Influence of Products and other factors on Corporate Social Responsibility - Term Paper Example

INFLUENCE OF PRODUCTS AND OTHER FACTORS ON CORPORATE SOCIAL RESPONSIBILITY + State Date Corporate Social Responsibility (CSR) is an ongoing commitment of an organization to act ethically and contribute to the economic well-being (Burke & Logsdon, 2005). It aims at enhancing the quality of life of the employees, their families, local community, and the public as a whole. In its simplest term, corporate social responsibility is where the company gives back some of what it has taken from the workforce, the community, and the environment. A company can behave socially responsible by using many different ways. Utilizing recycled products, donating to charities, and ensuring that products are fair trade are just some of the ways that a business can apply to act ethically responsible. Companies that value defined corporate social and ethical behaviors tend to do better and gain more profits than those that neglect such responsibilities. In the past, many business organizations did not consider it necessary to take care of their workers, community, and other stakeholders as long as they were making profits and growing. However, recent years have witnessed businesses starting acting socially responsible. The increased competition brought about by technological development and other factors cannot allow a company to neglect its social responsibilities. The nature of products that a business produces determines to some extent the degree of corporate social responsibility that a firm upholds. The views of stakeholders and customers on a particular product, as well as its demand, will significantly determine the extent to which a firm acts successfully responsible. For instance, products such as petrol and tobacco may not be friendly to the society in some ways. The companies that produce such products thus always combat their adverse influence on the society. The British Petroleum (BP) Company oil products inherently harm the environment and hence the society, despite the company upholding various social responsibilities. The company failed to act environmentally responsible in a successful way when almost 210 million gallons of oil spilled into the Gulf of Mexico. The failure of the enterprise to act socially responsible was mainly due to the nature of the products it produces. Extraction, purification, transportation and storage of oil call for complex and delicate procedures to reduce chances of adverse environmental effects. Customers who buy petroleum products from BP do not concern themselves with the environment since they are buying products that possess negative externalities. Consequently, it reduces the incentive for BP to be mindful of corporate social responsibilities since buyers will buy their products regardless of the Corporate Social Responsibility. As a result, the BP Company will only incur expenses and reduce profits if it engages in significant corporate social activities. The same goes for BAT and However, judging a business behavior needs an overview of all its behaviors. Some companies such as BAT may claim that they are doing socially responsible in many areas. The society may see some business products such as green energy as friendly. Apart from the type of products, several other factors may also influence the extent to which a business will be able to behave in a socially responsible way. Vaaland and Heide (2008) say that the values and attitudes of employees and investors are among these factors. Some staff members and investors may support the behaviors while others can oppose. Different stakeholder groups are another force that can exert power against or in support for a social responsible action. The financial status of an organization, legal structure, corporate objectives, competing demands for resources, resources dedicated to social responsibility and commitment of leaders are other factors that will determine the degree of a company’s social responsiveness. A business should consider these factors in its CSR initiatives. BP has faced criticisms and crisis in the recent years in its CSR acclaim (Belanger et al., 2015). It has continually claimed to ensure that one of its objectives is to be responsible, progressive and innovative (BP, 2009). It promises to be responsible to the community and handle any incidents that happen. The company values safety to the environment and people. The BPs Annual Sustainability Review states that its corporate values are respect, safety, courage, excellence, and teamwork. However, several major drawbacks have drawn criticisms towards the company, thus faulting its ambition to achieve corporate aims and objectives. Various reports on an explosion at BP’s Texas City oil refinery that killed several people in 2005 revealed that the plant had not followed required safety measures to reduce costs. The government compelled it to part with a fine of $87 to ensure that it complies with safety responsibility. The new leadership under Tony Hayward promised creation of improved safety measures. However, April 20th, 2010 saw the catastrophic explosion that sunk the company’s oil rig in the Gulf of Mexico. The incidence was another drawback to BP’s social responsibility policies. Community scrutiny and heavy media forced the BP Company to change its policies. It accepted responsibility for safety failures and vowed to pay for its behavior. It has since increased its safety standards in its operations and parted with large sums of money towards the stakeholders. It is settling damages with various organizations and making changes in its top management membership. BP is trying to win back its place in the society by using various CSR strategies, despite the substantial costs of providing socially responsible benefits. It has begun a range of voluntary standards and CSR initiatives. The efforts aim at enhancing safety and operational responsibility throughout the company (Belanger et al., 2015). Safe drilling, risk management, environmental footprint management, and socio-economic contributions are some of these initiatives. The company spends a vast amount of money, efforts and time in social ventures. It aims at investing to generate a positive impact on the society. In 2011, its direct spending was $ 103 million. The company works with community groups to foster education, infrastructure projects, health and other initiatives. The Tobacco industry is another industry whose social responsiveness is limited due to the nature of its products. The government prohibits advertisements by BAT, Philip Morris, Imperial Tobacco, and other tobacco companies. Thus, it resorts to CSR in curving an admirable image among the members of the society. In the late 1990s, the tobacco industry experienced defeat in the courts due to the Master Settlement Agreement that saw them losing billions (Tobacco Tactics, 2009). Consequently, the industry began to use the CSR policies to try to assist it in winning back the social trust. Since then, the BAT has benefited from CSR by attempting to prevent effective government regulation to minimize consumption of tobacco. BAT has tried to evade legislative and government regulations by providing voluntary forms of corporate governance instead. However, the use of CSR by BAT is in violation of the stipulations of World Health Organization on the control of tobacco usage. Thus, BAT tries to use dialogue with its stakeholders as an important public relation (PR) strategy. They believe that they would not be suspected of hiding anything if their operations are perceived as responsible, transparent and open. The stakeholder consultations motivated BAT to launch a BATresponsibility.eu website to highlight its EU Social Reporting Cycle. However, dialogue with stakeholders has some drawbacks. The primary disadvantage is evidenced by secret documents from the archives that showed how some stakeholders advised the tobacco industry to apply dialogue in minimize the opposition from interests social groups. Another strategy that BAT uses is partnering and good corporate citizenship. Tobacco Tactics (2009) says that the approach enables BAT to enhance its image as a good corporate citizen that take part in the governance. Some of the partnerships directly link to the company’s CSR. For instance, the company has collaborated with the Institute of Business Ethics. The Institute assisted BAT to develop policies on transparency and governance. Companies such as those in the tobacco industry also value sponsorships and philanthropy in creating a perception of responsibility and caring around their brands. They contribute funds to worthy causes. For instance, Philips Morris had documented plans to concentrate on supporting projects in arts, hunger and nutrition, and higher education. A certain document claims that since 1958, the company has been one of the arts supporters. In the late 1990s, it donated $100 towards the fight against hunger. According to its website, it currently contributes over $30 million towards charitable causes (Philip Morris). BAT web site now states that it recognizes the importance of its corporate citizenship by supporting charitable projects and local communities. It further claims that in 2011, its global CSR expenditure amounted to 13.6 million euro pounds. The Imperial Tobacco said in its Annual Report that they had revised their CSR policies to target developing countries that need their presence. The company claims that it allocated approximately 3 million euro pounds to partnership investment. From the above discussions, corporate social responsibilities have potential benefits relative to the costs of the business. It helps in restoring the image of a company back to its earlier position. Corporate social responsibility also helps businesses in an industry that has no right to advertize its products such as the tobacco industry to create a favorable image in the society. Hunnicutt (2009) affirms that through social responsibilities, companies that produce destructive products can make the societal members relate to them and see their role in shaping the betterment of the society. Thus, the company will find acceptance in the society as a responsible corporate citizen. Thus, the overall result is that the enterprise will experience an inflow of revenue that will cover its CSR expenses and increase its profits. The social responsibility is thus an important initiative that a business should not overlook when considering other corporate objectives, such as profit making. The approaches by the oil and tobacco companies also demonstrate the influences that define the responsibilities that a business accepts to uphold. First, the company has to adhere to minimum legislations when it comes to issues such as working conditions, environmental pollution, and minimum wages. The BP had to change policies and accept its social responsibilities in environmental and safety concerns. The second influence is the stakeholders since they exercise vast amount of power. For instance, BP shareholders invest enormous amounts of money in the company. They hence decide whether a social responsibility engagement will be profitable and earn them interests or not. Customers who purchase a product may also feel that a company should engage in a social responsibility as a way of thanking them for their loyalty. Clients can withhold purchases and consequently threaten a global business simply through a word of mouth. For instance, they can use the adverse effects of BAT tobacco products or the catastrophes’ related to BP to spread word on the unattractive side of products from the companies. Hence, a company will have to engage itself in some corporate social responsibility to drive home its positive image among targeted customers. The government is another stakeholder who influences the corporate social responsibility of companies. For instance, BP had to establish strict safety measures to avoid future fines and comply with the government regulations on safety. The government also places increased corporate social responsibilities when the environment and hence the society is at risk in case of an adverse incident (Burke & Logsdon, 2005). Corporate Social Responsibility is important for any company that wants to create a favourable image and hence increase its profits. The products that a firm produces determine the extent to which that company will engage in social responsibilities. The oil and tobacco products possess a challenging situation when it comes to CSR. Customers who buy petroleum products from BP do not concern themselves with the environment since they are buying products that possess negative externalities. Consequently, it reduces the incentive for BP to be mindful of corporate social responsibilities since buyers will buy their products regardless of the Corporate Social Responsibility. Companies in the tobacco industry have to use various ways of CSR to evade government policies and create a positive image in the society. Other factors intertwine with the nature of products in influencing CSR policies of a company. Such factors should be considered in developing an effective CSR strategy. Although actively engaging in CSR is expensive, it will enhance acceptance of tobacco and oil industries among the society and enable them actually achieve the other objectives. References Belanger, R., McNeil, D., Metzenroth, J., & Sherwood, P., 2015, Corporate Social Responsibility and Corporate Social Performance - BP Company Assessment. Retrieved from https://sites.google.com/site/702cap/corporate-social-responisbility-and-corporate-social-performance Burke, L., & Logsdon, J. M., 2005, How corporate social responsibility pays off. Long Range Planning, 21(3), 20-35. Hunnicutt, S, 2009, Corporate social responsibility, Greenhaven Press, Detroit. Tobacco Tactics, 2009, CSR Strategy - TobaccoTactics. Retrieved from http://www.tobaccotactics.org/index.php/CSR_Strategy Vaaland, T, I, & Heide, M, 2008, Managing corporate social responsibility: lessons from the oil industry. Corporate Communications: An International Journal. 25(3), 21-34. Read More