Key Issues in Corporate Social Responsibility - Essay Example

Corporate Social Responsibility Contents Contents 2 Introduction 3 Discussion 4 Overview of CSR 5 Key issues in CSR 6 Potential Business benefits 7 CSR measures-Regulation versus voluntary 8 Voluntary CSR 9 Stakeholder theory versus CSR 10 Corporate accountability and CSR 11 CSR and regulation 12 Conclusion 13 Bibliography 15 Introduction Corporate Social Responsibility (CSR) encompasses the incorporation of corporate self-regulation practices in the business model of different organizations operating in a wide array of industries across the globe. An alternative name for Corporate Social Responsibility (CSR) is Sustainable Reporting Business. The business objectives of using Corporate Social Responsibility (CSR) activities in an organization are to attain sustainability and long term profitability for the business through the implementation of these activities and policies in the regular functioning of the business. Corporate Social Responsibility (CSR) has emerged as a prominent and mandatory concept for both profits oriented and non-profit organizations across the globe. As contrasted to general belief, Corporate Social responsibility is not a new concept. Instead it has been existent in the business world for the last 50 years in a pre-nascent state. After the inception of the globalization era, the concept has become more popular among different transnational and multinational businesses mainly as an ideal way of achieving sustainable competitive advantage. The development of a large number of domestic as well as transnational corporations has become largely dependent on new dynamics of corporate social responsibility activities. The implementation of new doctrines of Corporate Social Responsibility (CSR) like the codes of conduct, triple bottom line concept, stakeholder engagement and certification and labelling in the global business environment indicates at an emerging new era of business where sustainability is a more critical issue than profitability. However, the critical role and impacts of Corporate Social Responsibility (CSR) on business activities and business sustainability has been a debated topic. While the supporters of Corporate Social Responsibility (CSR) have supported the idea that Corporate Social Responsibility (CSR) brings about long term profitability, the opponents of Corporate Social Responsibility (CSR) have argued that the excessive implementation of Corporate Social Responsibility (CSR) may misalign a business from its main business objectives and its pre-defined economic role in the business environment. Discussion Any organization operating in the business world, whether it is a profit oriented or a non-profit organization has certain impacts on the external environment of the business. These impacts may be positive or negative in nature. Apparently, a company will not have any benefits when it strives and spends to reduce the negative impacts of their business processes on the society and the community. 1However, with the emergence of the concept of sustainability, most businesses are focusing on extensive corporate social responsibility activities to enhance long term profitability and sustainability. Corporate Social Responsibilities are seen as major steps taken by businesses to ensure building consumer trust or regaining lost trust on the part of the consumers or employees. The regulations are imposed by the government and other international authorities so as to oblige the businesses to take steps towards reducing the negative externalities created by the business activities on the external environment. 2Regulations have been identified to be indispensible with respect to their role of restraining uncontrollable corporate power growth, ensuring proper corporate social responsibility reporting practices and empowering the civil society to have a balanced control over the functioning of the multinational corporations. Overview of CSR Corporate Social Responsibility (CSR) activities are argued to be devoid of legitimation when viewed from the perspective of neoliberalism. The CSR doctrine is argued to be threating for prosperity and development across both developed and developing companies. Corporate Social responsibility may lead to more economic freedom for the corporations while undermining the role and influence of the prevailing market economy in the country. Therefore, it is indicated that engaging in Corporate Social responsibility activities are not always pinned down as legitimate activities with respect to regulation and policy formulation. The multinational corporations across the world have moved towards demonstrating corporate citizenship through the socially responsible activities due to the pressure of the changing consciousness of the global consumers and other social and economic stakeholders of the businesses. The Corporate Social Activities (CSR) is aimed at furthering social, economic and environmental goals in the business while engaging multiple stakeholders in the activities. According to the neoliberal viewpoint, there are certain strategic reasons and goals for corporations to adopt different corporate Social Activities (CSR) practices. This includes the fact that through the Corporate Social Activities (CSR) are not considered to be universally legitimate yet strategic Corporate Social Activities (CSR) is considered to be beneficial for business as well as the society. However, the Corporate Social Activities (CSR) policies should be undertaken only when they are likely to add value to the image and profitability of the business. The strategic Corporate Social Activities (CSR) is argued to be beneficial for companies because they provide strategic advantages for a business while establishing ethical perspectives for the business. The growing impotence of business ethics has been supported by the development of strategic Corporate Social Activities (CSR), especially after the issue with Enron regarding business ethics. Corporate Social Activities (CSR) helps to give a more ethical dimension to the image and operability of the business. Key issues in CSR Some aspects of Corporate Social Responsibility (CSR) indicate that these activities move the business away from the set traditional value setting corporate environment. Moreover, at times, the expectations from Corporate Social Responsibility (CSR) activities of different multinationals become unrealistic. This may lead to a loss of brand reputation for the businesses instead of creating sustainability and economic profitability for them. 3Corporate Social Responsibility (CSR) has assumed a window dressing image which means that Corporate Social Responsibility (CSR) activities are used by corporates to pre-empt the control of the government and other international authorities over the functioning of the multinational companies. Some opponents of Corporate Social Responsibility (CSR) have emphasized on the fact that Corporate Social Responsibility (CSR) is a type of capitalist legitimacy wherein these activities are used by the corporates to generate more revenues and access greater control over the government policies. This has led to the emergence of immense power of the corporates in some aspects of policy and decision making. The lobbying activities of different transitional companies have been widely used as a dimension of the Corporate Social Responsibility (CSR) activities of the organization. Therefore, it may be identified hat Corporate Social Responsibility (CSR) has shifted from its initial role of being a social movement to become a more capitalistic approach. The Corporate Social responsibility (CSR) activities often lead to an increased level of control of the multinational corporations on the formulation of policies by the government regarding the different business aspects including propositions for doing a business in a foreign country, the financial markets etc. Potential Business benefits The nature and scale of the advantages of Corporate Social Activities (CSR) for a business can be varied. The potential advantages are dependent on the nature of the business and often are difficult to measure on a quantifiable basis. Though some critics have argued that the financial impact of corporate Social Activities (CSR) cannot be strongly established, yet it has also been identified that most companies engage in Corporate Social Activities (CSR) with the aim of developing their strategic position in the long term rather than generating short term financial returns for the business. The impact of Corporate Social Activities (CSR) on the business may be diversified including improvement of the triple bottom line, stakeholder impacts, business development, risk management and positive image creation. 4The Corporate Social Activities (CSR) is in adherence to the newly emerged triple bottom line concept and is used by organizations across the world to impact the triple bottom lines in their respective business. The three P’s –People, Planet and profit form the main pillars of a business and these are considered in every aspect of decision making for a business in order to ensure sustainability and competitiveness. The factor of people is incorporated in the business decisions and practices with the aim of benefiting and positively impacting the community, labour and the society in the region where the organization conducts its business. The planet factor is implemented in order to improve the sustainable environmental practices in the business. This factor is considered extensively in the implementation of Corporate Social Responsibility (CSR) activities of a business. The profit of a business indicates the economic value created for the business. This also forms an important part of the Corporate Social Activities (CSR) because the ultimate aim of the companies in engaging in these activities is to generate long term profits and sustainability. A Corporate Social Responsibility (CSR) program may have impact on the overall profitability and value creation for the business. But the impacts of these activities on the external environment and society can be questionable, especially with respect to the increasing power and control of the multinationals on political and regulatory decisions. CSR measures-Regulation versus voluntary The Corporate Social Responsibility (CSR) measures have been generally assumed to be voluntary in nature rather than being regulatory. According to the Neolithic views, any type of business regulations imposed on corporate social responsibility activities can be considered to be non-acceptable. 5However, in the changing regulatory environment, the neo-liberalistic views have been criticised with respect to the creation and implementation of the Corporate Social Responsibility (CSR) activities. More pressure is arising from all the critical stakeholders and authorities to make the government regulations either supportive towards the Corporate Social responsibility activities or act as a replacement for the voluntary Corporate Social responsibility activities adopted by different multinationals across the globe. The codes of conducts implemented in the voluntary Corporate Social Responsibility actions have certain advantages as well as drawbacks. 6The codes of conduct like the setting up of working conditions and labour standards have been negatively impacted by the restructuring of distribution and production and advent of globalization and trade liberalization. This has created the issue of providing legitimacy grounds to the voluntary code of conducts of the Corporate Social responsibility activity measures. It can be argued that legitimate ground sand regulations are necessary in implementing and guiding the voluntary codes of conduct in cases when there is an absence of necessary provisions of worker complains, third party complains and independent verification. A lack of transparency in the verification, remediation and monitoring process for the Corporate Social responsibility activities of multinationals is also an important ground for deciding the necessity of regulations for guiding the activities of multinational corporations. 7It can also be established that the negotiations made in the multi stakeholder engagement in the codes of conducts can lead to the establishment of a civil society, especially when these negotiations are supported and endorse by the state and national governments. Voluntary CSR The Voluntary social and environmental accounting and reporting (SEAR) approach to reporting has become more popular among the transnational and multinational companies. The SEAR reporting system encompasses the formal reporting of the Corporate Social Responsibility (CSR) practices, policies and impacts presented in order to engage the stakeholders. 8The CSR policies and SEAR reporting systems are aimed at delivering value to a wide range of stakeholders and at enhancing stakeholder engagement. Therefore, the multinational companies strive to align the economic interests of a group of the stakeholders with the environmental and social interests of another group of stakeholders. The corporations concentrate on developing and following these policies and practices in a voluntary manner so as to maximize stakeholder value. This indicates at the consistency of the business discourses with the voluntary practices. 9This also indicates that mandatory regulations are not necessary in corporate social responsibilities because the multinationals have an interest in conducting these activities ion an ethical and complaint manner and would therefore implement suitable practices in a voluntary approach for the corporate social responsibilities. The voluntary aspects of corporate social responsibilities are driven by the self-interests of the multinational corporations to create brand vale and sustainability. However, a suitable regulatory environment either to support or to replace these activities should be prepared so that the power of the multinationals over regulation and policy formulation does not shadow the role of the government in the decision making for regulations and policy development. Stakeholder theory versus CSR Stakeholders of a company are the people with financial interest in the company like the suppliers, financiers etc., the people who are involved in wealth creation for the business like the customers and employees, the people who have legal or commercial relationships with the business like the business partners and alliances and also the people who may be directly affected by the activities of the business. 10From the Corporate Social Responsibility (CSR) view, the stakeholders are important for supporting these activities. Therefore, many multinational corporations aim at developing multiple stakeholder engagement in their Corporate Social Responsibility (CSR) practise and policies. 11It has been found by some researchers that multinational companies have become proactive in linking their Corporate Social Responsibility programs with the organizational and social outcomes of the business. However, developing strong stakeholder relationships on the basis of corporate social responsibilities is not a priority for major companies. The presence of a regulatory regime in the CSR and SEAR activities are likely to enhance shareholder value creation as well as corporate profitability. Also, the presence of a regulatory regime in the business environment is likely to establish suitable linkages between the factors of profitability and shareholder value creation. Corporate accountability and CSR Corporate Accountability is an idea that follows the acceptance of different corporate responsibilities by an individual or the whole organization. A key division has been created between the activities around the two extreme dimensions of Corporate Social responsibility activities. One of the dynamics around Corporate Social Responsibility (CSR) activities is that many activists support the idea of corporate power as a threat to the global economic and business environment. This view aims at achieving corporate accountability. 12A contrasting dynamics is the acceptance of corporate power as a social and economic opportunity by many people across the world. According to this group of people, the growing corpse power of the multinationals driven by Corporate Social Responsibility (CSR) activities can be an opportunity if they are implemented and engaged in a positive manner. This view aims at being involved in corporate responsibility. There may be several dimensions to the view of regulation as related to Corporate Social Responsibility (CSR) activities. 13These are that Corporate Social Responsibility (CSR) activities form the base for taking up the responsibility for their actions and policies. But, this does not imply that the companies will be accountable for the activities. Another dimension is that the corporate voluntary practices and self regulations are seen as an alternative to the international and state regulations. Corporate Social Responsibility (CSR) activities cannot be separated from the macro political issues and structural issues like corporate power and lobbying activities aimed at influencing macro-economic policies, fiscal policies, pricing policies, de-regulation and economic liberalization. CSR and regulation The regulations on Corporate Social Responsibility practices and other business practices are increasing in the modern times due to the loopholes found in the impacts of Corporate Social Responsibility activities on the global societies and communities. Corporate Social Responsibility is often used by the multinationals as a way of avoiding the impositions of regulations on them. 14The Corporate Social Responsibility is often aimed at preventing regulations on the basis of the regulatory policies being a barrier to the socially responsible activities carried out by the corporations. These activities are the most critical support system for the lobbying activities of multinational corporations against government regulations. This can create negative impacts on the business world and in financial markets as well. 15Regulations are not put as a means of curbing the voluntary activities of the corporates. Instead they are aimed at controlling the overriding corporate power that may shadow the power of the governments on controlling the business environments. Regulations are seen as a positive way of curbing corporate power by implementing rules on structures of corporations, their impacts on the society and environment and their engagement and dealing with the stakeholders, workers and other internal and external customers of the business. The regulations are seen as effective ways to enable the democratic society to specify and control the acceptable and non-acceptable corporate activities and practices. Conclusion Thus, it can be indicated that regulations are necessary to ensure the proper implementation of the Corporate Social Responsibility activities of different multinational corporations across the world. The basic concept underlying the Corporate Social Responsibility activities is gaining public trust. Thus, the CSR approaches are aimed at creating standards and procedures which are uniform, stringent and voluntary in nature. However, this may lead to over regulation in the global economy which may create the threat of costs for the general public becoming more than benefits. Standardizing the norms and establishing universally accepted roles of Corporate Social Responsibility can have more negative impacts than positive impacts. This is because the conditions in every country are not the same. Therefore, setting up of similar norms and regulations on both developed and developing economies may lead to the widening of the gaps between the extremes of a society. More regulations would be lobbied by the powerful multinationals for creating competitive advantage by weakening their competitors and narrowing down competition levels. This may lead to worsened economic conditions and restrain the economic opportunities in the global business world. The private multinationals are likely to link their Corporate Social Responsibility activities to their sustainable competitive advantage creation more than the benefits to the society and community. This can be controlled by the development of a stringent regulatory environment to control their power. This will subsequently cause economic and social pressures that may hinder the market directed economy. Bibliography Airon Tilley, Behind the Mask: The Real Face of Corporate Social Responsibility. (Christian Aid 2003). Aleix Calveras, ‘Regulation, Corporate Social Responsibility and Activism’. (2000) 16 EMS 720. Arscott Clarke. ‘Confronting World: Pathways to a Post-Corporate Society’. 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Peter Frankental. ‘Corporate social responsibility - a PR invention?’ (2001) 6 IJ 18. Rhys Jenkins, ‘Globalization, Corporate Social Responsibility and poverty’. (2005) 81(3) JIA 540. Ruth Aguilera, Cynthia Williams, John Conley & Deborah Rupp. ‘Corporate Governance and Social Responsibility: a comparative analysis of the UK and the US’. (2009) 14 IA 147. Read More