Social Responsibility and Governance - Research Paper Example

 Corporate Social Responsibility and the Context of Globalization Contents Executive Summary 1 Hypothesis Statement 2 Introduction and Definition of CSR 3 Evolution of CSR 3 CSR and Globalization 4 Trans-National Corporations and Development 4 CSR, Competitive Advantage and Development 5 Conclusion 6 References 1. Executive Summary The role of companies towards social welfare and development has been subject matter of debate for long. Earlier companies could do away with minor roles of running charities or making donations to a public cause. Charges of misappropriation of funds and resources were not uncommon. With increased globalization, the discourse on Corporate Social Responsibility (CSR) has assumed centre stage. Globalization has also pressurized the natural resources, like never before, and there is near unanimous call for sustainable growth. Companies, especially Trans-National Corporations are adopting CSR best practices in their strategic business models. The paradigm shift in the affairs of Trans-National Corporations of moving from corporate philanthropy to corporate social responsibility began in the 1990s. CSR and globalization, though theoretically miles apart, are in practice complementary to each other with their roles, at times, overlapping. In this report, we carried out a review of literature to prove the hypothesis that CSR is a key issue in globalization. All authors studied are of the view that CSR is currently playing an important role in conduct of global business. The larger is the size of a company, the greater is the onus on it for taking up socially responsible role. 2. Hypothesis Statement CSR is a key issue in globalization. Introduction and Definition of Corporate Social Responsibility According to Kotler and Lee (2005), corporate social responsibility includes those set of voluntary business practices and contributions that a company makes to improve community well-being. Community, here, refers to buyers, suppliers, employees and the social milieu, the company operates in. CSR also stands for operating and exceeding ethical, legal commercial and public expectations of business. For a business to be socially responsible, it is important that its practices and processes should have positive outcomes on the community. CSR is driven by the ‘moral marketplace factor’ creating an increased morality in choices made by consumers, investors, and employees (Hess, Rogovasky, and Dunfee quoted in Kotler and Lee, 2005). Companies value being perceived as a good citizens and good corporate citizens. The importance of corporate social responsibility, today, is such that any large corporation can ill-afford to ignore. CSR is about wealth creation by making products and delivering services that are sustainable socially and environmentally. Advantages of CSR extend beyond immediate profit-making and bring long-term multiple benefits. Prior to the current spate of globalization, corporate social responsibility was restricted to philanthropic causes. Now, increasingly corporate philanthropy, is giving way to CSR, as a sound business practice. CSR is a competitive necessity (Shestack, 2005) and a strategic business tool that is well integrated into company’s business model. It is self-adherence to ethical standards, and 3. societal norms with routine business activities. In the current paradigm, the corporate social responsibility helps the company to swell the triple bottom line of: planet, people and profit. With usage of disparate terms to convey different ideas, extent and scope of socially responsible roles, there is lack of unanimity on a single definition of corporate social responsibility. The definition, extent and scope of CSR are thus in a state of flux (Shestack, 2005). Evolution of CSR The works of Berle and Means (1932) and Bowen (1953) can be called the conceptual forerunners of Corporate Social Responsibility literature (Norris and Inness). In the 1950s, a series of articles on Corporate Social Responsibility appeared in the Harvard Business Review highlighting the broader role of business entities in society. According to May, Cheney, and Roper (2007) a viewpoint developed in trade and business shortly after the World War II, which later came to be called the ‘corporate social responsibility’. In retrospect, CSR evolved from ‘strategic philanthropy’ or ‘cause-oriented’ marketing. 1990s were marked by hectic discussions on CSR, when its proponents came to study it in light of performance, sustainability, stakeholder theory, green marketing, citizenship theory, and business ethics (May et.al 2007). By the late 1990s, corporate social responsibility became integral to a company’s strategy. CSR, thus an old concept, has reinvented itself through current social, political, economic and ideological dimensions. The earlier avatar of corporate social responsibility was corporate philanthropy (May et. al, 2007). Later, during the 70s, the 4. movement of corporate responsiveness took shape. It emphasized inculcation of practices and principles that directed companies to ensure a better world. CSR wave and globalization are concomitant dating back to early 1990s. CSR and Globalization From their inception, globalization and corporate social responsibility are closely related to each other. Globalization relates to opening up of national boundaries for free flow of trade, advanced technologies, and open access to markets. Globalization has led to the rise of super powerful trans-national business entities. Globalization helps companies to increase their sphere of influence and evolve into international brands, create trans-national supply chains, offshore manufacturing and expand world wide. Globalization, by its very nature, also brings under spotlight such issues as labor rights, abuse of child labor, environmental degradation and need for sustainable development. The agenda of globalization includes bridging the rich poor divide, promoting sustainable development, protecting human and labor rights and helping in environment conservation. Trans-National Corporations and Development Large business corporations increasingly operate in a global business environment (Werther and Chandler, 2005). Companies often transcend national boundaries to choose low-cost, low-tax environments. In turn, they have the advantage of earning worldwide brand loyalty and customer base. It is difficult for the governments of individual countries, especially those of developing countries, to exercise control over large and powerful Trans-National corporations. In fact, the national governments do not have economic and political strength to regulate the large multi-national business entities (Shestack, 2005). Of the world’s 100 largest economies, 49 of them are countries and 51 are companies. General Motors has greater annual sales than the gross national domestic products of Denmark, Thailand, Turkey, South Africa, or Saudi Arabia. Wal-mart’s economy is greater than that of Poland, Ukraine, Portugal, Israel, or Greece (Werther and Chandler, 2005, p 53). Concerns about erection of regulatory regimes for Trans-National corporations date back to forty years. Way back in the 1960s and 1970s, concerns were voiced in the UN about creation of a regulatory mechanism to control the activities of the Trans-National Corporations (Jenkins, 2005). On the positive side, the multi-national enterprises, belonging to the developed countries bring to the developing nations, corporate social responsibility norms like sound labor, ethical, and environmental ethics. The Trans-National characters of large corporations create varying corporate social responsibilities. CSR is nearing its tipping part largely because of glolbalization and will increasingly become a mainstay of strategic thinking for businesses especially global corporations (Wether and Chandler, 2005, p54) In many ways, CSR is only the latest manifestation of a longstanding debate over the relationship between business and society (Jenkins, 2005). Globalization has served to transform this debate, while magnifying its importance exponentially (Werther and Chandler, 2005). According to Wether and Chandler (2005), corporate social responsibility is not only here-to-stay but will increasingly become a mainstay of strategic thinking for businesses especially global corporations. 5 Sustainable profits concerns inculcating a broad framework of economic, social, environmental and ethical values into companies’ commitment to growth and sustained profitability. It does not result from the single minded pursuit of monetary gain. Thus the Trans-National corporation dons the mantle of both a political and an economic actor. CSR, Competitive Advantage and Development Off late, the classification of CSR as a key development issue has made it of equal concern to the development practitioners and business managers (Jenkins, 2005). Having taken the role of the state, the trans-national corporations are sought to perform socially responsible roles. Differences in cultures across the globe lead to widely varying expectations of workers, customers, governments, and citizens. As such, companies may have different corporate social responsibilities in different countries. The development of value chain through which a web of suppliers in the South, to the northern states brought into focuses the working conditions and environmental conditions (Jenkins, 2005). CSR helps in enlarging market base; increasing brand recognition and satisfying the stakeholders. Besides, CSR offers positive strategic and economic outcomes, which help in gaining competitive advantage. Often Trans-National corporations shake hands with governmental and non-governmental organizations (NGOs) to fulfill their agenda of corporate social responsibility. At times, such partnerships are indispensable for the fulfillment of the common social responsibility programs. Effective CSR policies earn goodwill amongst governments, social, and environmental activists. Companies with CSR initiatives in place enjoy high retention rate amongst employees. Weaving social and environmental considerations into business 6. strategy can result in cutting edge innovation and competitive advantage (Fiorina quoted at Kotler and Lee, 2005). CSR has come to dominate all aspects of the functioning of a global business corporation. Buyers, suppliers, employees and communities want to deal with companies, they see as socially and environmentally responsible. It is argued that only when the needs of the suppliers, buyers, consumers, and employees are fully met by a company, do its stakeholders benefit the most (Werther and Chandler, 2005). Conclusion Effective CSR policy, its principles and practices are increasingly becoming the rule than exception in conduct of day to day business. They are, in fact, the need of the hour. Under the spell of CSR already companies are sought to play the role of governments in small and developing nations. However, it is to be noted that Trans-National corporations, howsoever mammoth their size, do not enjoy popular mandate like democratically elected governments. Their primary goal remains to increase the stakeholder value. As such their role in development effort can only be peripheral and at best supportive. Corporate Social Responsibility should be encouraged but not at the cost of loss of power of the governments. Whereas socially responsible behavior may differ from country to country, one region to another, the environmental issues remain the same across the globe. There is a greater need for companies to make a concerted effort to decrease the carbon footprint. The future generations of mankind, will be grateful to the present ones, in a measure of how effectively the companies carry out their corporate social responsibilities today. References Jenkins, R., (2005) Globalization, corporate social responsibility and poverty. International Affairs 81 (3) Pp 525-540. Retrieved May 15th 2009 http://earthmind.net/fdi/misc/ia-globalisation-csr-poverty.pdf Kotler, P., and Lee, N., (2005) Corporate social responsibility. John Wiley and Sons. May, S., Cheney, G., Roper, J., (2007) Overview, Ed May, S., Cheney, G., Roper, J., (2007) The debate over corporate social responsibility. Oxford University Press Norris, G., and Innes, J., (2005) Corporate social responsibility, Butterworth- Heinemann Publishers. Shestack, J, J., (2005) Corporate social responsibility in a changing corporate world. Ed. Mullerat, R., Brennan, D., Corporate social responsibility. Kluwer Law International Werther, W, B., and Chandler, D., (2005) Strategic corporate social responsibility Sage Publishers. Read More