improve the government of the day among others only when such activities generate some goodwill. Companies should be involved in social activities by using expenditures only when they are entirely justified for its self-interest (Friedman, 175). Likewise, Liket and Simaens (2013) found that the concept of Corporate Philanthropy was to an extent linked to advertising efforts. Such acts of social responsibility that benefited the company in a way were what Friedman was refereeing to. The corporate organizations are currently making use of the classical view of CSR. The companies are using the events to gain advertising mileage under the guise of corporate responsibility. Shell China for example has an improved goodwill than other companies competing with it. When Shell China get involves in philanthropic and CSR activities, they also do some advertising where they also present their product. Friedman in his opinion of CSR stated that it was only necessary for the companies to get involved in CSR when they were to gain some goodwill. Most businesses use such a view to advertising their products and increase market presence. A survey was done in China in textile companies, and it's proven that managers think of CSR as a way of keeping appearances and retaining employees (Cook & He, 2010). Keeping appearances in that context is what Friedman referred to as goodwill. As much as the main objective of companies is to make profits in a legal manner, most of them have realized that the importance of accountability to the community. The future of business is moving beyond accountability to its owners and a stakeholder approach. Duska (1990, p. 42) suggested a revision of the classical theory. The theory states that, even though, the business has a responsibility to make a profit, it must respect the rights of all stakeholders. They must also be treated justly and fairly and be compensated for the past wrongs done to them by the company. Friedman had seen some importance of CSR even when he advocated the classical approach. Duska in his revision of the theory had included respect to the stakeholders. Therefore, business must in addition to looking out for the interests of stockholders ensure that they also take care of the stakeholders. As most enterprises in the case of China have realized, it is almost impossible to conduct business without taking care of all the stakeholders. Stakeholders are an essential part in the conduct of business. The classical approached as explained by Friedman cannot effectively work in the current business environment. So, a social economic and broader view perspective is what companies are supposed to adapt to remain relevant in the global market. Social Economic View On the other hand, Simon, Powers and Gunnemann (1972) state that businesses have to maintain a minimum in terms of attempting to do no harm to the society. Shell China following that principle relocated a whole village of individuals so that their activities would do no harm to them. The writers are of the view that in a society that people are prevented from harming others, it becomes a better community. In order to avoid social injury, Simon, Powers, and Gunnemann propose the use of the Kew Garden Criteria to determine when an individual ought to act in aid of another. The criterion has three facets that include; a critical needs proximity, capability and last resort (Simon, Powers &Gunnemann, 1972, p. 67). Using the Kew Gardens principle, corporations should work in instances when there is an extreme need to do so. That suggests that the companies have a duty to report any wrongdoing that they may be a witness to (Brenkert& Beauchamp, 2010). According to Reed (2002), the corporations responsibility increase at times when an environmental need also increases; when they have the capacity to help; they have proximity to concern and have knowledge on the same; and when no one else has yet intervened (p. 185). Several companies have in recent years used the Kew Gardens principle approach to social responsibility. The Novozymes China has collaborated with the local government in order to develop protection projects for the environment to make sure that production and new projects that come up are in accordance with the local community and law (Buhmann, 2005). That indicates the organization attempts not to do any harm to the surrounding community. Novozymes China has one example in China that is employing the social, economic view in its conduct of business in the country. In the context of Kew Gardens approach, there is a critical need to take care of the environment and the company the company took the necessary step for the sake of the community. The reality of its location in China meant that it was in proximity. There have recently been a problem of pollution in the country and something needed to be done. Corporate entities are one the biggest culprits for contributing to the environmental degradation, and so they have the responsibility and capability to compensate by making efforts towards improving the environment. Freeman's notion is that the manager has a relationship with the stakeholders that are fiduciary-based. Freeman (2001) asks the question on whose benefit and expense should a business be run. According to Freeman's theory, just as the stockholders can demand action from the company, so do the stakeholders. Some of the typical speakers include the owners of the business, the employees, the suppliers, local community, customers and the managers (Freeman, 2001). According to Freeman, the stockholder theory is to maximize the interests of the shareholders. On the other hand, the stakeholder theory, as opposed to the stockholder concept, seeks to redefine the purpose of the business. According to Carroll (2000), the corporate social performance is the quantification of the extent of performance by the company in relation to not only the community but also to its employees, the owners, consumers and the environment. Carroll in way supports the view by Freeman (2010) that businesses should have a responsibility towards that its stakeholders and not only the stockholders. That view is also supported by Wood (1991). Carroll rightly defined CSR as the discretionary responsibilities in areas that the company willingly gets involved in and not because it is required of them. Novozymes China was not obligated to act towards the improvement of the environment but was out of their will. China has been regarded as the new frontier in terms of CSR (The Economist; 2008, p. 19) and companies like Novozymes China have taken the necessary steps. The success of CSR in China must be used as a model for other countries to enhance it. There are many pros o accrued for the businesses when they engage in CSR activities. Furthermore, the Kew Gardens principle dictates that corporate organizations are among the best placed to take care of the environment and other needs of the community. The Do Good View While many in literature may refer to CSR as old fashioned and outdated, Liket and Simaens (2013) found that it was practiced widely by corporations the world over. According to Wood (1991), the idea of CSR and the company are that they are tightly connected (p. 165). Nozovynes China and CSR activities are connected. The company cannot be mentioned without referring to the CSR activities they are involved. Wood also states that the CSR of an institution is a function that must not be abused. The functional theory says that most of the tasks in the society are accomplished by social institutions (Wood, 1991, P. 165; Davis, 1973). CSR functions are essential to the growth of the community. The central idea is that companies operate in a shared environment which is in the community and must be accountable towards it. As a branch of CSR, Corporate Philanthropy has been one of the ways that corporate organizations take care of one section of their stakeholders – the community. Many companies these days make an effort to encourage philanthropic activities among its customers and employees. Examples of such organizations include Ashland Oil, Microsoft and JP Morgan Chase. These organizations are among the corporate members of the ‘The Work Place Giving’; a program sponsored by the employers offering their staff opportunities through payroll deductions to make charitable contributions (Carroll & Shabana, 2010). The primary objective of the broader-maximal view of CSR is to make the world better and do business. Another example of the broader-maximal view of CSR is when Shell China resettles about 8000 people close to an oil extraction area (Buhmann, 2005). The company also embarked on projects that offered employment opportunities to the people. They were not supposed to do so, however, out of their will chose to do good to the community. Various researchers have done studies on the benefits of Corporate Social Responsibility (Schmidt &Rynes, 2003; Banerjee, 2008; Arrow, 1973). Involvement in CSR ensures that the enterprise attempts to reverse any adverse effects it might have caused in the conduct of business (Doane, 2005; Bell, 2002; Mackenzie, 2007). The government of China has in recent times started encouraging CSR in the public sector and other types of businesses. That is to promote a better image of the product coming from China. CSR has numerous benefits, and they include goodwill to the company and the community. The current business environment around the globe requires that businesses get involved in CSR activities to be competitive and improve the community in which they are found. According to the functional theory, the businesses have an important role to play to make sure the community improves and by doing that, the business environment also enhances. Conclusion There are three main views of CSR; classical, social economic and broader maximal are all employed in the business today. The classical theory is used by new business that is searching for a foothold. It is also used when companies involve themselves in philanthropic activities for their benefits such as creating goodwill as Friedman called it. The social, economic view is another view of CSR that guides the companies towards doing no harm to the community. The last perspective is the broader-maximal view where companies look to do business and make the world a better place. Shell China is an excellent example of a corporation that used this view. The companies use all three perspectives in order to achieve a number of social goals. References Albach, H. (1991). Changing Values of German Managers. Japanstudien. Jahrbuch des DeutschenInstitutsfürJapanstudien, 4, 113-126. Arrow, K. J. (1973). Social responsibility and economic efficiency. Public Policy, 21(3), 303-317. Banerjee, S. B. (2008). CSR: The Pros, the Cons and the ugly. Critical Sociology, 34(1), 51-79. Bell, D. V. (2002). The role of government in advancing corporate sustainability.Background Paper. Final draft. Sustainable Enterprise Academy, York University (Canada). Brenkert, G. G., & Beauchamp, T. L. (2010). The Oxford handbook of business ethics. Oxford: Oxford University Press. Buhmann, K. 2005. "Corporate Social Responsibility in China: Current Issues and Their Relevance for Implementation of Law". The Copenhagen Journal of Asian Studies, Vol. 22, pp. 62-85. Carroll, A. B. (2000). A commentary and an overview of key questions on corporate Social Performance measurement. Business & Society, 39(4), 466-478. Carroll, A. B., & Shabana, K. M. (2010). The business case for corporate social Responsibility: a review of concepts, research and practice. International Journal of Management Reviews, 12(1), 85-105. Cook, Fang Lee and Qiaoling He. (2010). Corporate social responsibility and HRM in China: a study of textile and apparel enterprises. Asia Pacific Business Review Vol. 16, No. 3, July 2010, 355–376 Davis, K. (1973). The case for and against business assumption of social responsibilities. Academy of Management Journal, 16(2), 312-322. Doane, D. (2005). Beyond corporate social responsibility: minnows, mammoths and markets. Futures, 37(2), 215-229. Duska, Ronald F. 'What's The Point Of A Business Ethics Course?'.Business Ethics Quarterly 1.4 (1991): 335.. Freeman, R. E. (2001). A stakeholder theory of the modern corporation. Perspectives in Business Ethics Sie, 3, 144. Friedman, M. (2007). The social responsibility of business is to increase its profits (pp. 173-178). springer Berlin Heidelberg. Liket, K., &Simaens, A. (2013). Battling the Devolution in the Research on Corporate Philanthropy. Journal of Business Ethics, 1-24. Mackenzie, C. (2007). Boards, Incentives, and Corporate Social Responsibility: the Case for a Change of emphasis. Corporate Governance: An International Review, 15(5), 935-943. Reed, D. (2002). Employing normative stakeholder theory in developing countries: A critical the perspective. Business & Society, 41 (2), 166-207. Simon, J. G., Powers, C. W., &Gunnemann, J. P. (1972). The responsibilities of Corporations And their owners.Ethical theory and business, 5, 61-66. The Economist (2008);"Going Global", Jan. 19, 2008. Vol. 386, Iss. 8563; pg. 18. Wood, D. J. (1991). Corporate social performance revisit. Academy of Management review, 16(4), 691-718. Read More

According to the classical theory, in order to get funds for social responsibility, the wages are reduced, prices go up, and the profit decreases. Shell China has been successful for some time now without the prices of the product going up, wages getting reduced and profits going down. In fact, the companies have been doing better than its competitors that do not get involved in CSR. When an executive in a corporation should desire to be involved in a social responsibility acts, they must do so on their accord and not by using the business’ money.

Doing that according to Friedman would be like taxing the people and then deciding on how to use the cash (p. 174). Such roles are only to be done by the current government. Despite all that, Friedman suggests that corporations can be involved in social responsibilities such as building of amenities in the community, actions that improve the government of the day among others only when such activities generate some goodwill. Companies should be involved in social activities by using expenditures only when they are entirely justified for its self-interest (Friedman, 175).

Likewise, Liket and Simaens (2013) found that the concept of Corporate Philanthropy was to an extent linked to advertising efforts. Such acts of social responsibility that benefited the company in a way were what Friedman was refereeing to. The corporate organizations are currently making use of the classical view of CSR. The companies are using the events to gain advertising mileage under the guise of corporate responsibility. Shell China for example has an improved goodwill than other companies competing with it.

When Shell China get involves in philanthropic and CSR activities, they also do some advertising where they also present their product. Friedman in his opinion of CSR stated that it was only necessary for the companies to get involved in CSR when they were to gain some goodwill. Most businesses use such a view to advertising their products and increase market presence. A survey was done in China in textile companies, and it's proven that managers think of CSR as a way of keeping appearances and retaining employees (Cook & He, 2010).

Keeping appearances in that context is what Friedman referred to as goodwill. As much as the main objective of companies is to make profits in a legal manner, most of them have realized that the importance of accountability to the community. The future of business is moving beyond accountability to its owners and a stakeholder approach. Duska (1990, p. 42) suggested a revision of the classical theory. The theory states that, even though, the business has a responsibility to make a profit, it must respect the rights of all stakeholders.

They must also be treated justly and fairly and be compensated for the past wrongs done to them by the company. Friedman had seen some importance of CSR even when he advocated the classical approach. Duska in his revision of the theory had included respect to the stakeholders. Therefore, business must in addition to looking out for the interests of stockholders ensure that they also take care of the stakeholders. As most enterprises in the case of China have realized, it is almost impossible to conduct business without taking care of all the stakeholders.

Stakeholders are an essential part in the conduct of business. The classical approached as explained by Friedman cannot effectively work in the current business environment. So, a social economic and broader view perspective is what companies are supposed to adapt to remain relevant in the global market. Social Economic View On the other hand, Simon, Powers and Gunnemann (1972) state that businesses have to maintain a minimum in terms of attempting to do no harm to the society. Shell China following that principle relocated a whole village of individuals so that their activities would do no harm to them.

The writers are of the view that in a society that people are prevented from harming others, it becomes a better community.

Read More