Why the Emphasis Put on Corporate Social Responsibility Is Doomed to End - Coursework Example

Order 404162 Topic: As a consequence of the recent recession, firms will concentrate on reducing their costs. Therefore the emphasis put on Corporate Social Responsibility is doomed to end. Discuss. “Corporate social responsibility is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources.” (Kotler, et. el.2004,p.3) Since this is the accepted philosophy now, business leaders choose social causes, draft charity initiatives, seek employee support, give them an opportunity to actively involve in such initiatives and evaluate their efforts. They constantly endeavor to adopt the best practices and cutting-edge ideas to enable them to increase their contributions to social causes and for the overall welfare of the society. Many imaginative business corporations went a step ahead. They integrated CSR initiatives as part of the total business strategies which produced sterling results, and created enormous goodwill for the products of the company. The range of loyal clientele gradually widened. Business leaders thus got an opportunity to learn how to align business goals with social and cultural goals. But suddenly the business world found itself engulfed in recession. It came like the avalanche and the organizations were not ready to face this serious eventuality. The wise saying goes, “When the Going gets Tough, the Tough get Going!(Ocean,1985) This is the testing time for the grit and heroism of the Corporate Sector. Toby Radcliffe comments upon the issue thus: “Global recession, embedded in the financial sector, is creating an environment of cost-cutting and streamlining. For leading international saving and wealth management groups, the current economy has produced a particularly challenging environment in which to operate. It has also produced a challenge for sustainability.” When a child is sick, one tends to take care of it more. Ethically speaking, corporate social responsibility is an important part of the business establishment, during recession. The case for CSR is the truest, even when the economy is passing through a period of crisis. To prioritize business in the face of recession, is a prudent function. That approach is just; no questions about it. To think of pruning the CSR budget while things are comfortable, is harmful from the long-term perspective of the growth of an organisation. Funds earmarked for CSR, in addition to direct donations to Non-Governmental and philanthropic organisations, are linked to HR and training programmes, experimental and innovation budgets, promotional and marketing budgets, research and other non-core activities. The management thinks of the cuts in these areas first. But it is again the question of foresight and imagination. If the listed activities are productive and beneficial to the company in the long run, axing the planned budget on them would be counter-productive. Those who think that CSR is the part-time initiative of the Organization and can be dispensed with with the least provocation, need to read what Carly Fiorina, Hewlett-Packard,said at the Business for Social Responsibility said addressing the Annual Conference, November 12, 2003. “ For many years, community development goals were philanthropic activities that were seen as separate from business objectives, not fundamental to them; doing well and doing good were seen as separate pursuits. But I think that is changing what many of the organizations that are represented here today are learning is that cutting-edge innovation and competitive advantage can result from weaving social and environmental considerations into business strategy from the beginning. And in that process, we help develop the next generation of ideas and markets and employees.”(Kotler, 2004,p.1) The survival of any business organisation depends upon the responsiveness of the consumers that support the organisation in particular and people in general. When the consumers withdraw support to the products, company will suffer direct losses. When the goodwill of the people is lost, the organisation suffers notional losses. Regaining the trust once lost and recouping the original reputation are no ordinary tasks. You can not drive a vehicle at top speed, while the reverse gear is in operation. Competition in the market is tough, even when the business conditions are normal; retaining and pushing the reputation is going to be the herculean task in period of recession. In such conditions, the first reaction of the customers is to disbelieve and rumors will have the field day. The people will take to the safest course of postponing investment/purchase decisions. This is not the time for the organisations to sit back and watch the trends. This is the time to hit back with a positive frame of mind. Keeping quiet will create more confusion and mistrust in the minds of the consumers. Use the important tools of reporting and transparency. Never hesitate to tell the consumers what is happening and how the organisation is fully geared to meet the challenge. The first duty is to establish a strategic reconnection and draw the customers within perimeters of its influence. This testing time needs to be met with the age old approach, “Every crisis is an opportunity.” Toby Radcliffe comments, “CSR must evolve during the financial downturn. In times of recession, key business concerns focus on maintaining cash and liquidity, reducing debt and salvaging working capital, managing costs more efficiently, and maximizing productivity. While these may ensure the bottom line in the short term, this list should also fully take account of sustainability. But sustainability and CSR should also take account of these traditional concerns. CSR must evolve to survive.” Recession is the time for the true leadership qualities to come to the fore. Read this example: A particular bank faced the crisis of confidence of the clients, due to malicious propaganda initiated against it by certain vested interests. On the day allegations appeared against that Bank through print and electronic media, there was a beeline of customers for withdrawal of deposits. The concerned Branch Manager not only boldly accepted the withdrawal requests of the clients, he met each one them in his office over a cup of tea, and told them that he would be pleased to fiance any consumer durable articles like, refrigerator, TV, air-conditioners, car loans etc. and the the amount will be sanctioned and disbursed within 48 hours. As this news filtered amongst the clients, the message that the Bank is not facing the fund-crunch spread, the pace of withdrawals was almost negligible on the second day and soon it petered off. After some days, fresh deposits began to arrive as usual, and conditions absolutely normalized for the Bank. John Quelch comments,“Corporations engaged in recession-driven cost-cutting are trimming or eliminating corporate responsibility initiatives. Though corporate survival is key and consumer skepticism of business CR initiatives at an all-time high, such actions are short-sighted. Now more than ever, businesses need to be saying "yes" rather than "no" to their social responsibilities.” The present recession is not a local or national issue. It is a critical cross-border international issue. The multinationals corporations need to face it squarely and their CEOs should put their think-tanks together and find suitable solutions. CSR cut is certainly not the appropriate solution. Recession leads to more poverty and the problems of the poor increase due to wage-cut, lay-off etc. Most of the NGOs face the resources-crunch and one cannot expect to them to offer solutions to such a gigantic issue. When a family of an individual faces starvation, one will not be interested in the long-term economic plans. One wishes to have immediate solutions. If some of the pro-poor schemes are curtailed, the problems will multiply and the poor will be totally disheartened. They will distrust business, and to an extent feel, apart from the government, the multinational giants are responsible for their woes. The concept of the world market is one and global competition are not issues of choice for the common consumer, who isnt very clear, whether such competition has resulted in his benefit. He continues to distrust business on an increased scale. Organizations should understand this position and do not indulge in the exercise of pruning the CSR budgetary initiatives as they are the important linkage between the people and the organization. It is a contact point to feel the pulse of the people. One who remains in the initiative during tough times, has won the goodwill of the people on a permanent basis. In a situation of crisis, the frame of mind of the crisis-managers needs to be positive. Recession does not mean doom on all fronts. The companies that own excellent quality products and services, are the least affected. This is the time for such companies to augment their CSR budget and earn goodwill of the customers. The ethical perspective: The importance of ethical perspective of CSR is more than ever before, from the time it turned out to be an important part of organisations. During the time of recession ethical and moral considerations need to get priority. An affected individual needs support; the impacted part of the society needs the balancing factor. This is not at all the time to think to prune the CSR initiatives or to abandon it. The question, if all it must arise, is one of realignment. Find out priorities and proceed accordingly. The bold and beautiful approaches to CSR: Loss of market share, slump in the demand for the products, and urgent necessity for reducing costs does not mean the CSR budget needs to be pruned. It has to become more strategic. Projects should be drawn with a vision and the best think-tanks of the Organisation must involve in the process. The sustainability criteria of the CSR must be reevaluated and suitable modifications should be carried out. Judged from the broader perspective, no CSR funding will cause loss to the company. The benefit of goodwill derived for the company is the long-term one, about which immediate and precise assessment is difficult. The brand loyalty: Brand-building is an astute process. Once the brand building process reaches certain levels, wealth creation follows automatically for the Organisations. Such organisations, when they are involved in permanent CSR initiatives, say for example running a school for the blind or education for girl-children, reducing financial aid or withdrawing from the project altogether, will cause immense human problems for such vulnerable sections of the society. Great loss of goodwill will ensue and the Organisation may face a backlash. Recession is not a permanent phase in the business world and it has to go. But if the good will of an organisation is lost, the brand image will suffer much. From direct involvement to indirect support: Due to the impact of recession, cost cutting may become inevitable. Still, is should not serve as the license for an organisation to prune the CSR budget. All decisions, diversionary tactics need to spring forth from the firm conviction that the CSR budget will not be cut. In a dire situation, two possibilities can be examined. Whether government involvement and total/partial funding in the projects is possible? When the projects fit into the national strategies, this should be possible. Whether the entire responsibility of the project can be transferred to a responsible NGO for a fixed number of years, say 5-10? This should save considerable overhead expenses and expenses on fixed salaries. Many competent NGOs are willing to take up such projects as most of the NGOs work on no-profit basis. The Organisation will then oversee the project from sidelines, as per terms and conditions framed for the purpose in view. The publicity angle needs to be taken care of while finalising the terms and conditions of governance. Meeting the challenge: Fine, recession has created a problem. But the solution is not in giving up. When the enlightened Organisations have accepted that CSR initiatives as part of the core business activities, the best option is to streamline the model of CSR. If you have five projects and if you find the going is really tough( for no bank will finance for a specific CSR project—it takes into consideration the overall balance sheet of the organisation) downsize one of them, do the cut-back on the other, put the least essential on hold—with a clear emphasis that these are temporary measures. You will go ahead with added initiative, once the things are normalised. Let this be admitted openly; people will appreciate and understand transparency; the problem arises when Organisations keep the Public Relations Department shut, and would not disclose the latest developments. Desperate situations.. Desperate situations need desperate remedies. With such an approach critical times can be turned into a win-win situation. Innovative business leaders invent cost-efficient measures in times of crisis. Cut CSR cost to the minimum extent necessary for the minimum period of time. But do not Cut CSR altogether. The consequences will certainly be damaging. With the mounting compulsion to cut the budget, communicate more with the affected people. Your resilience in the current market conditions will win you many loyal friends in all the areas-be it customers, suppliers or business partners. Show by word and deed how the CSR projects are dear to your Organisation. Praise the co-operation of all and look forward to the same from them in future as well. The most fearful storm will pass away. Howsoever powerful may the waves, their real nature is mere water! Not too in the distant future, recession will just be a memory! ************ Reference List: Kotler, Philip(Author), Lee,Nancy (Author).Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause; Wiley; 1 edition,December 13, 2004. Quelch, John.,2009.How Corporate Responsibility Can Survive the Recession - Available at:blogs.hbr.org/quelch/2009/09/how_corporate_responsibility_c.html – Cached(Accessed 2 March 2010) Radcliffe, Toby.,2009. CSR View from the Field(Online)(Updated February 2009) Available at:www.article13.com › Home › The issues - Cached – Similar-Toby Radcliffe (Accessed 2 March 2010) “When the Going Gets Tough, the Tough Get Going" is a popular song originally recorded by Billy Ocean in 1985 at Battery Studios North London. Read More