The Evolution of Corporate Social Responsibility - Essay Example

?Corporate Social Responsibility Introduction: Every corporate entity functions with its set of goals to attain certain objectives but those with a visionary leadership cherishes a notion of universal progress and strive to make sure that their operations inflict the “least possible burden on the environment.”1 The research paper focuses on outlining and discussing the evolution of Corporate Social Responsibility (CSR), by defining CSR, and explicating on its history and evolution. It also discusses the principles of CSR and its objectives with regard to the society. The paper further explores in detail the role of CSR in the financial crisis. Furthermore, the paper will explain the future goals as well as prospects for CSR and it intends to support these by providing suitable examples. The topic of social responsibility is a highly debated one, as several theorists think that “business is obligated only to make profits.”2 On the other hand, many believe that all business entities have a social obligation it is bound to fulfill. However, there is no denial of the fact that while operating to make profits, a business organization has to ensure that they keep the interest of the society and environment in mind because basically the revenues they make have to primarily derive from the same society and environment. Definition: Corporate Social Responsibility can be defined as the “relationship between global corporations, governments of countries and individuals citizens.”3 CSR is also encompasses the relationship between corporations and their stakeholders. The EU Commission further defines CSR as a concept where “companies integrate social and environmental concerns in their business operations”4 as well as during their interactions with stakeholders on a “voluntary basis.”5 Thus, in simple terms it is the responsibility corporate organizations have towards the society they work and operate in. Furthermore, this responsibility is not limited to the present generation in a particular society, but also extends to coming generations, that is the “future members of the society.”6 CSR is greatly related with “corporate citizenship, business responsibility, business reputation, ethical corporation, sustainable business”7 etc but is different from them. The CSR approach believes that stakeholders such as “consumers, employees, the community at large, government, and the natural environment”8 are supposed to be given a stronger focus. Social responsibility of the firms basically stems from the fact that they are using the natural resources available in the area where they function. Thus, they are bound to give something back to the society. In the present day, the wellbeing of society has become increasingly important, and community is given the main priority in all spheres. In such a community centered world system, the question of who is responsible to safeguard the interests of the people cannot simply be answered by government. While government has a key role, the growing private sector companies including corporate entities need to focus not only on making profits, but also consider the impact of their operations within the society. History and Evolution of Corporate Social Responsibility: The basic idea of CSR has its roots in the era before the birth of Jesus Christ and is first seen when in “1700 BC”9 the ancient Mesopotamian ruler brought into practice a code that imposes punishment on “builders, innkeepers or farmers”10 by death if as a result of “their negligence”11 any inconvenience is caused to local citizens. The people engaged in any trade related activities have to abide by this code, not merely because they feared “legal consequences”12 but because of their strong sense of “moral conviction.”13 On the other hand, ancient Roman senators were upset with the fact that businesses were unable to provide adequate taxes in order to “fund military campaigns,”14 therefore unsuccessful to “contribute to the war programme.”15 In “1622,”16 some shareholders of the Dutch East India Company came up with pamphlets that showed the public how they gave importance to “management secrecy and self enrichment.”17 Furthermore, notions regarding the exploits of the East India Company were arrived at during the seventeenth century. Therefore, for “over 150 years,”18 UK had been following a “tradition of benevolent capitalism” that experimented with forms of business enterprises that were both “socially responsible and value-based.”19 During the late nineteenth century, “the emergence of large corporations and the era of the robber barons”20 in the US eventually led to the “anti-trust movement.”21 In order to counter such movements and to gain back the trust of people, corporations put stress on “corporate responsibility and philanthropy”22 so as to communicate the message that government intervention was “unnecessary.”23 The beginnings of the “modern CSR movement”24 date back to the discussions about social responsibility of firms during the “1920s.”25 Various new concerns regarding the main roles of business firms in the society started arising and this ranged from “Internet spam to genetically modified food.”26 The arguments regarding social responsibility of business entities were based on how each thought or perceived the relationship between business and society. In the 1930s, at the time of The Great Depression, government intervened and this resulted in “Roosevelt’s New Deal”27 in the United States as well as “nationalisation and regulation”28 by the Labour government in the UK. During the 1950s, the concept of CSR shifted from actions and decisions taken by leaders to the organization as a whole, which resulted in making social responsibility “transparent to the companies’ direct surroundings.”29 This also made it possible for citizens or members of society to understand how committed a particular business entity was to the society. Later on, in the late “1960s and 1970s,”30 more attention went to “growing social and environmental impact”31 of transnational corporations (TNCs) and again further regulation was placed on corporate activity. Similarly, perceiving the threat to economy and society, governments began implementing various regulations on the functioning of corporate entities. However, business organisations responded to this by addressing their social responsibilities and obligations to both people as well as the society as a whole. It was also in the 1970s that the “development of stakeholder theory”32 evolved, and this further added to the “emergence of a well defined CSR.”33 However, the efforts of corporate entities failed due to certain activities of some US based companies, such as ITT, which tried to “overthrow the democratically elected Allende government.”34 Furthermore, such problems arose when US corporations tried to exploit the emerging economies of countries that were not yet fully developed. Therefore, regulating the activities of corporations became an international issue, which forced the UN to develop a code of conduct for TNCs. Moreover, this regulatory intervention forced corporations to use self-regulation and thus cater to the increasing needs of social responsibility. However, the 1990s witnessed a large magnitude of negative impact from corporate activities occurred, involving “corporate scandals”35 in the US. Such instances, along with consequences of the irresponsible attitudes of other global corporations had led to various environmental disasters worldwide. Thus, the need for a greater degree of social responsibility was demanded through various organisations that included “international trade unions, development NGOs, human rights organizations and environmental groups.”36 Therefore, again corporate entities were required to assess their level of involvement with societal activities and were forced to compensate for any damage to the society by standing up to their social responsibilities more seriously as well as carrying them out effectively. Principles of Corporate Social Responsibility: Although the focus of CSR has changed overtime, the basic principles regarding corporate social responsibility of a business entity still remain the same. The main principles can be defined by three terms, that is, “sustainability, accountability and transparency.”37 These principles are the driving force of CSR and in simple terms they govern the corporate activities of various business entities. Sustainability addresses the needs of future generations in addition to that of the present generation, thus reminding corporations that their activities must not harm the society or environment in any way. All the activities of the firm are mostly accountable to the authorities such as auditors, government, stakeholders etc, as well as the general public too. Transparency means the corporations should not hide anything from the public and that they should share necessary information with them. Furthermore, the business is also not supposed to be involved in any fraudulent activities or corruption and try to take advantage of the consumers or its employees. Thus, these principles can also be seen as objectives of the business entities with regard to their function in the society as well as their services to members of the society. Experts offer various definitions and different objectives or principles of CSR too, and one among them is Andrew Carnegie. In his book titled “The Gospel of Wealth,” Carnegie contends that corporate social responsibility is based on two primary principles, namely, “the charity principle and the stewardship principle.”38 These principles perceive “business owners in a parent like role to child like employees and customers who lacked the capacity”39 to act according to their interests. Role of CSR in Financial Crisis: With the advent of the technology in the modern world, globalization has been a product that significantly changed the way trade and commerce worked. Globalization helped countries from all around the world build bonds with one another, and this relationship has allowed them to import products that they needed as well as export products that others demanded. However, along with the positive impacts of globalisation on the world economy, there have been certain negative effects. For instance, the financial crises, which arise out of “international funds/capital flows,”40 lack of appropriate regulatory standards, financial instruments that are highly complex, accelerated growth of financial markets “asymmetric information and information transfers,”41 are generally characterised through globalisation. It is through globalisation that the crisis in one country gets transferred to another country as a result of systemic risk effect. This crisis if not immediately sorted out turns into global crisis thus affecting several countries simultaneously to the extent that it impacts even those countries that are not mutually bound with economic or fundamental problems. An analysis of global crisis in the history indicates the primary reason of a lack of “market integrity, financial regulation and supervision”42 in markets or rather “unregulated markets.”43 Unregulated markets are prevalent where government regulation is absent or is not adequate. Corporate entities under such markets basically rule the economy and have no one to impose any standards upon them. Such entities lack CSR as they do not have any regulatory bodies to intervene in their corporate practices. However, on the other hand, it is seen that financial crisis does not occur in markets, which are regulated, where adequate government intervention is prevalent. Moreover, in such markets, the main players will be corporate organisations who are socially responsible and strictly follow their CSR goals and principles. Therefore, it can be seen that CSR plays an important role in controlling financial crisis as corporate entities focus not only on profits, but also on fulfilling their obligations to society. For example, Korea realised the “importance of CSR through its financial crisis,”44 which forced the country’s government to borrow “US$ 30.2 billion”45 from IMF and the World Bank. This crisis forced companies to incorporate their acknowledged information regarding CSR into daily business practices. When firms’ corruptions were revealed, policies with regard to perfectionist trade were abolished and monopoly was uprooted. The business firms through this were prompted to revaluate the “role and responsibilities of corporations in society”46 and build “reputation as a responsible business”47 by taking care of the demands of the citizens both in terms of employees as well as consumers. Future Prospects for Corporate Social Responsibility: Werther and Chandler assert that Corporate Social Responsibility is mostly an attempt to “define the future”48 of the society. Whereas professionals related to several fields are researching further into the concept of CSR, it does not come as a surprise that there is no single definition of the term. However, it is clear that CSR is an essential component in the functioning of all corporate entities. Many companies have adopted this concept and are practicing it well. However, some still have to understand the importance of CSR and its relevance. One apt example of a modern company that has crafted CSR into its essence is the Kellogg Company, which since its establishment in 1906 has always had social responsibility at the heart of all of its operations. The company mainly achieves this through the quality of their products, and they believe that the products are ultimately what consumers can depend on for “great-tasting, high-quality foods.”49 In most companies nowadays, it is not just the executives that are interested in social responsibility, but also the employees who work in the company. The human resources of these corporate entities are gaining awareness of this concept and they themselves want to give back to the society as much as possible. Thus, even if the management indulges in activities that are harmful for the society, the employees are at express their opinions, which shows that the accord priority to CSR. Crane, a professor and an eminent researcher, believes that some US businessmen tend to be sceptical with regard to the theory of CSR and that they will realize the success of CSR only when it “adds to the bottom line”50 or when it can be “delineated as having made such an impact.”51 However, success of a business is not merely in the hands of executives, it also largely depends on the public or the society. Thus, despite to certain business enterprises thinking that CSR will be only successful if it can add to their corporate success, the fact remains that due to the major role society plays in the growth of a business, “CSR has an upbeat future in global business arena.”52 According to Lydenberg, CSR is a “major secular development, driven by a long-term re-evaluation of the role of corporations in society.”53 Thus, it transpires that an element of this degree will definitely be important in the time to come even if its relevance is not fully acknowledged now. Conclusion: The research paper at hand deals with corporate social responsibility. The main aim of the paper is to explore the evolution of CSR and how it has changed now. The growing importance of CSR is understood not only by the executives of corporations, but also the employees who are now increasingly active in this sphere. Business enterprises currently have mixed views about CSR, however, soon they will come to know of its relevance, this realization maybe triggered by the next financial crisis, as it is seen how financial crisis arises when there is no CSR. Therefore, it can be seen that every corporation is bound to cater to the needs of the society it works in, with regard to social responsibility and that in the global front, is the relevance of CSR. Bibliography A Guide to Corporate Social Responsibility (CSR). Asongu, J. Strategic Corporate Social Responsibility in Practice (1st edn, Greenview Publishing Company, United States 2007) 29. Broomhill, R. Corporate Social Responsibility: Key Issues and Debates (Don Dunstan Foundation, South Australia 2007). Carnegie, A. The Gospel of Wealth, and Other Timely Essays (1st edn, The Century co., New York 2010). Crane, A. The Oxford Handbook of Corporate Social Responsibility (1st edn, Oxford University Press, Oxford 2008). Crowther, D., and Aras, G. Corporate Social Responsibility (Ventus Publishing ApS 2008). Horrigan, B. Corporate Social Responsibility in the 21st Century (1st, Edward Elgar Publishing Limited, UK 2010) Mallin, C. A. Corporate Social Responsibility: A Case Study Approach (1st edn, Edward Elgar Publishing Limited, UK 2009). Moving Forward Responsibly. Bombardier, 2011. accessed 14 November 2013. Murray, M., and Dainty M. Corporate Social Responsibility in the Construction Industry (Taylor and Francis, Oxon 2009). Paetzold, K. Corporate Social Responsibility: An International Marketing Approach (1st edn, Diplomica Verlag GmbH, Germany 2010). Shalhoub, Z., K. Organisational Downsizing, Discrimination and Corporate Social Responsibility (1st edn, Greenwood Publishing Group, Inc, USA 1999). Schwartz, M., S. Corporate Social Responsibility: An Ethical Approach (Broadview Press, Canada 2011). Souto, B. F, 'Crisis and Corporate Social Responsibility: Threat or Opportunity?' IJESAR accessed 14 November 2013. Werther W. B., and Chandler D. Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (1st, SAGE Publications, Inc., USA 2011). Zu, L. Corporate Social Responsibility, Corporate Restructuring and Firm's Performance (1st edn, Springer-Verlag Berlin Heidelberg, Italy 2009) Read More