The Key Drivers for Corporate Social Responsibility and Social Responsible Companies - Case Study Example

Corporate social responsibility provides greater benefits to the organisation than it does to society and other stakeholders Introduction There has been a strong debate concerning Corporate Social Responsibility (CSR) and how beneficial it is to the organization, the society and other stakeholders (the government, employees, suppliers and customers). Questions have emerged regarding the business of businesses, whether they should try to solve the ills of the society or maximize the shareholder’s wealth. In addition there is a debate of whether or not corporate social responsibility provides greater benefits to the organization than it does to society and other stakeholders. This paper tends to disagree with the motion that indeed organisations receive greater benefits from CSR than the society and other stakeholders do. This paper will cover the overview and definitions of corporate social responsibility, examples of social responsible organisations, benefits of CSR to the society at large, benefits of CSR to the organization, mutual benefit of CSR, and the conclusion. Definitions of corporate social responsibility There are various names given to CSR which include community affairs, corporate responsibility, corporate philanthropy, corporate citizenship, corporate societal marketing, community relations, global citizenship, community affairs, corporate community involvement, and corporate giving. There is no substantial difference in calling this social commitment that organisations have. There is no agreed definition of corporate social responsibility though it is important to arrive at an acceptable one. According to Sharma (2011) just like CSR ‘responsibility’ has been ambiguous in the context of a business. On one hand it has to do with accountability central to administrative control, involving direct supervision of behavior of other people in early form but in recent times it has to do with empowerment of individuals to take responsibility and be held accountable for the consequences of their actions. On the other hand there is an emphasis of responsibility being a matter of ethics (Neimark, 1995) and a felt obligation for and to others rather than something that can be measured or specified. CSR definitions range from enhancing societal welfare to performing ethical practices that are standard. There has been a proposal that the meaning of CSR concept has become void. Some people claim that though the CSR definitions vary they are similar, with each relating to how stakeholders are affected by a business. A business dictionary defines CSR as “a sense of responsibility that a company has towards the environment and the community in which it conducts its operations, expressed through reducing their waste and pollution, contribution of social and educational programs and using society resources adequately”. Sharma (2011) defines CSR as engagement of corporations in voluntary social efforts that exceed legal regulations including environmental activism, charitable giving and community service. ISO 2600 defines CSR as follows: responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that (i) contributes to sustainable development, including health and the welfare of society, (ii) takes into account the expectations of stakeholders, and (iii) is in compliance with applicable law and consistent with international norms of behavior; and is integrated throughout the organization and practised in its relationships CSR rationale has been voiced in different ways. It is about establishing sustainable business which needs healthy communities, markets and economies. The key drivers for CSR are (i) social investment, (ii) enlightened self-interest, (iii) trust and transparency, and (iv) increased public expectation of the organization. With social investment organisations are expected to contribute social capital and physical infrastructure as an essential part of doing business. Enlightened self-interest involves creating ethics cooperation, a sustainable economy and a cohesive society where communities, labor and markets are working together. Trust and transparency deals with the increase in expectations that organizations will be more accountable and open, in reporting publicly about their performance in environmental and social arenas. The increased public expectations of organisations relates to provision of jobs and contribution to the economy through employment and payment of taxes as public expectation. From the above definitions there are assumptions and rationale behind the discourse of social responsibility. Bannerjee (2008) supports this as follows: (i) Organisations should go beyond making money and mind about environmental and social issues, (ii) organisations are expected to behave ethically and exhibit high level of transparency and integrity in their operations, (iii) organisations should participate in the community in which they operate by supporting the community in philanthropic activities as well as enhance social welfare. Example of Social Responsible Companies Many firms have a belief of ‘giving back’ to the society by providing products and services that are environmentally friendly, contributing money and time, and improvement of individuals’ lives globally. This section discusses examples of companies that demonstrate social responsibility coupled in their strategies to enhance goodwill while building impressive and sustainable businesses. Founders of Ben & Jerry have included the notion of ‘give back’ and ‘linked prosperity’ between the company, the community and its employees. Ben & Jerry Foundation was meant to give back to charitable organizations and donated 7.5% of pretax profits. The founders stated that they strove to show deep respect for all humans both within and outside its company and for the communities in which they live. Ben & Jesrry was in 2000 bought by Unilever which continues to support the foundation. Starbucks coffee focuses on acting ethically and responsibly since its initiation in 1971. It focuses mainly on sustainable production of green coffee. It even create C.A.F.E Practices which provides guidelines in achieving social responsibility, economic accountability, environmental leadership and product quality. Starbucks supports Ethos Water providing clean water to over one billion individuals who do not have access to water. Pedigree dog food built focused on encouraging people to adopt dogs that were homeless. It did this by funding the care and support of these dogs. In 2009, its goal was to support over 1000 shelters and breed rescues by distributing 1.5 million dolars in grants. Everytime it gets a Facebook fan Pedigree provides animal shelters with one bowl of food. Its goal is toprovide every shelter dog in America with a donation of four million bowls of dog food. Benefits of CSR to the society When a large store chain is established in a certain area it makes it more convienient for residents to shop because of the proximity, and it saves on their gas money as well as time. However, the presence of this shop may put all the small shops out of business, and building of the premises for the store may mean clearing of trees leading to deforestation. This section discusses the benefits of CSR to the society at large. Business establishment, maintaining and expansion may affect the society and its environment, the reason which many organisations are engaging in both generation of profits and social responsible programs. CSR improves the living standards of people, improves their economic status and mitigates the business’ impact on the society. Corporate Social Responsibility addresses key areas like protection of the environment and the wellbeing of the civil society, the community and employees currently and in the future. Different efforts of CSR benefits the society at large by being assured of high quality and safety product, accessing community education that is corporate sponsored, accessing programs concerning anti-poverty, housing and employment, receiving charitable contributions and benefiting from outreach activities through employee volunteering (Roberts, 2003). Schwartz & Saiia (2012) discuss Merck & Company decision to donate a drug to cure river blindness in tropical nations. River blindness is a parasite-borne disease that can infect many millions of individuals every year. The generosity of Merck benefited millions of individuals who have been cured of the mysterious infection. Many nations now testify that the disease is no longer a health threat. This is an example of how CSR benefits the society. Benefits of Corporate Social Responsibility to an organization For modern organizations it is very important to be socially responsible. CSR is increasingly becoming a significant concept for businesses as investors become more sophisticated and consumers demands more. Thus, organisations need to demonstrate their willingness to responsive to social problems. The nature of the business dictates the extent of which corporate social responsibility can benefit the organization due to its benefit variation. However, there is an identification of a strong correlation between financial performance and social performance. The Institute for Business Ethics research emphasizes that for organisations to receive commercial success in future, they need to demonstrate corporate social responsibility. A survey organized by ‘Personnel Today’ in 2007 showed that over 50 percent of surveyed organizations had explicit policy on CSR. CRS explicit policies can be addressed to the organization’s departments including finance, business development, marketing and human resources. Although the main focus when implementing these policies should not be on profit, there are numerous long-term business benefits related to such practices; (i) risk management, (ii) employee motivation, and (iii) product differentiation. Organisations through the implementation risk management strategies eliminate or reduce risks born by potential threats. Risk management is essential to many strategies of an organization. Organisations may have spent a lot of their resources for many years trying to build and maintain a good reputation through customer loyalty and product development strategies, but all these may go down the drain in seconds if a corruption scandal occurs like in the case of Enron or an environmental accident as in the case of Chernobyl. The media is drawn to such incidences and may damage the firm’s reputation irrevocably. Anticipating such events and offsetting risks can be managed by entrenching social responsibility into the culture of the organization (Roberts, 2003). Employee motivation is also another benefit of CSR to an organization. It is easier for organisations to recruit and retain human capital if they are socially responsible. Kenexa Research Institute surveyed employees in India, Germany, China, UK, Brazil and USA in 2007, and revealed that employees are more willing to work for a company that has CSR strategies, and are ready to align with its organization culture and even recommend it as the best workplace to be. Corporate Social Responsibility that derive employee satisfaction results in higher productivity and retention rate of employees, better performance of the organization, and in turn higher profitability. CSR programs also boost the morale of an organisation’s employees. When an organization provides volunteer opportunities it explains a lot about its corporate culture. When employees work on volunteer programs company loyalty, employee satisfaction and team building is enhanced. Corporate social responsibility also benefits organisations by helping them achieve product differentiation. Differentiated products ensure that organisations remain viable and competitive in the marketplace. Organisations that implement CSR policies enable product differentiation to satisfy the consumers’ unmet needs, hence providing business and financial benefits to the organization. There is a higher growth in sales for companies that provide products that are environmentally friends compared to those that sell conventional products. In addition, organisations that offer consumers with unique value propositions based on ethical values enables product differentiation to occure in the minds of consumers and contribute to build customer loyalty. Another CSR benefit to the organization is that it enables the organization obtain good public relations. Firms that involve in community programs increase their visibility and meet opportunities to relate positively with local individuals, organisations and businesses. It is a great way of building good business and creating awareness of the organization as an employer. Mutual Benefit So far the discussion of benefits of CSR to both organisations, society and its stakeholders have been discussed. This section will support my argument that CSR does not benefit organisations greater than the society and other stakeholders, through providing a balance of benefits and mutual benefit for all. The need for a healthy society by successful organisations cannot be disputed. For a company to have a productive workforce equal opportunity, health care and education are essential. Safe working conditions and products attract more customers and lower internal costs resulting from accidents. Utilizing water, energy, land and other natural resources enhances business productivity. For efficiency and innovation, property rights, rule of law and good government are essential for the organization. Both competitive firms and consumers are protected from exploitation by strong regulatory standards. Eventually, a society that is healthy creates demand expansion for business as organisations aspirations grow and meet more human needs. The success of a firm that pursues its goals at the society’s expense will be deceiving and not survive for long. On the other hand for a society to be healthy it needs organisations that are successful. Social conditions and standard of living are increased by ability of companies to create wealth, jobs and encourage innovation. Without the CSR activities conducted by organisations there will be stagnation of wages, rise in unemployment rate, fading of regional and corporate competitiveness, and charity contributions and taxes evaporate. Focusing too much on which entity has received greater benefits from CSR is like committing injustice towards both the organization, the society and other shareholders. Porter & Kramer (2006) agrees with this point that CSR provides shared value to both corporations and the society because they both depend on each other. If either one of these entities benefits more than the other then the whole CSR policy rides on a dangerous path and though one will party will gain the other party’s prosperity will be undermined which will affect the long-term prosperity of both in the long-run. Some individuals argue that for organisations to benefit from CSR they must pursue the society and other stakeholders’ interest. However, Adam Smith (1981) thinks otherwise and argues that as organisations pursue CSR for their own self-interest (profit) it through the ‘invisible hand’ promotes social welfare. Smith suggested that it is human nature to act out of self-interest than pure compassion and that actions based on self-interest eventually benefit society. He reasoned that society is helped more by organisations when they pursue their own interest (profit) than whey they strive to benefit the society deliberately. To insist that the organisations benefit more from corporate social responsibility is to mean that without CSR the business cannot operate or the business will fail. Corporate citizenship notion is said to be operationalized by engaging stakeholders and build relationships with them. This notion asserts that by organisations embracing good corporate citizenships their financial performance is bound to be good, and if the organization becomes a bad citizen them it is at a risk of getting its license revoked. Banerjee (2008) takes these as simple assumptions without empirical or theoretical support. Large corporations like Shell, Exxon, Nike and Union Carbide were majorly responsible for negative social impacts and environmental disasters in the Third World, but they did not loose their operation licenses because of these actions. Instead they have grown to be more powerful and stronger regardless of whether it is through public relations campaigns, restructures and mergers. I also agree with the argument of Bejou (2011) that there CSR still lacks a valid empirical findings, strong theoretical foundations and a clear definition. In my argument Corporate Social Responsibility benefits the society and other stakeholders more than the organization. It is more apparent that CSR is imposed more on the organization for the benefit of the society. The responsibility of the society and other stakeholders is not defined even though they are the greater beneficiaries; I think it is at the expense of the organisation. I agree with Cosans (2008) and Mulligan (1986), who expand on Milton Friedman’s thoughts that a corporation’s responsibility is to increase profits for the shareholders. The reason why a company exists or is started is to increase profits and build wealth for its shareholders. Though I don’t agree with Friedman that these companies should ignore the society needs and those of other stakeholders, my emphasis is that CSR should not be imposed on those companies but ethics policies should be implemented in their strategies (Neimark, 1995). By companies opening stores close to customers, hiring from the society in which they operate, and improves the social and economic standards of individuals is CSR in its own way. This is more beneficial to the society and its stakeholders than it is to the organization. Conclusion As discussed the debate of for and against Corporate Social Responsibility is still ongoing with one of the contentious issues being whether CSR benefits the organization greater than the society and other stakeholders. This paper is against the statement and does not agree to it. Although Corporate Social Responsibility benefits cannot be measured explicitly because they are based primarily on the nature of the business, numerous of them are in existence and cannot be ignored. Benefits of CSR to the organization are motivated employees, satisfied customers, positive public relations, costs reduction, increased business opportunities and long-term future for the business. The benefits of CSR to the society at large are assurance of product quality and safety, employment, anti-poverty and housing programs, corporate-sponsored community education, charitable contributions and benefiting from outreach activities by employee volunteers. At the end of the day, corporate social responsibility is an obligation that every business has been made to believe, will be for its success but more in real sense the these undertaken efforts are more for the benefit of the society and other stakeholders, than for the organization. Reference List ASQ Quality Press, 2010. ‘ASQ/ANSI/ISO 26000-2010: Guidance on social responsibility’. Baker, M & Roberts, J 2011 ‘All in the Mind? Ethical Identity and the Allure of Corporate Responsibility’ Journal of Business Ethics, 101, pp 5-15. Bannerjee, SB 2008 ‘Corporate Social Responsibility: The Good, the Bad and the Ugly’, Critical Sociology, 34(1), pp 51-79. Bejou, D 2011 ‘Compassion as the New Philosophy of Business’, Journal of Relationship Marketing, 10, pp 1-6. Cosans, C 2009 ‘Does Milton Friedman Support a Vigorous Business Ethics?’ Journal of Business Ethics, 87, pp 391-399. Mulligan, T 1986 ‘A Critique of Milton Friedman’s Essay “The Social Responsibility of Business Is to Increase Its Profits’’’, Journal of Business Ethics, 5, pp 265-269. Neimark, MK 1995 ‘The selling of ethics: The ethics of business meets the business of ethics’, Accounting, Auditing & Accountability Journal, vol. 8, no. 3, pp 81-96. Porter, ME & Kramer, MR ‘Strategy and Society: The link Between Competitive Advantage and Corporate Social Responsibility’, Harvard Business Review, pp 1-15 Roberts, J 2003 ‘The Manufacture of Corporate Social Responsibility: Constructing Corporate Sensibility’, Organization, 10, pp 249-265. Schwartz, MS & Saiia, D 2012 ‘Should Firms Go “Beyond Profits”? Milton Friedman versus Broad CSR’, Business and Society Review, 117, pp 1-31. Sharma, G 2011 ‘Corporate Social Responsibility as Mutual Benefit: Why Should SMEs Care?’, PeopleWiz Consulting. Smith, A1981 ‘An inquiry into the nature and causes of the wealth of nations’, Indianapolis, IN: Liberty Classics. 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