Corporate Social Responsibility - Essay Example

?Corporate Social Responsibility (CSR) refers to companies are require by law and regulations to take responsibility for their actions that have degrading effects on society and specifically on environment. CSR imply to the efforts made by corporations to protect environment such as constructing an eco-friendly setting in the production process and initiating some positive social welfare for people, employees and stakeholders (Maignan, et al., 1999). Corporate Social Responsibility reporting usually brings company graph higher which encourages more stakeholders, shareholders and investors. Many researches reveal the fact that through communicating CSR reports whether internally or externally, the ultimate benefit goes to the corporation. CSR reporting is usually related with positive virtues of the corporations which confirms that corporation is working in accordance with societal obligations specified by the law (Brown & Dacin, 1997). CSR reporting helps its stakeholders to create their critical opinion upon firm’s activities and these opinions keep firm under the regulatory control. Number of researches supports the argument that CSR communication and information mostly attract stakeholders to the firm but besides attraction too much communication and information can also be seen as company is hiding some of its unlawful actions and through CSR communication they are trying to maintain their public relations (Ashforth & Gibbs, 1990). CSR regulatory surveillance and critical opinion of shareholders have been developed strongly and are increasing continuously. Nowadays, the critical opinion of regulators or stakeholders does not only influence company’s decisions but its impact can be seen throughout the society and throughout the production process of the company. Under such surveillance and reasoning it will be unfair to blame CSR communication as just a tool to maintain public image and relations. Media, society, politics, shareholders and law makers today are well aware of their concerned companies which ensures effective CSR communication information and effective information strategies (Cramer, et al., 2004). Though CSR reporting is required to be comprehensive and beneficial for stakeholders but through company perspective it is difficult to fulfil the information needs of all the stakeholders which necessitates an effective stakeholder management. Now it depends upon managers how do they overcome this challenge but in the process a clever manager may overrule the critical opinion of shareholders and just provide CSR information just to maintain public relations fooling both regulatory surveillance authorities and shareholders around (Craig-Lees, 2001). Over decades many theories, models and strategies have been developed to ensure beneficial CSR reporting which explains actions of the company and environmental performance too. Over past decade few strategies have developed specifying models for public relations in the process of CSR communication. These model unfold company’s information strategies to their stakeholders and feedback from shareholders. These strategies over period have attempted to ensure sophisticated two way communication though one way communication is necessary but that is not enough for continuous delivery of environmental performance (Freeman, 1984). Three CSR communication strategies are as stakeholder information strategy, stakeholder response strategy and stakeholder involvement strategy. First strategy of stakeholder information is a one way communication model which flows information from company to shareholders (Grunig & Hunt, 1984). According to this theory CSR communication is considered as a process of informing stakeholders which purposefully publicise information related to welfare deeds and environmental performance. The only purpose of this strategy is to publicise information objectively through publications, through press conference and through media to enlighten general public, regulators, politicians and shareholders. This strategy only consider efficient flow of information to stakeholders only because they provide financial support to companies. The company feels need that publicising its positive image will earn positive support from shareholders for which CSR decisions should be communicated effectively (Smith, 2003). Besides this meaningful objective most of the companies sincerely wants to reveal information too for improving social welfare and protecting sustainable environment. Even though this strategy is inappropriate because critical role of stakeholder is marginalized (Paine, 2001). Next strategy of stakeholder response provides a two way communication but still stakeholders role is not as effective and influential. In this strategy though stakeholder can respond to corporate decisions but still the authority of disseminating information prevails with the company as company reporting and communication can effect public opinion and attitude but company’s decision are not liable to change accordance to public demands. In this strategy company can conduct survey and polls to gauge the company standing in the form of feedback from stakeholder and improve its CSR according to shareholders tolerance level. Besides this strategy is more like an evaluation mechanism where company manages its public relations through evaluation from stakeholders and examines effectiveness in earning positive stakeholders for company. This strategy is much improved version of stakeholder information strategy but still not good enough. Last strategy for CSR reporting is of stakeholder involvement which encourages dialogues and negotiation between company and stakeholders. In this strategy both parties try to convince each other. This strategy encourage repetition of arguments, acceptance and rejection which ultimately falls in between party’s stands on protecting environment and social welfare (Weaver, et al., 1999). In this regard social and environmental welfare takes place. On the other hand stakeholders are active participants and are involved in corporate reporting which ensure complete positive shareholder support and thus company earns improved CSR rating. Rather than dictating stakeholder with information that company want to share, this strategy invites stakeholder to change the company decisions when required. Involvement of stakeholders in CSR reporting and communication process keeps shareholder up to date with the company standings which helps in understanding investors’ expectations. So, comparing all strategies one can easily assume that in contrast with first two strategies, last strategy is effectively beneficial and useful for informing stakeholders with company social welfare and environmental performance. Stakeholder information strategy gives stakeholder with only option of accepting or rejecting company reporting while only company can affect public opinion. In response strategy stakeholders’ expectations can only be fulfilled by surveying market tolerance to company’s CSR reporting and communication while in the last strategy company and shareholders are equally involved in the CSR reporting process that ensure active involvement and positive support (Brennan, et al., 2013). Following last strategy company can easily maintain interaction with numerous stakeholders because of their involvement, every shareholder has a say in the communication process which enable company to know expectations of each investor that develops mutual understanding which is not possible for other strategies where company cannot interact with all investors at the same time. So, these three strategies define how effective the CSR reporting and communication can be if the right interactive strategy is applied efficiently otherwise no doubt CSR communication can also be just a maintenance of public relations. Apart from communication strategy, the usefulness of social welfare and environmental performance of CSR communication can also be examined through the company behaviour to maintain its image in the market (Schereck, 2009). Usually companies and organization avoid to reveal their negative trends and performance for which most of the time accounting narrative are used to give their reporting a flowery touch of exaggerating facts. Impression management techniques are used to resent corporate reporting to cover up social, economic and psychological layer over the company’s actual performance. In this regard companies do not disclose their performance to media rather they overstate the results through accounting narratives over media in the form of performance reviews, press releases, annual reports and on their websites too. Such media tools have very huge audience which help companies to build up their portfolio for positive stakeholders. Brennan specified four perspective of impression management as economic, social and psychological perspectives (Hooghiemstra, 2000). These perspectives target investors and shareholders for financial assistance. Organizations present distorted financial facts using accounting narratives which pose company standing as the beneficial platform for investment (Aerts, 2001). If stakeholders fail to understand the actual standing of the firm and invest in any accounting narrated corporation, it may result in misallocation of resources. The practical example of such public imaging can be seen during the financial crisis of 2007 when financial institutions like Moodies and Lehman Brother distorted the facts and assigned bogus rating to corporations who were almost near to the collapse (Davies, 2010). Such illegitimate economic imaging of corporations took world economy to depression. When companies use social impression management, they usually target society to accept their decisions which according to them should be legalized and considered legitimate (Giacalone, 1991). Corporations desire positive imaging and higher rating for their actions so that regulators, general public and shareholders may legitimize their corporate social welfare and environmental decisions. Sociological imagining can be seen practically in the form of child labour in most of the third world countries where company labour policies are overruled to minimize costs. Similarly disposal of waste material to lakes, rivers or to rural areas is a common practice in most of the world especially in India and China. No doubt every organization apply impression management to attract investor and audience but the inappropriate use of impression management may undermine the effectiveness of social welfare and environmental performance. In recent years we have seen number of disaster and floods around the world which every individual on earth knows is mainly caused by deforestations and global warming. On the other hand child labour, labour exploitation, social benefits and forced labour are common. The ultimate responsibility lies on corporations to integrate CSR and communicate reports correctly with stakeholders. If CSR reports are communicated as they are without any accounting narrative along with effective strategy can be very useful and beneficial for both corporations and stakeholders otherwise inappropriate use of impression management is not more than a formality for maintaining public relations. References Aerts, W., 2001. Inertia in the attributional content of annual accounting narratives. s.l.:The European Accounting Review. Ashforth, B. & Gibbs, B., 1990. The double edge of organizational legitimation. s.l.:s.n. Brennan, N., Merkl-Davies, D. & Beelitz, A., 2013. Dialogism in corporate social responsibility communications: conceptualising verbal interactions between organisations and their audiences. s.l.:Centre for Impression Management in Accounting. 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Maignan, I., Ferrell, O. & Hult, G., 1999. Corporate citizenship: cultural antecedents and business benefits. s.l.:Journal of the Academy of Marketing Science. Paine, L., 2001. Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance. New York: McGraw-Hill. Schereck, P., 2009. The business case for corporate social responsibility understanding and measuring economic impacts of corporate social responsibility. Physica-Verlag ed. s.l.:Heidelberg. Smith, N., 2003. Corporate social responsibility: whether or how?. s.l.:California Management Review. Weaver, G., Trevino, L. & Cochran, P., 1999. Integrated and decoupled corporate social performance: management commitments, external pressures, and corporate ethics practices. s.l.:Academy of Management Journal. Read More