Corporate Social Responsibilities and Their Implementation in Horbo Manufactures Limited Company - Case Study Example

A Critical Look into Corporate Social Responsibilities and Their Implementation in Organizations by       Name University Name City Date Introduction The business environment has become diverse with the changing times, and, therefore, the parameters of success in any competitive environment have also changed. One component of the recent critical factors for business success is the corporate social responsibility of the business (CSR).Opinions on the contents of CSR are divergent and different arguments have been put forward to describe what it entails and how it should be applied. Other arguments have also been brought forward stating that CSR should not be implemented in business organizations (Urip, 2010, P. 3). The decision lies with the government and the organizations themselves regarding whether or not to implement the CSR. There are nations where the government policy mandates all businesses to have a CSR policy. CSR can be given a regional or worldwide definition as the relationship between a business and the citizens, other forms of businesses that are in that area and the governance of the country in which the company is located (Urip, 2010, P. 2). It can also be given a lesser definition as simply the relation of the business with the local residents of the area in which it is located and a final definition as the role of a business to its stakeholders. CSR requires a business to perform its operations in manner within the confines of the law, benefits stake holders in the business and is also sensitive to the issues of the surrounding society (Alkew, 2009, P. 23). According to Carrol’s CSR pyramid, the CSR is composed of a number of responsibilities to specific spheres of the business environment. The first role of a business to its society is philanthropy. Corporate philanthropy began back during the industrial revolution and was spearheaded by businessmen such as Rockefeller and Henry Ford (Urip, 2010, P. 34). These activities include the contributions that the business makes in terms of gifts to charity, children’s homes and to schools. The contributions can also be in the form of services and goods offered by the business to the community. This is, however, difficult to account for since there is no well-defined mechanism to monitor them from an accounting perspective (Baxi, 2005, P.5). Another aspect is the ethical responsibility of the business. Ethics in this sense refers to widely accepted standards of the limits of what is right and what is wrong (Baxi, 2005, P.5-6). According to this argument, business ethics includes the level of honesty of a company to its employees and society. This pertains to whether it gives the correct information about its products or its management or financial state. It entails how the business entity shows loyalty to its employees and how it shows the society that it cares about its welfare. There are also legal roles of a business. These include the roles of the business in ensuring that it operates within the bounds of the law (Baxi, 2005, P.6). The business must abide by the regulations in the country or region it is, they include; policies on labor, the environment and laws on crime. The business is expected to uphold these laws. The final responsibility of the business is the economic responsibility. This is the most important role of the business since it entails the making of profit (Baxi, 2005, P.6). Neglect of this responsibility will lead to the business experiencing losses and hence it will be unable to comply with any of its other responsibilities. In the business world today, there are those who support the implementation of out and out CSR in businesses and those who oppose it. The proponents of CSR uphold the stakeholder theory (Alkew, 2009, P. 34) and argue that CSR has a significant effect on the organization’s bottom line. According to them, businesses are better positioned to gain more in the future since it enhances certain principles such as customer loyalty and trust. They also argue that it directly increases returns in parameters such as the community relations, the environment and the monetary returns of the business. According to Milton Friedman and other critics who hold the free market view of CSR, CSR compromises the fundamental goal of the business which it to make profit. It goes against the principle of value maximization. They also argue that in most scenarios, that the activities in CSR remain unseen by the wider society due to insufficient publicity. This leads to double losses in the business since the aim of the CSR is not achieved and there is the opportunity cost of the money spent. They also argue that CSR is a way of the businesses taking on the burden of huge responsibilities which in essence belong to the government and the community. This paper focuses on Horbo Manufactures limited company. It analyses what this company defines as CSR, the reasons it considers CSR to be vital to a company’s success, the circumstances under which it can implement CSR and a definitive look into the actions that it undertakes in the implementation of its CSR program. It also gives summary of the response of the society and the government towards it program and the obstacles which it faces in its implementation. Finally, it gives recommendations on how to remedy the problems faced.The paper aims to bring to light the dynamics of CSR and its implementation in a relatively competitive environment. Body Horbo manufactures is a sulphuric acid manufacturing company. It is the leading supplier of sulphuric acid in Southern America has over one thousand outlets all over America. In 2010, it received the global award for the most entrepreneurial company of the year (Mulleret, 2011, P. 45) and boasts of two other awards in management and customer relations. Its headquarters is located in Montgomery, Alabama, about 200 miles from the city. It is located next to a lake and is surrounded by a relatively big community. Horbo employs over 2000 employees in its headquarters and over 5000 in other sub-branches and outlets (Alkew, 2009, P. 29). Out of the 2000, 1200 are local residents who are employed on a permanent basis and 300 are employed on a temporary terms. The rest of the 500 employees compose of people from other states such as North Carolina, Florida, Georgia and consultants from China. Horbo manufacturers earn an average gross income of 20 billion dollars each financial year from the sale of Sulphuric acid countrywide, and 10 billion dollars from the sale of subsidiary goods and services (Mulleret, 2011, P. 29-30). In the last financial year 2013/2014, Horbo made a gross profit of 10 billion dollars from its sale of sulphuric acid-10 billion dollars down from its annual average gross income. The company held a crisis meeting to discuss the sudden drop in gross profits. From the meeting, it was concluded that a panel of 15 members would be created to look into the matter and provide a succinct dossier on the causes and remedies of the sudden drop in gross profits. This was done with reference to crisis management strategies as outlined in Mullerets Corporate Social Responsibilities; Governance of corporate organizations. The panel would be composed of professionals from various departments of the company. After three months of thorough investigations, the panel presented its dossier to the board of directors for analysis. According to the dossier; the reasons for the fall in gross income were varied. The dossier illustrated how the company was disposing off sulphuric waste into Lake Port which was adjacent to the company premises. The waste had led to the pollution of the water, causing the death of aquatic organisms such as fish (Mulleret, 2011, P. 63). This had negatively impacted the surrounding community since their main source of income was the sale of the fish. It also resulted into a reduction in the number of tourists who came to visit the river due to its abundant and diverse aquatic life. According to the information in the document, the company was being sued by the residents on the basis of carelessness and negligence of their social responsibilities. The polluted water had also led to the spread of water-related illnesses rapidly since the water was being consumed by the residents (Halladey, 2011, P.21). It was due to this that civil rights activist groups started a campaign to force the closure of the company. Environmental activist groups had also taken the issue to court and the company was facing a fine of 3 billion dollars or the risk of closure. The company was also receiving a lot of negative publicity due to the water pollution on social media sites such as Twitter and Facebook. A hash tag deemed `whenHorbecloses` was trending the social media platforms and this had resulted in a significant decrease in consumer trust. A survey conducted by the panel also revealed that the percentage of the youthful population that was strongly backing the company had reduced from 76% to a staggering 21% (Halladey, 2011, P.47). The company was also facing charges from the Alabama courts for the contravention of the policies on river and lake conservation in the region. According to the policy, no individual, group or groups of individuals, companies both public and private were allowed to dispose of waste in any river, lake, dam or water source that may be deemed by the courts as public property (Hopkins, 2012, P.12). It was facing a fine of 1.5 billion dollars or indefinite closure. The dossier recommended a number of remedies to counter these problems. First on the list was to desist from the disposal of the sulphuric waste into the river. This would help by first stopping the further death of fish and other aquatic organisms (Hopkins, 2012, P.87). This move would also help to prevent any further fines from the Alabama law courts since the fines were increasing with the increase in disposed waste in the river. It would also help to reduce the attacks that the company was facing from civil and environmental activist groups. The dossier proposed that the sulphuric acid waste be disposed by safer means such as neutralization by sodium hydroxide (Hulker, 2011, P.32). The dossier warned that this process was expensive but the expenses could be compensated if the neutralized sulphuric acid could be recycled and used again to manufacture pure sulphuric acid. The dossier also recommended that instead of facing the community and the affected individuals in court, it was better to approach the representing council and solve the issues outside court (Hopkins, 2012, P.42). This would be done through outside court settlements. The advantage of this, the dossier argued, would be less negative publicity from the media and the company would also come out as humane in the face of the public. The move would show that the company had acknowledged its wrong doing and was in a way apologizing. The dossier also recommended a speedy finalization of the fines that it was facing from the Alabama law courts and other court cases. It argued that the longer the cases dragged, the more the reputation of the company was being tainted hence a speedy resolution of the trials would ensure that the company kept the trust that was left (Montreg, 2008, P.62). It further recommended that the company should take it upon itself to begin the purification of the lake. This it argued was in order to prevent further harm to the fish and to human beings who consumed water from the lake. This move would prevent any further law suits against the company and also build the reputation of the company as an environmentally-sensitive company. Finally, in order to remedy the damage that was done to the company`s reputation and improve the damaged relations to the society and the government, the dossier recommended the implementation of CSR (Montreg, 2008, P.12). It argued that the trust of the community could be regained through activities such as donations and the sponsorship of public events. After an analysis of the reasons and recommendations outlined in the dossier. The company began a speedy implementation of the recommendations. There however was disagreement when it came to the implementation of CSR. Some of the board members who were proponents of the stakeholder theory argued that the CSR would only plunge the company into further losses considering that its profits had already dwindled (Urip, 2012, P.34). They argued that the recommendations which had been proposed were good enough to bring the company back to its feet and that there was no need to incur unnecessary expenses. The board members who held the free market view argued, however, that the only way for the company to gain back the trust of the people was through CSR. They stated that if the company did not have the trust of the society and a certification of good conduct from the law courts; it would lose its market share to other companies that were considered good. After a series of meetings, the proponents of the free market theory won the argument with a majority vote. The company implemented the CSR in various stages. The first stage was the conduction of a CSR analysis. This composed of an assessment of the various activities of the company that contravened any of the principle of CRS (Urip, 2012, P.21). The main factor here was determined to be environmental pollution. This was determined to occur through the disposal of environmental waste into the lake. This modus operandi contradicted the ethical responsibilities of CSR and the responsibilities of the company to maintaining the environment. It also determined that the fact that the company was disposing the waste into the lake against the consent of the Alabama law courts was a contravention of the legal responsibilities of the company (Sorke, 2006, P. 42). It was imperative that changes be made. The company had also in the previous years, not been involved in the activities of the surrounding community and hence it had lost touch with it. This move contradicted the principle of philanthropy as one of the major responsibilities of a company to its society. They then developed a plan for the implementation of CSR, followed by the generation of commitments and an implementation of those commitments. The plan basically entailed the three parts of CSR. The first was philanthropy. The company set aside finances that would be used in activities such charity and also in sponsoring public events. It also chose schools from around the region whereby well-performing students would be sponsored to further their education. The company decided to build a vocational school around the area for the disabled. The school would charge a considerably lesser fee compared to other vocational schools. These activities would make the company more likable to the community (Sorke, 2006, P. 42) In implementing the ethics principle, the company desisted from disposing the pollutant in the lake. It also worked in collaboration with an Australian company to remedy the pollution that had been done to the lake. Furthermore, it catered for the medical charges of all the community members who had been affected by the polluted water (Sorke, 2006, P. 98). The company implemented its legal responsibilities in various ways. First, it began complying with the state laws of Alabama by desisting from pouring the contaminant into the lake. It also did this by the actual formulation of a CSR policy since in Alabama it is a state law that all companies must have a CSR framework. It also implemented its approach economic responsibility. This it did by attracting more investors in the region who built hotels hence providing more tourism. The investors also created job opportunities for the society. The company also made profit hence attaining its basic goal; accruing profits. Limitations in CSR Implementation The company experienced huge financial constraints in implementing the CSR policy (Paetzold, 2010, P.52). These constraints were to the huge amount of money that was required to implement its philanthropic and ethical responsibilities. It also experienced resistance from a section of the public who believed that the company was trying to buy back their favor (Paetzold, 2010, P.53). The company did not have a well-trained team that could that could spearhead the implementation process. The result was a lot of delays and wastage of funds and resources Some of the measures implemented as part of the CSR were not productive as it was earlier thought they would be. Recommendations In order to effectively implement CSR, the company reported in its evaluation of the progress that a budget allocation would be done each financial year for CSR (Paetzold, 2010, P.53). The company also resolved to create more awareness about the details of CSR in order to reduce resistance from the public. The employees of the company should be properly trained on how to go about the implementation of CSR. The human resource department should also seek the service of professionals in that field. Before measures are applied in the society, professionals should be consulted on mock outcomes to be better prepared for any future scenario (Simpson & Taylor, 2010, P.62). Bibliography Alkew, D (2009).Corporate Social Responsibility: The Governance Of Companies. 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(2006).Corporate Social Responsibility.New York, Free Press Taylor, R and Simpson, R.(2013).Corporate Governance Ethics and CSR. New York, Free Press Urip, S. (2010) Corporate Strategies: Corporate social responsibilities Oxford: Oxford University Press Read More