Risks and Rewards of Corporate Social Responsibility - Term Paper Example

Risks and Rewards of Corporate Social Responsibility Introduction Definition of corporate social responsibility Business organizations have emerged from being profit and growth centred to adopting various initiatives aimed at giving back to the society and reducing the impacts of their actions. Corporate social responsibility is defined a set of actions taken by an organization to remedy the impacts of the organization’s operations on the environment and the society. Corporate social responsibility goes beyond what an organization is expected of by the regulators and legal institutions governing their operations. In corporate social responsibility, organizations incur costs, which have no short term or immediate benefits and returns to the organization but seek to create positive benefits to the society and the environment. Aims of corporate social responsibility In the previous years, organizations were driven by the desire to maximize profits and reduce the costs of operations through eliminating no beneficial expenditures. This goes against the aims of corporate social responsibility, which seek to create a positive and constructive environment for the operation of the business. Such programs include improving the education and literacy levels of the members of the society, access to proper healthcare facility and the development of adequate social amenities. Corporate social responsibility is also geared towards giving back to the environment as a way of remedying the impacts of the processes of the business. By adopting cleaner’s environmental practices, organizations contribute to the elimination of greenhouse gas emission and global warming. Potential risks of corporate social responsibility In this section, the potential risks associated with adopting corporate social responsibility will be discussed in line with various practical examples. Corporate social responsibility is considered a good thing in the 21st century and this is attributed to the pressures from the government and the public for organizations to give back to the society. This does not however mean that corporate social responsibility is a progressive and beneficial process to an organization as a number of risks are involved. Adhering to CSR in modern business environment presents a number of risks to the organization and the stakeholders whose investment is used for involving the society. Engagement in corporate social responsibility is expensive and requires massive resources from the organization in order to be considered a success. For corporate social responsibility to be successful, employees must be trained and adequate resources must be available to enable such a venture to succeed. However, such a venture in CSR has no expected returns as witnessed with other investments made by an organization, making it a risky investment. This is the basis of an article that was written by David Vogel in which he argued against corporate social responsibility as an expensive and thankless venture (Hack, Kenyon & Wood, 2014). Corporate social responsibility according to Vogel have little impact on an organization despite the desire to reduce the overall backlash organization who do not engage in it experience. A number of organizations have endured the most of investing significant amount of their resources and time in corporate social responsibility without emerging victorious from such ventures. Previous corporate social responsibility endeavours by sun microsystems have failed to depict it as an organization committed to giving back to the society. Though the company has been faced with various environmental destruction suits, the approaches aimed at promoting the relationship of the business with the society significantly failed (Glac, 2014). The implementation of corporate social responsibility can only be successful if all the gaps are identified and possibly sealed to improve the returns on CSR investments. Most organizations have invested in CSR without developing adequate implementation plans, which highlight how the organization intends to achieve its objective and how public backlash will be eliminated. An organization such apple has intensive plans to adopt green and eco-friendly operations aimed at reducing the level of greenhouse gas emission into the environment. However, achieving this under the banner of corporate social responsibility can only be possible if negative public opinions on other areas are eliminated (Mason & Simmons, 2014). For example, the high cost of apple products has depicted the company in negative light and has been attributed by lack of response to societal needs. Implementing eco-friendly operations for the company can only be possible if the other gaps are eliminated and the relationship or image towards the society improved. Other organizations such as general motors and Wal-Marts have had a positive working relationship with suppliers; they operate in an environmentally responsible manner, and adopt transparent accounting processes, which are devoid of tax evasion but have a gap that has affected the success of the CSR. Both the companies have faced racial discrimination suits from former employees who argue that the company treats them unfairly due to their religious and racial affiliations (Glac, 2014). In the 21st century, business operates under the banner of maximizing its profits and remaining competitive in the face of growing competition. Achieving this capitalistic goal is viewed as gaining the trust of the shareholders as the value of their investment increases. As a result, most organizations have an adopted a practice where they include their corporate social responsibility policy and corporate citizenship report with their corporate guidelines report. Corporate governance operates under the tenets that all company operations should improve the level of share values and thus improve the engagement of shareholders (Schmeltz, 2014). However, corporate social responsibility has upset the equation and led to the need to balance corporate governance and citizenship. This has been attributed to continued shareholder alienation in most organizations as they work to improve their reputation before the public and emerge winners in the dynamic business environment. Most shareholders have shunned from buying shares from companies they believe are investing in dead end programs such as corporate social responsibility, which has no positive consequence to their investments (Ubius & Alas, 2012). The development of corporate social responsibility must be done in a way that significantly balances the interests of the stakeholders. In most instances, company investors have felt let down by the managers of their investments due to exposing them to risks arising from corporate social responsibility. However, the society is an important stakeholder in a business whose interest must be met through corporate social responsibility for the organization to reap the benefits of operating within it. Balancing these two conflicting interests in expensive for most organization, as the possibility of upsetting the expectation of some stakeholders are high. Successfully implementing corporate social responsibility is thus more complex as compared to the common concept of maximizing profits in most business organizations today (Virvilaite & Daubaraite, 2011). Rewards of corporate social responsibility Despite the risks that have been mentioned on corporate social responsibility this far, CSR have massive rewards to organizations that structurally implement it. The basic concept of corporate social responsibility is to improve the reputation of a company in the face of allegation of strong competition in the market. A business must demonstrate to the society that it is committed to clean practices aimed at improving the society and reducing the impacts of its actions on the environment (Glac, 2014). With corporate social responsibility, an organization is not just required to do the right thing but also reflect such policies on its actions and deeds. Most organizations have lost market and the trust of consumers due to poor business practices that are harmful to the environment and the society. Corporate social responsibility therefore has a number of benefits to the success of an organization operating in any business environment (Ubius & Alas, 2012). Corporate social responsibility improves the reputation of companies in the face of stiff competition and mudslinging tactics adopted by competitors. Through corporate social responsibility, organizations can interact directly with the target market and meet their needs through giving back to the society. A number of projects such as enhancing education programs, improving access to quality healthcare and engaging environmental conservation programs can be adopted as corporate social responsibility. Through such programs, an organization is engaged directly with the society and is well placed to address various issues emerging from them (Weber & Gerard, 2014). Corporate social responsibility acts as glue that brings together members of the society and the organization by ensuring that the operations of the business positively influence the society. However, the question of the impact of corporate social responsibility on the performance and reputation of companies has remained central to the discussions on the relevance of the practice. In the past, the attitude and attention of members of the society on the operations of businesses was limited and this affected the progress of corporate social responsibility (Weber & Gerard, 2014). However, current studies show that the number of people concerned with the impact of business operations on the environment and members of the society is on an increase. Most people are becoming concerned on how business operations positively or negatively affect the society, a development that places the reputation of companies at stake. According to a study conducted by the Carbon Trust in the United Kingdom, 50% of the respondents develop strong brand loyalty and respect to companies that have demonstrated commitment to environmental conservation. Adopting the right corporate social responsibility policies can provide an opportunity for marketers to improve the reputation of their brands in the market. A positive reputation developed by an organization based on its corporate social responsibility strategies enhances the performance of the organization in the market and improve overall productivity (Crowther & Hamid, 2013). For example, Wal-Mart has developed a comprehensive corporate social responsibility program that has enhanced its reputation with the target market. Despite the negative publicity that its products have received as far as weight gain and healthy eating habits are concerned, the company has initiated a number of nutritional programs targeting obese members of the public. This has demonstrated that the company is committed to healthy eating and developing high nutritional value food products for the market. Apart from company reputation, corporate social responsibility also increases the reputation of brands marketed by the same organization. Products marketed by Wal-Mart and Samsung are known and held in high esteem in different markets across the globe due to the corporate social responsibility policies of the company (Cruceru & Rădulescu, 2014). Positive public reputation enables a company to increase its customer base and retain the existing customers as the company is viewed with high esteem as compared to the competitors. Consumers are comfortable being associated with organizations that are committed to the public through their initiatives such as corporate social responsibility. Scandal riddled companies has a negative image before the society and this affects it customer retention ability due to the bad overall image in the market. Companies like Samsung have continued to rule different markets across the globe despite being based in a small Asian country. Samsung has developed proper and engaging corporate social responsibility programs, which have improved its image before its consumers and the stakeholders as a whole. In Africa, Samsung has remained consistent in its corporate social responsibility program and this has enabled it to retain its customer base. Apart from Nokia, most developing countries have a bigger market share for Samsung and this is attributed to its positive reputation (Cruceru & Rădulescu, 2014). Corporate social responsibility also improves the financial performance of an organization as the level of sales increases with an increase in market reputation. According to a recent longitudinal study commissioned by the University of Harvard, companies that have balanced the stakeholder’s interest with their corporate social responsibilities have more than four times growth rate. Employee retention is such companies are also high due to the positive image of the company and its friendly policies towards environmental conservation. With low level of employee turnover, the cost of recruiting and training new employees is considerably reduced; a situation that improves the financial performance of such companies (Glavas & Kelley, 2014). This can be attributed to the growth of companies such as Wal-Mart and Samsung whose corporate social responsibility programs are transparent and available to the public. Samsung and Wal-Mart have continued to enjoy high sales and customer loyalty over the years due to the well-developed corporate social responsibility. Based on a number of studies conducted on different companies with different CSR policies, the level of customer loyalty and levels of sales is influenced by the reputation of the company. However, businesses are driven first by the desire to satisfy the primary needs of the consumers such as positive pricing, appearance and taste, its responsibility to the society is important. Most employees tend to prefer companies that have not faced sweatshop and child labour related scandals in the past. Conclusion Corporate social responsibility is a concept that most organizations have today embraced as a way of improving overall performance and reputation. Aristotle and other early philosophers touched on the benefits of giving back to the society and serving the interests of the people while improving the profitability of the organization. Corporate social responsibility has a number of benefits and risks to an organization and this is influenced by the nature and soundness of the policy adopted. In this paper, the risks and rewards associated with corporate social responsibility has been discussed in relation to a number of companies such as Samsung and Wal-Mart of the United States. References Crowther, D, & Aḥmad, J., 2013. Education and corporate social responsibility: international perspectives, Bingley, U.K.: Emerald. Cruceru, A. & Rădulescu, V., 2014. Social responsibility of the organization to consumers through corporate communication’, Romanian Journal of Marketing, 3, pp. 73-76 Glac, K., 2014. The influence of shareholders on Corporate Social Responsibility, Economics, Management & Financial Markets, 9(3), pp. 34-72. Glavas, A, & Kelley, K., 2014. The effects of perceived corporate social responsibility on employee attitudes, Business Ethics Quarterly, 24(2), pp. 165-202. Hack, L, Kenyon, A, & Wood, E., 2014. A Critical Corporate Social Responsibility (CSR) Timeline: how should it be understood now?’ International Journal of Management Cases, 16(4), pp. 46-55. 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