The Importance of Corporate Social Responsibility - Essay Example

Corporate Social Responsibility The CSR is used to measure a company’s value and performance, considering all economic, social and ethical parameters. To observe a sustainable development of an organization, CSR is an important requirement. Organizations should abide by business ethics, legal rules and regulations. Organizations are dependent on employees, leaders and managers. Business ethics, legal rules and regulations are dependent on the social, economic, political and cultural atmospheres. So, organization should set up its business ethics according to the change in these aspects. Implementing effective business ethics is very difficult for international business because those organizations have to consider several countries’ social, economic, political and cultural set up. The relationship between the environment stability and organizations’ business ethics is controlled by CSR. Through sustainable growth and development, economic efficiency increases by proper implementation of CSR. These organizations and people are dependent on each other. Employees make the spine of the companies. Without efficient employees, organizations cannot even use the modern technologies to get advanced output. As a result, people and societies expect some social, legal and ethical support from these organizations. Several models and theories on the corporate social responsibility (CSR) were suggested to improve its efficiency. The most important theories of CSR are divided into four groups- instrumental theories, political theories, integrative theories and ethical theories (Garriga and Mele, 2004, pp.53-58). Instrumental theories are applied for wealth creation and maintaining social activities. Political theories are required to use the power of organizations into political aspects. To meet the social requirements, the integrative theories are much more effective. The ethical theories are mainly based on the ethical responsibilities of organizations. The four core theories are the Carroll’s theory, Stakeholders theory, Value theory and Anchor complexity theory. Carroll introduced the first model of CSR in 1991. Philanthropic, ethical, legal and economic responsibilities are the four divisions of Carroll’s CSR model (Visser, 2005, pp.32-34). These instruments are related with each other. Some organizations are interested in philanthropic, ethical and legal responsibilities. Other organizations are more concerned about the economic responsibilities (Michael, 2006, pp.4-5). The philanthropic responsibility provides better quality of life through contribution of resources to the society. Moreover, philanthropic responsibility is required to meet the charitable expectations of the society. The ethical responsibility helps employees to maintain the correct way of working and avoiding all shorts of risks for the organization. The legal responsibility teaches the employees how to follow the legal rules and regulations of the society and government. Implementation of economic responsibility helps to maximize profit and minimize the cost. To be a successful organization with its efficient and competitive position in the market, it should meet all the economic responsibilities. To follow the legal rules and regulation of society and government, the “Stakeholders Theory” has a significant role. This is another important theory of CSR. Organizations are not allowed to violate other organization’s rules and regulations. Increasing the moral value and maintaining the business ethics are the two most important aim of this theory. Stakeholders’ involvement is more important than the shareholders. This theory also gives the idea of how a manager should work for his organization, through the proper allocation of scarce resources (Phillips, 2004, pp.3-4). This theory is also effective to identify the differences between the everyday ethics and the business ethics. Company’s value is the most important assumption for this theory. Managers of an organization play a vital role in sharing company’s value. Creating value for the stakeholders is the main task for companies. But sometime, company gives importance to increase the shareholder value. This increases the incentives for the managers and this increases the stakeholder value for the organization. This also suggests the correct way for the managers of an organization to avoid the entrepreneurial risks (Freeman, Wicks and Parmer, 2004, p.366). These theories are not able to explain the quick adaptation of new management procedures by the companies and its employees. Other two theories CSR suggest about the adaptation of new management procedures by the managers of organizations. These two necessary theories are the “Anchor Complexity Theory” and the “Value Theory”. The Anchor Complexity Theory is one of the main theories of CSR. This is the most effective and useful theory for the present condition. The Anchor Complexity Theory consists with four important concepts. These are “Self-Organization”, “Self-Assembly”, “Complex Adaptive System” and “Fitness Landscape”. These concepts are based on Darwin’s theory of evolution. “Survival of the Fittest” is the main concept of Darwin’s theory. However, at present, it is very tough for organizations to adopt all requirements in this fluctuating condition of socio-economic aspects. The present socio-economic condition is much more challenging than before. Companies have to manage with the change of the challenging environment under several complexities. “Self Organization” is one of the concepts of the Anchor Complexity Theory. This is a continuous and stable ordering of the environmental elements and human resources (Frederick, 2006, p.140). Sequentially, “Self-Assembly” process is also important to make immediate changes in the organization management procedures with the change in the social, economic, legal and ecological responsibilities. Adaptation of new ideas in business management process is required to get a sustainable development of the organization. The Complex Adaptive System (CAS) plays a vital role to exercise this adaptation in organizations. CAS helps to manage the condition of organization and its surroundings. The fourth and final concept of this theory is the “Fitness Landscape”. This increases the efficiency of employees and also increases the value of the firm (Frederick, 2006, p.141). These concepts of the Anchor Complexity Theory are very important to exist in the continuously changing socio-economic and environmental conditions. Another important theory of CSR is the “Value Theory of CSR”. This theory helps to maximizing shareholders’ profit, protection for the stakeholders. Involvement of efficient managers is significant for the benefit of the company. According to this theory, managers should have the power to take any decision to change the management procedure for sustainable development of an organization. This theory also tries to increase the interest of the shareholders of the organization. The profit of the organization should be distributed properly not only in the shareholders, but also in the employees, customers and stakeholders of that organization. There is another important theory for socio-economic and environmental sustainable development. The “Triple Bottom Line” theory is based on the three pillars- people, planet and profit. This theory measures the values of organizations depending on their social, economic, ecological, legal and ethical success (Brown, Dillard and Marshall, 2006, pp.2-4). This theory emphasizes on the ecological and social aspects. In 1994, John Elkington invented the term of “Triple Bottom Line”. The aim of this theory is to create sustainable balance in the social and ecological instruments. This theory is mainly dependent on the “Stakeholders Theory” and it states about the more importance of the stakeholders, rather than the shareholders for an organization. It is sufficient as a guide towards natural and human resource management. This theory helps to increase the awareness of competing with others. Though it has the ability to boost the sustainability of organization, it is not sufficient to maintain the balance of environmental and human resource elements (Brown, Dillard and Marshall, 2006, pp.7-8). The social and political sustainability has a significant effect on the environmental sustainability. Instability in social and political aspects affects the environment and reduces the balance of the elements of environment and human resources. For corporate social responsibility, one of the main elements is the economic responsibility and environmental and human resource management comes under the account of economic responsibility. Therefore, the relationship between the corporate social responsibility and triple bottom line theory is highly significant. The Corporate Social responsibility (CSR) is dependent on the change in the social, economic, ethical and legal atmospheres of society. Therefore, these theories and models may be effective for a society and not for another. Managers of organizations have a great responsibility to change the management process according to its requirement. References: 1. Michael, M. L. (March, 2006). ‘Business Ethics: The Law of Rules’. Corporate Social responsibility Initiative. Working Paper No. 19. Cambridge. Retrieved on June 25, 2010 from: http://www.hks.harvard.edu/m-rcbg/CSRI/publications/workingpaper_19_michael.pdf 2. Visser, W. (2005). Revisiting Carroll’s CSR Pyramid. Retrieved on June 25, 2010 from: http://www.waynevisser.com/chapter_wvisser_africa_csr_pyramid.pdf 3. Phillips, R. (March/April, 2004). ‘Some questions about stakeholder theory’. Ivey Business Journal. Retrieved on June 25, 2010 from: http://www.iveybusinessjournal.com/view_article.asp?intArticle_ID=471 4. Freeman, R.E., Wicks, A.C. and Parmer, B. (May/June, 2004). ‘Stakeholder theory and the corporate objective revisited’. Organization Science. Vol. 15, No. 3. Retrieved on June 25, 2010 from: http://my.t-bird.edu/files/personalfiles/133488/10Corp_Obj_Freeman_Reply.pdf 5. Frederick, W.C. (2006). Corporation, be good: the story of corporate social responsibility. Dog Ear Publishing. 6. Garriga, E. and Mele, D. (August, 2004). ‘Corporate social responsibility theories: Mapping the territory’. Journal of Business Ethics. Springer Netherlands. Vol. 53, No. 1-2, pp. 51-71. Retrieved on June 25, 2010 from: http://www.springerlink.com/content/t2j5p5r60k671481/ 7. Brown, D., Dillard, J. and Marshall, R.S. (n.d.). Triple bottom line: a business metaphor for a social construct. Departament dEconomia de lEmpresa. Retrieved on June 25, 2010 from: http://www.recercat.net/bitstream/2072/2223/1/UABDT06-2.pdf Read More