The Growth of Corporate Social Responsibility - Literature review Example

Business and Society of the of the Introduction The second half of the 20th century has witnessed huge interest in the growth of Corporate Social Responsibility (CSR) as a separate discipline. It is absolutely impossible to find one universally accepted definition of CSR because the concept of it is a multi-faced one that embraces philanthropy, transparency, innovation and environmental sustainability. The overall framework of corporate social responsibility can be divided into three broad frameworks namely socio-economic framework, triple-bottom line approach and stakeholder framework. There is now a growing consensus among researchers that local communities play an important role in shaping the CSR actions of firms. Local communities form the immediate external environment of the firm and their development is crucial for firm’s growth. The purpose of this paper is to investigate the reasons that motivate organizations to engage in social and environmental issues in the local communities. Discussion Developing local communities is one of the primary reasons that forces corporations to take socially responsible efforts. This idea is relatively new as most of the previous work in literature has focused on the importance of financial perspective of undertaking CSR activities. Majority of researchers in their existing works have linked the aspect of profitability to adaptation of CSR practices. According to researchers like Carroll (1979), one of the main reasons which stimulate companies to engage in CSR is the cost saving ability. For instance, investment in technological advancement by a company has the potential of reducing its toxic emissions in the environment and proves to be financially rewarding in the long-run. According to the research work of Davis, Lukomnik and Pitt-Watson (2006) there is a strong positive correlation between corporate social performance and corporate financial performance of a firm. In an empirical study undertaken by Rushton (2002) it has been shown that the financial performance of companies enlisted in the Dow Jones Sustainability Index is better than Dow Jones Index by 36%.Innovation has also been found as one of the strong reasons that compel companies to implement CSR in their strategies. The paper published by Marquis, Glynn & Davis (2007) had attempted to provide a theoretical background to highlight the community as a reason which compels firms to be socially responsible. This paper had made an attempt to divert from the financial perspective of taking up corporate actions and focus on a community based perspective of undertaking corporate actions. The findings from their research had suggested that institutional pressure from local communities in which the headquarters of the company is situated creates additional pressure forcing companies to take up social actions. Integration of social demand in the business ethics forms the basis for considering the impact of business activities on local communities. The idea of institutional theory in the adaptation of CSR activities have also been reflected in the works of Campbell (2007). The findings from the research had pointed out that a number of local factors are responsible that results in an organization adopting CSR actions. Public and private regulation of the business organization, non-profit organizations monitoring the corporate behaviour and dialogues among corporations and stakeholder can be considered as institutional factors that stimulate the organizations to behave in a socially responsible manner. The research conducted by Porter and Kramer (2002) had also pointed out that improvement of reputation in the local communities is one of the strong reasons that motivates firms to take up socially responsible actions. It can be argued that multinational organizations have a need to develop the local community because the local community can act as a resource pool for the organization. The efforts taken by Microsoft in developing community are also commendable in regard of creating vocational training. The company not only make efforts to improve the social and economic conditions of the society but also is consciously raising the level of IT literacy of masses which can help them in becoming more productive. The Twin e-Learning Project developed by the company can be considered as one such effort where it provides computer education to the underprivileged youth so that it becomes easier for them to find employment (Microsoft, 2014). Adequacy of health care efforts also becomes an important part of improving the productivity of labour force. Researcher have pointed out that if companies undertake CSR activities for development then major benefits can be accrued from them namely improving its social image in the public and preventing government regulations from hampering the business growth (Hess, Rogovsky & Dunfee, 2002). According to the research made by Scott (2001), communities act as an important factor in formulation of the CSR actions because they are the immediate environment of organizations. It can be interpreted that local communities forms the institutional environment that becomes the target for social change by the corporate powers. The importance of societal development can therefore be treated as a major force that compels companies to take up community development. The arguments developed by the researchers show that economic considerations in development of CSR are slowly receding and increased efforts are being taken up by companies to improve social responsibility of business. The changed attitude of business can be considered as a token for reciprocation by the business to return benefits it obtains from the society. Researchers have also found out that engaging in community development also allows firms in their quest for international expansion. The rationale behind the argument is that as firms enter new markets helping the local community allows the firms to build a reputation for themselves, enhance marketing and branding activities and help in comprehending local behaviour (Waddock & Boyle, 1995). According to the resource based view of the firm, private firms due to access to variety of resources often has potential comparative advantage over governments and public organizations, to respond to critical social needs of the nation in which it is working (Hart, 1995). For instance, in Gaza, Coca-Cola has taken up efforts to provide clean drinking water to the poor families to ensure safety for the population. Coca-Cola has also taken initiatives by forming partnerships with local farmers and government agencies to prevent soil erosion and reduce water usage. Though the theoretical literature has underpinned the importance of multinational corporations in taking up community based developmental works there is evidence that the role played by the multinational corporations in developing countries is inadequate in this regard (Eweje, 2006). The scenario is changing recently and some corporations are taking actions for community development. For instance Shell Oil Company in Nigeria has taken up initiatives to build community by focusing on education of the poor and the destitute. Besides providing educational support to the poor sections of the society, the company also provides scholarship programs for university and helps the population to develop vocational skills. De Beers is another example of a multinational firm that has made major investments in South Africa for community development efforts by donating money to charitable funds. It has been estimated that the company have invested about US$45 million dollars in charitable works pertaining to healthcare and providing poor with motor vehicles and other objects for making livelihood easier (Eweje, 2006). The local communities want a share of benefits of firms that particularly operate in the mining and oil industry (Wasserstrom & Reider, 1998). In an empirical study conducted in India it has been found that most of the companies take up CSR activities because they want to develop the community in which they operate. Majority of the firms working in India have been observed to be engaged in the development of health and education programs for overcoming the constraints in the areas where they operate (Chahoud, 2006). The agenda of these firms is to improve the socio-environmental conditions of these regions for mutual benefit of both the community and the company. Community building efforts have also been observed as a major part of business activities of Coca-Cola. Coca-Cola has taken an attempt to empower women in local communities of India. This attempt can be considered to uplift women and make them economically independent (Coca Cola, 2013). Conclusion There has been a major shift in the reasons for which companies are adopting corporate social responsibilities. The precedence of economic factors like cost reduction are increasingly being replaced by performing social responsibility by the corporate houses. It can be stated that the local communities form the immediate environment for the companies. Therefore, institutional forces like the local community can be considered as a major factor that forces companies to take up CSR actions. The agenda of smooth international expansion is also one of the biggest motivations for companies to take up CSR actions in local communities as they help in building reputation and sustainable brand image. Social and economic development of the local workforce can also be considered as a reason for firms to take up CSR as firms often need to hire labourers from the local resource pool. Therefore, it can be agreed that firms engage in development of social and environmental activities often under the pressure of local communities. References Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of management Review, 32(3), 946-967. Carroll, A. B. (1979). A Three-Dimensional Conceptual Model of Corporate Performance. Academy of Management Review, 4(4), 497–505. Chahoud, T. (2006). Shaping corporate social responsibility (CSR) in India–Does the global compact matter? Retrieved from http://www.die-gdi.de/uploads/media/download_document__127_KB__01.pdf. Coca Cola, 2013. Sustainability Report 2013. Retrieved from Read More