The Evolution of Corporate Social Responsibility - Essay Example

TABLE OF CONTENTS The Evolution of Corporate Social Responsibility 2 Introduction 2 History of Corporate Social Responsibility 3 Contemporary Corporate Social Responsibility 5 Role of Corporate Responsibility during Financial Crises 8 Future of Corporate Social Responsibility 10 Conclusion 11 References 13 The Evolution of Corporate Social Responsibility Introduction Corporate social responsibility (CSR) is fundamentally a moral and ethical movement. Those who advocate CSR tend to desire higher ethical standards in business (Schwartz, 2011, p. 12). There is considerable disparity regarding the best means to achieve this objective. It is argued by some that greater regulation of business and more severe legal sanctions can prove successful in achieving this goal (Robins, 2008, p. 337). On the other hand, there are others who propose a partnership function for business with the government, and the setting of a desirable example by the corporate sector (Aras and Crowther, 2012, p. 141). However, there are some people who prefer to remain silent. Despite this variation, the final objective of a decent and humane society has been acknowledged as one in which the corporate sector sustains the environment and conserves resources (Robins, 2008, p. 337). Moreover, CSR has the capacity to contribute to the environmental and social sustainability of business (Manske and Frey, 2006, p. 11). With regard to businesses that apply emerging technologies, the forestalling and management of the wider social impacts of these technologies assume importance. A number of enabling technological solutions have been facilitated by nanoscale science and technology (NST). These solutions could result in unprecedented innovations in several sectors of the economy, such as healthcare, electronics and sustainable energy (Groves et al., 2011, p. 525). As a consequence of this potentiality, NST has raised concerns regarding its ethical, legal and social influences (Frewer et al., 2011, p. 271). There are several issues related to nanotechnologies, and attempts to address these problems have been limited. For instance, there are important knowledge gaps regarding the probable effects of nanomaterials upon the environment and health. Moreover, nanomaterials derive their importance from several traits. One of these is their enhanced reactivity. Some of these characteristics can produce negative consequences on accidental release and exposure to these substances (Groves et al., 2011, p. 525). History of Corporate Social Responsibility The early definitions of CSR had focused upon what constituted the social responsibility of a company, and the reasons for rendering them socially responsible. These definitions had also regarded CSR to be the same as the philanthropic and voluntary acts of business organisations that had been aimed at addressing the drawbacks in society and at benefiting the disadvantaged sections thereof (Mishra and Suar, 2010, p. 307). Some scholars defined the social benefits of CSR that a company attempts to achieve, in conjunction with the usual economic gains. Others referred to CSR as a conglomerate of the discretionary economic, ethical and legal expectations of society with regard to business organisations. A number of researchers went further and prescribed a holistic approach towards corporate social performance (Mishra and Suar, 2010, p. 307). Heald showed that for several decades, academic studies have focused upon the necessity for companies to engage in socially responsible activities. Moreover, Cannon described the development of CSR through the traditional involvement of business. Such historical development resulted in a fresh assessment of the correlation between business, government and society (Moir, 2001, p. 16). In addition, CSR has achieved the status of a crucial issue in international business. Financial meltdowns, corporate defaults and other contemporary economic events have underlined the importance of comprehending business legitimacy issues with regard to CSR. This has caused businesses to acknowledge the limit of a problematic discretionary approach towards CSR. It is essential to adopt a holistic corporate strategic vision, as mere monetary logic cannot prove successful in the present day international market (Kim and Scullion, 2013, p. 6). Although employees are some of the most important stakeholders, management discussions tend to ignore their significance. However, the relevant literature depicts an area where employees and CSR come together. It is the contention of scholars that human resources management (HRM) and CSR are closely related (Kim and Scullion, 2013, p. 7). This is especially true with regard to the notion that CSR can function as a device for exploiting several of the missed opportunities in HRM. It has been acknowledged that motivation for workers is provided by non-financial elements, to a much greater extent, than their need for money (Kim and Scullion, 2013, p. 7). As such, CSR is primarily concerned with the amalgamation of economic, environmental, ethical and social considerations with the practices and strategies of business. There has been a significant increase in the importance and momentum of CSR in the recent past; however, it is a concept that boasts of considerable antiquity (Jones et al., 2007, p. 244). Business and social objectives have always been opposed to each other. In this context, the power of craft guilds of the Middle Ages, the slave trade and the struggles to improve the working and living conditions of the cities and towns of Britain, during the 19th century, have been cited as apt instances (Jones et al., 2007, p. 244). Moreover, it is contended that in the 19th century, the functions of corporations were defined. Such descriptions were in the context of the wider moral and social obligations and transpired in the centres of capitalist development. It is emphasised that CSR was not a novel concept and that the debate regarding the evaluation of business as a moral institution dated to the days of Plato, Aristotle and other philosophers (Jones et al., 2007, p. 244). Contemporary Corporate Social Responsibility The present impetus imparted to CSR has been attributed to several factors. One piece of evidence regarding this increase in momentum has been provided by the fact that there has been a tenfold increase in the number of companies publishing CSR reports. It is suggested that greater awareness on the part of stakeholders regarding corporate ethical, social and environmental conduct, direct stakeholder pressures, investor pressure, peer pressure and increased awareness of social responsibility have affected the increasing emphasis of business upon CSR (Jones et al., 2007, p. 244). Furthermore, it is claimed that moral obligation, sustainability, licence to operate and reputation constitute the prevailing justifications for CSR. As such, the national and supranational governments have been promoting CSR actively. An example of this is provided by the European Union (EU), which has promoted CSR in its member states (Jones et al., 2007, p. 245). Moreover, the Commission for European Communities argued that CSR is being increasingly acknowledged by the corporate sector. This recognition is with regard to CSR being a crucial aspect of the new and emerging forms of governance, as it is endowed with the capacity to assist them in responding to basic changes in the general business milieu (Jones et al., 2007, p. 245). Some of these changes are: globalisation and the responsibilities that companies deem necessary to address during their activity of sourcing services and products from the developing nations; the issues associated with image and reputation, which have assumed significance in promoting corporate success; and the inevitability of companies having to recruit and retain highly skilled personnel. From the perspective of strategic marketing, CSR has been depicted as a crucial device for generating, developing and sustaining brand names (Jones et al., 2007, p. 245). Cannon showed that the basic function of a business is to produce goods and services that are required or desired by society. All the same, business and society tend to be interdependent due to the necessity of having in place a stable environment and an educated workforce (Moir, 2001, p. 16). As such, the contribution of business to society is adequate only when it is efficient, profitable and socially responsible. The other proponents of CSR define the pertinent area in such a manner that it encompasses a variety of issues such as employee relations, corporate ethics, community relations, environment and human rights. An instance of this is provided by CSR Europe, which constitutes an organisation of large companies in Europe. This organisation, in its reporting guidelines, examines the areas of community, ethics, environment, human rights, employees, customer and suppliers (Moir, 2001, p. 17). The corporate strategic framework addresses a dynamic business environment. As a consequence, it can be presumed that a change will be effected with respect to consumer expectations and needs, legislation, technology, economy and competition. Social responsibility causes firms to acknowledge that the altering business environment indicates such a course of action. The consumers have developed greater sensitivity towards environmental issues. Hence, organisations in the food industry are more likely to contemplate upon the appeal of such commitment (Ness, 1992, p. 45). The basic idea behind CSR is that business has to recognise that it possesses something more than a mere economic function in society. Therefore, it has to shoulder greater responsibility for the effect of its actions on society and the natural environment. Stated succinctly, business has to engage in active efforts to improve the world (Robins, 2008, p. 330). It was contended by Dra Belén Fernández-Feijóo Souto (2009) that the contemporary financial and economic structure has to be revised. Subsequent to the evolution of the global economic systems, it has now been widely recognised that capitalism constitutes the best model. However, several changes have to be made, and individual companies are responsible for effecting such changes. In this context, CSR constitutes a management model that circumvents undesired outcomes and facilitates better transparency in the markets (Souto, 2009, p. 46). Implementation of CSR requires business organisations to restate their fundamental business goals. Furthermore, it is essential for these objectives to conform to the company’s strategy. In addition, there should be no incoherence betwixt these goals and the organisational culture changes that distinguish CSR. The novel attitudes, forms and perspectives should be the outcome of intensive introspection that will enhance the intrinsic worth of the firm (Souto, 2009, p. 46). Role of Corporate Responsibility during Financial Crises The global banking system was seriously and adversely affected by the financial and economic crisis that came to the fore in 2007. At that juncture, the dominant global financial centres of the US and UK were also harmed to a significant extent. In fact, London and New York were the crux of the crisis. The banks in these cities underwent extraordinary levels of losses and debts with regard to the intricate mortgage backed securities (Bruner, 2011, p. 309). In the aftermath of this uncontrolled crisis, the US and UK implemented regulatory interventions that had a wide-range influence. The objective behind these initiatives was to arrest the damage and to prevent the recurrence of such disasters. Some of the more important measures adopted during these exercises were to engender reforms to corporate governance so as to restrict risk taking (Bruner, 2011, p. 309). These proposals advocated the empowerment of shareholders. Such shareholder empowerment was with respect to financial firms and public companies (Cioffi, 2010, p. 229). This was based on the premise that shareholders would be enabled to restrain the reckless managers of banks, financial institutions and other entities in the future (Bruner, 2011, p. 309). The losses and debts on mortgage based securities initially occurred in the US and then spread across the Atlantic. However, debt in securitisation and the financial sector emerged between 2000 and 2007 in the UK. As such, a credit and property price cycle that was similar, in both the US and the UK, came to the fore. The banks in the two nations were exposed to loss of confidence, loss of liquidity and a drastic decrease in asset value (Bruner, 2011, p. 315). This unwelcome development gathered momentum in 2007 and culminated with the financial collapse of Lehmans in September 2008. The UK government was compelled, much as its US counterpart, to provide financial guarantees to several financial institutions such as Bradford & Bingley, Lloyds Banking Group, Northern Rock and the Royal Bank of Scotland (Bruner, 2011, p. 315). Corporate governance was defined by Sir Adrian Cadbury as the mechanism that facilitates the control and direction of companies (Aras and Crowther, 2010, p. 194). The failure of a company usually indicates the absence of corporate governance. This concept has been in existence from the time that control and ownership over a company were divorced (Hamill, Ward and Wylie, 2010, p. 56). Several corporate sector failures have been discerned across the world, some instances being Barings Bank, Enron, Nortel, and Parmalat. This induced the London Stock Exchange to make it obligatory for the companies listed on the main market, to furnish it with a report regarding their compliance with the governance recommendations (Hamill et al., 2010, p. 56). Future of Corporate Social Responsibility As such, CSR covers innovation, and such innovation promotes the central value of a company. Moreover, CSR has a beneficial influence on the internal variables of the company. Some of these are entrepreneurial culture, patronage of stakeholders in their new role towards the company, fortification of the business strategy, strengthening of the market position, and trust of the investors. This provides companies with an improved position to overcome the unsettled state of affairs within the existing economic and financial situation by employing CSR as a business prospect (Souto, 2009, p. 46). The recent years have witnessed a number of industrial bankruptcies and financial scandals. These incidents profoundly affected the business perspectives of stockholders and managers. As a consequence, there has been a strengthening in the belief that business has to undergo change essentially. This change has to combine profit with a long-term view and bestow the necessary importance upon the stakeholders (Souto, 2009, p. 41). The process related to the implementation of CSR tends to be drawn out. Moreover, it admits of improvement. This remarkable trait of CSR makes it possible to plan a sequence of tasks on the basis of circumstances at hand. Moreover, the deep internal reflection that should necessarily form the basis of CSR serves to furnish sufficient material for establishing the initial version of social accounting (Souto, 2009, p. 47). Following the financial crisis, the Walker Report was published in 2009. A comprehensive review of the banking sector was provided by this endeavour. In addition, this report divulged the information that pertained to all institutions. The cardinal conclusion of the Walker Report was that the Combined Code had not met with failure. All the same, this report expressed misgivings about the diligence of non-executive directors of companies (Hamill et al., 2010, p. 57). One of the suggestions forthcoming from this report stated that there should be greater concentration upon risk identification and management. It was also recommended that the shareholders should safeguard their individual interests by adopting a more proactive function and by ensuring that the company was adequately governed (Hamill et al., 2010, p. 57). These initiatives have not been in vain, and shareholders have shown better involvement and use of their power in exercising control upon the decision making of company directors. Thus, during the Annual General Meeting of Tesco in June 2010, the remuneration report failed to obtain the approval of 47% of the shareholders. Moreover, Pirc, a UK governance advisory group, disclosed that opposition to remuneration reports increased from zero per cent in 2005 to 65% in 2009 (Hamill et al., 2010, p. 57). CSR is essentially a generalisation of what constitutes desirable business conduct. It pertains to issues that can be judged as ethically good. This renders CSR a norm of corporate behaviour that enjoys a broad scope. Despite the absence of agreement regarding its definition, the development of this concept admits of a published history. The other related terms are corporate citizenship and corporate responsibility (Robins, 2008, p. 330). Conclusion CSR is founded on the notion that business and society are not distinct entities and that they enjoy an intimate interrelationship. This causes society to entertain certain expectations with respect to appropriate business conduct. At the same time business is obliged to facilitate the improvement of society. It has now been universally recognised that it is indispensable to restrain institutions and to regain the confidence of investors. Such control will, in all likelihood, further economic growth. However, in the absence of adequate CSR initiatives, legislative interventions cannot prevent incidents of unethical and immoral conduct in the corporate sector. References Aras, G. and Crowther, D., 2010. 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