Evolution of Corporate Social Responsibility - Essay Example

? Discuss the Evolution of CSR Discuss the Evolution of CSR Corporate Social Responsibility (CSR) can be defined through the threeindividual words it is derived from and broadly be viewed as the responsibilities owed by corporations to the societies in which they run their businesses or are located. These responsibilities are distinguished from the legally mandatory ones by their nature of being social obligations based on goodwill (McDonald & Rundle-Thiele 2008, p. 171). The corporations can be governmental and for-profit, private companies. CSR can then be termed as a business organisation recognising the groups that make up its stakeholders (beyond the shareholders) in the society and integrating their values and needs with the organisation’s decision-making procedures and strategies (Lea 2002, p. 14). Businesses have traditionally been known to exist for the key purpose of making profits. However, from as early as the start of the 20th century, entrepreneurs, mostly in the Unites States, recognised the importance of using resources in ways that would benefit both their businesses as well as the societies they worked with (Brewerton & Millward 2001, p. 76). As the idea gradually took root over two decades later, more organizations saw the significance of the entire business behaving in ways that were considered responsible socially, just like it applies to individual citizens. Although not evenly developed globally, the concept of CSR is becoming a key feature of organizations in regions that embrace it as it penetrates corporate consciousness and culture (Visser, Dirk & Manfred 2007, p. 69). That aspect has called for studies that examine its history, societal roles especially in times of crises and where is heading to. This paper will outline and discuss the evolution of CSR. It will include its history, role in the financial crisis and its prospects for the future, supported by examples. One rationale behind the genesis of SCR was the assumption that some theorists have termed wrong; that which perceived businesses as solely money-making organisations for the owners (Dincer & Dincer 2007, p 44). This assumption supported the idea that those who engaged in business only had personal and selfish interests. The implication was that it was up to consumers to assume the role of caring for the society’s welfare and take actions that support their interests (Dincer & Dincer 2007, p 46). However, most entrepreneurs recognise that while that still remains a real reason for the presence of their business in the society, they are also aware that they came together to collectively achieve what they could not as individuals. This perspective added a new objective to their reasons of existence; that of contributing to a society without which they could not survive. This awareness is embedded in the fact that the businesses only exist when there are societies to produce goods and services for; to produce raw materials for the businesses; and to offer a labour force in the businesses (Bhattacharya, Sankar & Korschun 2011, p. 83). However, the concept of giving back to society as initiated by the American businessmen at the start of the 20th century had to be abandoned in the advent of the early 1930s’ Great Depression. At that time, the only goal for businesses became to survive, while citizens only needed an employment that generated income. Then in 1939, a co-founder of the largely successful Hewlett Packard rekindled the need for companies to value to their existence and that of the societies, which took a slow start due to WWII and was later revived in the 1950s (Morrison, R 2008, p. 9). His opinion was that consumers will only be condescending to products that in turn support noble causes, charity and the environment. The revival is believed by some theorist to have resulted from a global corporation by regions that backed each other during the course of WWII and the recovery period that followed. By the 1980s, CSR was already a vital aspect of modern business and supporting societies in dealing mainly with problems of pollution and the environment. At the same time, CSR had already appeared to have taken on two distinct attributes depending on the region it was practiced, and the attributes are still evident today. The two types are European and American (McDonald & Rundle-Thiele 2008, p. 179). The European fashion of organisations being socially responsible is by paying higher taxes thus enabling state and national authorities to manage different social programs for their citizens. For them, they opine that philanthropic donations do not improve local skills, as opposed to a community-oriented approach that builds more sustainable community development. Therefore, in the European perspective, it is believed that governments are the only unique institutions that adhere to solid models of solving social issues faced by their subjects, where business organisations merely help. The pressure exerted on businesses by the taxes they are charged does not present charities and sponsorships as popular ventures (Bhattacharya, Sankar & Korschun 2011, p. 104). However, whenever they participate, they still focus on the two introductory fields of pollution and the environment, with some venturing into employment and the economy. On the other hand, CSR in the American perspective is portrayed as that having the highest number of authorised corporate entities that approach it from a more philanthropic front. So many and influential are they that they also greatly shape government decisions that in any other geographical region (McEwen 2008, p. 23). Their key corporate objectives, which come before shareholders, are profitability followed by responsibility to the society. Charity, which the society highly appreciates, is among the activities given top priority by American enterprises. The authorities finance a large portion of social initiatives through funds and donations received from business organisations. They are in the form of aid and monetary donations offered to both local and international communities in the fields of education, health, housing, arts and the environment (Bhattacharya, Sankar & Korschun 2011, p. 104). However, due to the expenses brought about by offering solutions to social issues, the American businesses pay less tax in comparison to their European counterparts. Apart from these two major types of CSR, other countries and regions that are trying to implement the idea in their economies may display characteristics of both depending on the size and ability of individual corporations. For example, after the abolition of socialism in Russia, they first took on the notion of CSR basing on the American fashion in the 1990’s. But more recently, they have been aligning with the European model of CSR (Dincer & Dincer 2007, p 49). Towards the turn of the millennium, CSR was already a conventional industry and saw international firms like KPMG and PricewaterhouseCoopers entre the provision market for CSR services. In the contemporary business environment, CSR is already integrated with all business operations. Social pressure has played a bigger role in achieving this than have the businesses’ positions. It is common to find a CSR office appointed as a strategic position within the decision-making hierarchy, whose main responsibility is to oversee the development and implementation of social policy. The office also ensures that the top management’s commitment to its cause, especially that of the CEO, is corresponded and engrained in the organisation’s culture (Visser, Dirk & Manfred 2007, p. 102). Relationships with interest groups and stakeholders as well as CSR audits for the annual reports are coordinated by the office. Its operations are also made more effective by taking into consideration feedback or whistle-blower procedures, which are essentially anonymous and watched over by outside ombudspersons. Its operations basically take on two types of relations: internal and external. The internal aspect handles employees, distributors and suppliers while the external handles the government, nongovernmental organisations, consumers, investors and the media. The current situation of CSR in the world views the internal and external aspects as very crucial (Mcllroy 2008, p. 203). Before achieving external excellence, most organisations initially spent more on developing internally. This is because their employees, distributors and suppliers are part of the society who determine the quality of service and products they offer to the community, which is their core objective of existing. This may take the form of employee training and development, incentives like medical covers, sufficient wages, and intervening in family problems such as finding daycare for children or housing for employees. Then the external part will involve optimising quality of services and goods, pledging and committing sponsorships, transparent accounting, protection the environment and supporting educational causes. Essentially, CSR today for business managers is more a management tool than a social initiative. The present day practice of CSR has become synonymous to business organisations and, in the event of a financial crisis, backing out may not be the obvious option as was the case during the Great Depression of the 1930s (Snee 2004, p. 34). Instead, it would be more useful to design solutions to cushion affected communities and then implement strategies that will prevent future repeats of the situation. It is in view of this that the financial crisis that began in 2008 has stimulated resurgence in the deeply rooted sense of responsibility after watching the collapse of institutions like, for example, Lehman Brothers. Enterprises must be obliged to responsibility that exhibits commitment. The commitment must be apparent in the way they are foresighted; in transparent services and products that are able to create value in society; in a management that is oriented towards value by recognizing and acknowledging risk; in displaying practical custodianship of the billions that taxpayers have given towards bailouts; and in preserving employments (George & Jones 2006, p. 206). The role of business enterprises in the financial crisis is made more important by the fact that the value system currently in must be revised, with the obvious target being the economic and financial systems. To them, responsibility must imply immediate action by the private sector and states to alleviate problems of the future which indicate there will be a global scramble for natural resources caused by inequalities in the society. It, therefore, becomes inevitable to for them to restructure their economic and financial systems so as to align with both social and ecological responsibilities. The starting point then becomes in-depth considerations of the way their business and the society will relate with each other in the political sphere and context of socio-ecological responsibility in management. Looking at CSR as a strategic tool in present day business management, it aids managers in planning and preparing for crisis situations by having companies integrated more holistically in the society (George & Jones 2006, p. 201). The private sector will already have worked with civil societies and policy makers towards a universal good by observing global megatrends. Business enterprises must strategically manage both the risks and opportunities that accompanied the financial crisis early enough since they directly affect their value chain rather than passively avoiding risk. To better understand what role CSR would play in a financial crisis, it is imperative to first know what would become of business organisations that do not enhance its practice. For example, the shortage and high cost of fossil fuel, which also contributed to the crisis, exposes manufacturers of vehicles to specific risks if they did not heed to warning signs and trends to develop substitute drive systems. In the same way, the ever-expanding population of the low-income class can easily facilitate the collapse of manufactures that do not produce and offer consumer goods affordable enough to meet their needs in the difficult times. Financial institutions serving both bankers and consumers may also contribute towards aggravating the situation by developing more mysterious financial products in a frantic bid to overcome losses. Therefore, CSR would facilitate the transformation of social challenges posed by the crisis into strategic opportunities by acting as an experimental and negotiation process. Through CSR, businesses would work together with societal and political stakeholders and interest groups in redistributing social responsibilities and testing innovation solutions in three practical contexts. First it can be done outside the markets through philanthropic measures and involving the businesses as corporate persons. Second, it may be within the markets through the sustainable rearrangement of a business’ core activity and third, by improving overall conditions in the markets (McEwen 2008, p. 21). An evaluation of the third measure shows that the crisis confirmed that businesses compromise their legitimacy to operate when they work in ways that erode the trust placed in them by society, consumers and investors. So, they must join together to form soft law initiatives under trade associations and set standards such as those on working conditions, which have the capacity to broaden or remedy already existing laws. They can also initiate responsible lobbying to enact laws aimed at reconciling societal, economic and ecological objectives that are aligned to their businesses like, say, lobbying to abolish agricultural export subsidies (Snee 2004, p. 29). Future prospects of CSR will basically ride on what business organizations perceive them to be at the present time. A general trend may be derived basing on the advantages seen by businesses which include the opportunity to create a corporate legitimacy and reputation as well as profitable partnerships by establishing relationships that create value (Mcllroy 2008, p. 288). Further, the financial crisis will significantly determine the direction many organisations, and consequently countries and regions, will take. The American and European regions’ standing on CSR will also be impacted by the financial crisis, but those regions that are still forming and yet to fully embrace the concept may have several and not so easily predictable situations. Most businesses in such regions will question whether they really must conform to social responsibility. Even if some will opt to be, economic problems may not sustain them in their choice for long. However, CSR in countries that will emerge from the crisis and have a steady recovery will be strengthened through companies that know the significance of solving societal, community and humanitarian problems. The knowledge of best practice and an appreciation of its power in positively transforming the performance of a business will provide a great incentive to take CSR to a higher level. An observable trend that has been observed through CSR studies from 2000 has shown that there is a tremendous shift in favour of communication and transparency. In 2000, only around 12 companies from the Fortune 500 issued annual sustainability and CSR reports as opposed to presently where over 95 percent have issued them consistently for four years (Sun, Stewart & Pollard 2010, p. 63). If the trend endures, then CSR has a very strong future prospect. This could also mean businesses will shift from viewing their corporate citizenship from an angle that has become tantamount to corporate philanthropy. Instead, most of them are likely to firmly engrain into business operations, growing the number of those taking that approach higher than what was observed a less than a decade ago. As more organisations take on enhancing the concept, one thing that will most likely happen will be putting an end to defensive reactions towards social pressure directed at businesses. Instead, societies will see more proactive responses that address the external business environment, and that is essentially them, in a more objective manner (Sun, Stewart & Pollard 2010, p. 55). References Bhattacharya, C, Sankar, S & Korschun, D 2011, Leveraging corporate social responsibility, Cambridge University Press, Cambridge. Brewerton, P & Millward, L 2001, Organizational research methods, Sage, London. 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