Corporate Social Responsibility - Essay Example

 Corporate Social Responsibility Corporations are facing more and more pressure to answer consumer fears about how the markets impact upon society and the environment. One of the ways in which they have tried to do this is through promotion of Corporate Social Responsibility. Milton Freidman stated that the “Business of business is business”, and this view seems incompatible with a socially aware intent. In looking at the opposing views of the market in society, questions still remain: is CSR compatible with the demands of shareholders? Is CSR a genuine movement, or a company PR exercise? Can a company be profitable while also being socially aware? Corporate Social Responsibility (CSR) is a phrase used regularly by companies when they attempt to assure people of their ethical intentions. The EU’s report on ‘Implementing the partnership for growth and jobs’ defines CSR as: A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. (EU, Implementing 1). Consumer concerns about ethical treatment of the poor and exploitation of the Third World have made the promotion of social and ethical statements in business procedures essential. However, many in the consumer movement now feel that CSR is a sham, and a corporate PR exercise designed to whitewash the continuing exploitation of the vulnerable and poor. The question this essay attempts to argue concerns how compatible CSR is with the traditional role of companies, which is to make money for their shareholders. The issue of Corporate Social responsibility seems to be between those who feel that companies are part of society, and others who are more inclined to concur with Milton Friedman’s belief that the only social responsibility that a business has is to its shareholders: “The Social Responsibility of Business is to Increase its Profits” (Friedman, 1970). By looking firstly at how government has supported the CSR movement, then at the positive elements of CSR, with reference to increasing profits and ‘Social profit’, and finally at the opposition to CSR from both businesses and consumer movements, this essay hopes to establish whether Corporate Social Responsibility interferes with the ability of companies to make a profit, or whether it is a recognition of a larger social movement to improve the values and ethics of society. Recently, Both the Commission to the European Union parliament and the British Government issued reports on the growing use of CSR amongst companies. The issues centred around how the EU and the UK were going to manage the rising demands for more ethical business practices. The first report by the Commission observed that CSR was Not a panacea….but they can contribute to a number of public policy objectives, such as Integrated labour markets… Investment in Skills development…and employability… Improvements in public health… More rational use of natural resources… [and] greater respect for human rights, environmental protection, and core labour standards. (Commission, 6) This is clearly expecting a lot from corporations, and does seem outside their responsibilities. Companies might consider that investments in learning and in public health might be better off in the hands of public bodies such as national governments. Responsibility for the health and welfare of a country’s citizens should be assumed by the ruling body; to put some of that responsibility into the hands of markets and similar foundations is surely against the interests of the society: Corporate Social Responsibility has important implications for…the public authorities, who should take them into account when determining their own actions. (European Commission, 6) This attitude is very worrying, as it seems to promote the idea that governments should rely upon the philanthropy of big business when calculating their policies towards these same businesses. However, the Green Paper also notes the importance of the idea of corporate transparency in business’s decision to promote themselves as more ethical. The spread of consumer movements has been significantly assisted by websites such as ‘CorportateWatch’, which monitors and discloses businesses’ unethical practices (corporatewatch.org.uk). Businesses have to be more ethical, because they are being watched every step of the way. Although the Commission have observed this, they have not weighted their policies to take this aspect into account. Instead, the Green paper concentrates mainly upon benefits to companies involved in CSR. The Corporate Social Responsibility movement can be seen by business as a good PR exercise. The consumer pressure groups are an important source of income for big business. In face, an industry survey of 1,500 delegates at the World Economic Forum, only 20% of these thought that “Profitability was the most important measure of corporate success” (Economist1). Nearly a quarter thought that company reputation and integrity of the product were the most important (ibid). As this article notes, “Corporate virtue is good for profits”. In addition to making many of the CSR businesses seem more socially friendly, it also attracts investors and insurers: CSR makes companies attractive to both mainstream investors and to the fast-growing ethical-investment sector… socially responsible investing…is one of the fastest growing sectors of European and global markets. (Christian Aid. 11) In sum, there are several reasons for companies to practice CSR policies: consumer pressure, governments’ expectations, seeking investments, and an attempt to distract from negative affects such as high pricing, or even just the need to make profits. The fact that so few of the delegates admitted to having profitability in mind when doing business shows how aware people are of the need to suppress this element of business practice. CSR is also seen more negatively, both by consumers and by other businessmen. Many consumer groups believe that the Social responsibility is a sham, citing Shell as an example of one company that has been both promoting its CSR beliefs, and at the same time showing lack of ethics in its business practices. CSR…helps to greenwash the company’s image, to cover up negative impacts by saturating the media with positive images of the company’s CSR credentials (Corporatewatch) Some parts of the consumer pressure groups also feel that companies are hijacking the environment and human rights campaigns in order to prevent governments regulating businesses through laws. companies are effectively capturing the issue space around major social and environmental problems and seeking to propose solutions which fit within a market centred worldview. (ibid) This may be too extreme a position, since it tends to define corporations as big evil forces, animating these businesses as though they were a thinking being, rather than a collective organism of investors, executives and employees. Another opposition to CSR comes from within business itself. Some economists believe that When it comes to actually voting with their wallets, consumers… like to contribute individually, not as part of a huge pool. They certainly do not expect the …corporations in which they invest to deploy corporate assets for social causes. (Atkins). To Atkins, to invest shareholder’s money in worthy causes is “Not only irresponsible, but deceptive”, a belief which harks back to Friedman’s argument that to make social investment is contrary to the interests of shareholders. However, other business people such as Marc Benioff argue that “The Business of Business is not just business, because employees do not want to be 100% commercially orientated.” (Clark). In conclusion, we can see that there are a number of irreconcilable positions within the CSR debate, from Consumer watchdogs who suspect business of “Greenwashing” their unethical practices, to businesspeople who see it as a way of practicing a 21st century philosophy. The economists on the right, taking their cue from Milton Friedman, certainly have a good cause when they say that ethical social practices are unethical business practices. However, the fact that investors are looking for Corporate Social Responsibility in companies, and insurance firms also want to see ethical values in the business plan, means that companies which have no CSR policies may find it increasingly difficult to get business funding and insurance. A company which cannot raise a loan is likely to find itself out of business, and certainly these facts will impact on profitability. With that in mind, it is possibly to say that, in fact, Corporate Social Responsibility is essential for the long term survival of a business. Bibliography Atkins, B. Is Corporate Social Responsibility Responsible? Forbes.Com 28 November 2006 Christian Aid: Behind the Mask: The Real Face of CSR Clark, H. The End of Philanthropy As We Know it. Forbes.com 06 July, 2006. Commission of the European Communities. Implementing the Partnership for Growth and Jobs: Making Europe a Pole of Excellence on Corporate Social Responsibility 22/03/2006 Corporate Watch: The Arguments Against CSR. www.corporatewatch.org.uk The Economist Two Faced Capitalism Jan 22 2004 Ibid. The Good Company Jan 20 2005 European Commission Promoting a European Framework For Corporate Social Responsibility: Green Paper. July 2001 Friedman, Milton: The Social Responsibility of Business is to Increase its Profits from The New York Times, September 13, 1970. Read More