Challenges in Corporate Social and Environmental Accountabilities - Term Paper Example

«Corporate Social Responsibility, Accountability & Reporting» Introduction: Corporate social responsibility is buzz word that has gained recognition like fire in the current business scenario as well as all the industry circles. With the growing increase in its recognition and awareness, more and more businesses have started taking this concept seriously; allocating a chunk of their annual budgets for the promotion of the modern concept of corporate responsibility (Manila Bulletin, 2005). Corporate social responsibility in general refers to the accountability of the company’s obligation to all its stakeholders in relation to all its operations and activities. Numerous multidimensional and global issues are inculcated in its umbrella that has strategic implications for the business and its policy makers. It is concerned not only with what the business does with its profits but also with how it obtains them. Corporate social responsibility in other words addresses how the company manages its economic, social and environmental impacts along with its stakeholder’s relationships in all the key spheres of influence (SEEP, 2009). With the modern advent of the concept of corporate social responsibility, it is now expected of the businesses and the companies in general to be transparent and accountable in terms of their social performance. This idea of corporate social responsibility both reflects as well as drives the societies’ changing customs along with the social roles the businesses are expected to play (SEEP, 2009). In other words corporate social responsibility is basically about what the organizations do in order to be socially responsible. It encompasses the way the company’ managers respond to the diverse expectations that its stakeholders have from the company in terms of stakeholder management, issues management, as well as environmental scanning (Black, 2006). Developments in corporate social responsibility: Corporate social responsibility is a concept that primarily got developed due to the extension of a few contributing factors, such as the advent of the increased focus on human rights. Such factors in turn forced the businesses to pay more attention to the subject matter of corporate social responsibility. With the obligations to fulfil the social duties, the organizations started to invest in this sector in order to fulfil the expectations of the stakeholders long with the clientele as both the promoter as well as a protector of human rights. The race to gain more competitive advantage has also, in a way, influenced the pressures for corporate responsibility beyond traditional forms of compliance (SEEP, 2009). Which can be demonstrated by the fact that people are more in favour of those organizations and businesses that are friendly and transparent, not only to their customer base, but also to their work force. The focus on the social problems by the corporations has also increased as a result of the failure of the governance in dealing with those issues and finding their suitable solutions. Special attention has been made a compulsion for the organizations to keep the social issues in check and contribute to solving them, especially those that also concern the corporate environment, overall environmental degradation, human rights, inadequate product safety etc (SEEP, 2009). The growth of the people in terms of the exposure and connectivity leading to a better awareness of what is present and what should be, have greatly boosted the calling for more socially aware organizations that do actually contribute to the betterment of the overall environment. Along with that, the realization of the government and the organizations in general of the scarcity of resources and the realization of the social, economic, environmental and security challenges as being too great to tackle alone, has also contributed in prompting of the collaborative efforts (SEEP, 2009). In addition to all that is mentioned above, the corporate issues in the early 2000’s also brought into focus the corporate citizenship issues and corporate governance. Also, institutional investors and regulators with the increasing financial muscle have responded to ethics scandals and governance crisis; aiming for a better corporate governance and accountability (SEEP, 2009). The realization of the need of time to aim for the betterment of all that has prompted the organizations in this aspect in financial monetary terms is quite a big step that actually proves the importance of corporate social responsibility all the more. The manifestations by the increased interest in corporate resource responsibility in terms of recent developments in its fields can be pointed out as follows: In recent years, the interests of the large investors in the category of corporate governance and ethics, as well as broader issues has contributed a lot in the spreading of a better awareness of the social issues. Also, more focus is being made on implications of the broader issues such as global climate change, eco-efficiency, obesity etc in terms of the risks and opportunity factors for the businesses (SEEP, 2009). In recent years, the size as well as the relative share of the socially responsible investments has been seen to be on the rise. Also, some steps have also been taken by some specified governments for the intervention in relation to the corporate social responsibility agenda, giving it a greater edge which cannot be ignored (SEEP, 2009). We can also now see a number of international initiatives being taken for the promotion and establishment of conventions related to corporate citizenship, for example the financing for development initiative, the U.N’s convention against corruption, the UNDP’s UN commission on the private sector and development etc (SEEP, 2009). We now also see that the issue of corporate citizenship is an issue that is constantly kept in the focus of the public agenda by the social and environmental activists such as the NGO’s: Human Rights Watch, Global Witness, Oxfam, among them just to name a few. There has also been an increased collective action by the industry stake holders along with the financial services which has also specified proper procedures for the determination and to keep in check the corporate related issues such as Equator Principles, Global Reporting Initiative, Social Accountability International etc (SEEP, 2009). Challenges in corporate social and environmental accountabilities and reporting: When it comes to discussing and implementing corporate social responsibility, the first and foremost concern that occurs is the fact that the social and environmental impacts differ all across different industries. In other words, it can be said that the meaning of the term of corporate social responsibility differs over different industry sectors all across the globe. There is still some ambiguity concerning the main purpose of this issue in relation to some businesses as a mere attempt to boost public relations, but some businesses have now started to place corporate social responsibility in a more strategic frame work (Chatterjee, 2008). In addition to that, we still have some issues concerning the measurement of the corporate social responsibility, seeing as the process still lacks proper matrices and performance indicators that can be benchmarked. Furthermore, some organizations still do not take this sector seriously are not investing in it as much as they probably should, based on the fact that they are not really aware of its implications or they do not know how to apply this concept strategically (Chatterjee, 2008). In addition to that, we also see that according to some the concept of corporate social responsibility as being the issue and concern of only the big bees still holds. While it is a fact that its proper utilization can only be achieved by collaborative efforts of all as we cannot restrict this issue to just those who have more than enough resources and capabilities. This projection needs to be changed and the people have to realize that it can be inculcated in smaller organizations as well, keeping in view their capabilities, to showcase their commitment to their work force and overall community in general (Chatterjee, 2008). To attain maximum utilization and implementation of corporate social responsibility in the business circles, there is a dire need to consider corporate social as well as environmental accountabilities and reporting as a core part of the businesses. Though the awareness of it is spreading, but still it remains to be a minority opinion and so the challenge is on the political will on part of the businesses to look at the impacts they make through the prism of sustainability (Chatterjee, 2008). Over the past few years we have seen the market growth and globalization in general to have completely eclipsed the government to some extent, but nevertheless, the government still remains to be a significant factor when it comes to the regulation in corporate social responsibility accounting and reporting and can act as a negative, positive or a neutral part based on how its policies effect the business orientations (Chatterjee, 2008). Governance and ethics associated with accountability: With the growing rate of awareness among stakeholders and a general increase in the strength of consumer movements, corporations now have started to realize the importance of integrity, transparency and communications in terms of its working scenarios. Now-a-days investors not only want to invest in companies that are well managed but also have proper corporate governance (Giri, 2007). When it comes to governance, although at first it may appear that it is only concerned with the adherence of the codes and principles of practice, but it in fact also encompasses human behaviour and the role of the business in the overall society in general as well. The two terms of ethics and accountability are also inculcated under its umbrella. Ethical conduct by financial markets is not just restricted to not being crooked but it is about deciding what is right and what is good (Solomon, 2007). Similarly, corporate governance is not just about compliance but it is also about the way in which the businesses are run and how they relate to their stakeholders. It is about the developing and maintaining trust in the society through dialogue and engagement. Its main purpose is meaningful and quality reporting or in other words transparency in terms of accountability (Solomon, 2007). Corporate governance is regarded by many as a control mechanism for the optimum use of mechanical and well as financial resources of the organizations. Hence the companies now have started to integrate ethics in their corporate cultures and have started assigning proper corporate governance mechanisms in place (Giri, 2007). Although, there has been a significant progress in the field of corporate governance, but it still has a long way to go. We do see that the institutional investment community is active, but the resources being channelled for the purpose are still insufficient. Corporate governance though, can be seen to have shifted to a more reflexive and self evaluative corporate community. For the evaluation of the performance in the category of corporate governance and internal control, the companies are being asked to produce governance reporting and risk reporting. This can be considered to be quite a significant step towards a more genuine accountability method and stakeholder inclusion as it does not only represent a disclosure but also a proper evaluation of processes and performance and their communication to the stakeholders (Solomon, 2007). Methodologies and approaches within CSR and associated accountabilities: Corporate social responsibility, being a field still prone to ambiguity, is constantly confronted by the issues relating to the regulation question and the development question. We do see however, that the gradual increase in the hardening of the soft approaches has entered a new phase which inculcates not only more effective codes of conduct, reporting, monitoring and certification systems but also resource to public policy and law. This new approach is actually encapsulated in the term corporate accountability (Utting, 2005)). While previously corporate social responsibility was only associated with voluntarism, self regulation and ethical responsibility, the advent of corporate accountability has made it an obligation to answerability in terms of being answerable to different stakeholders and enforceability in terms of non compliance which results in some sort of penalty. The term has also developed itself in terms of applicability where it has been justified that corporate social responsibility is not just restricted to companies willing for voluntary participation but in fact it has to universally applied to all (Utting, 2005). Many initiatives taken by various companies are basically attempts to strengthen voluntary approaches, which imply that the rights of freedom of the companies must be balanced by the voluntary social responsibilities but also by obligations. What needs to be considered is the fact that in order to make the term of corporate social responsibilities really effective, the companies have to address the structural and macro policy issues. Although, we do see that the accountability section of corporate social responsibility does address the issue of implementation, there is still the need to address the issue in terms of development (Utting, 2005). According to a general survey (Daskalova, 2007), it has been proposed that though the companies have started recognizing corporate social responsibility as a proper corporate issue that has to be implemented, the companies still cannot generally make a clear distinction between giving, sponsorship and socially responsible activities. In general we can see that corporate social responsibility is basically categorized by the organizations in three terms: economic, environmental and social with the last one being subdivided in to two categories: first one being the internal dimension and the second one being the external dimension (Bissacco et al, 2005). According to survey we see that the internal dimension is generally approached by the organization in terms of HR management, health and safety at work etc (Bissacco et al, 2005), in other words caring for company staff and their families. In terms of the external dimension, it is approached by the companies by the social activities benefiting the local community or activities with a long term social impact (Daskalova, 2007). When it comes to the methodologies being used for the evaluation and implementation of corporate social responsibilities, we see some issues in terms of their validity. Corporate social responsibility still lacks concrete tools for the measure and evaluation which in turn triggers the issue of reliability due to a lack of clearly articulated bench marks for reference (Thompson & Smith, 1991). Plus, we do also see that the measures are quite prone to biases and halo effects. In addition to that most of the methodologies do not inculcate multiple stakeholders and other dimensions of social performance (Blackburn et al, 1994). Business accountability positioning: The general perception of the products and services as being the only profit cashing institutes of a company has changed over the past few years with the awareness of other factors as also having an influence on the company’s outcome. One of these is the level of accountability within and outside of the organization that forms the general perceptions of the people in regard to that particular organization. And it is exactly that factor that pushes the organization forward giving it a competitive edge (Maggard, 1976). Accountability within the organization is something that is critical to the success or failure of the organization. The final outcome of the company is dependent on all its executives, employees and even the staff and their level of dedication and mutual trust. In today’s era smart companies know the importance of accountability and its standing in terms of the prosperity and survival of the company (Corelli, 2010). Accountability when positioned at different levels within an organization can be seen in terms of an accountable leader as being responsible for positive results, effective communication and execution of the strategies etc. In terms of a sales pro, as being a master of their product and service, taking responsibility for sales results and be a trusted advisor etc. Similarly, for an employee, it is his duty to support the organization with his full dedication and participate to the maximum of his abilities to push the organization in the forward direction (Corelli, 2010). In terms of implementing accountability outside of the organization, one has to promote transparency in terms of every aspect of the organization. The organizations have to stay true to their stakeholders as well as employees in order to promote accountability. Conclusion: Corporate social responsibility, accountability and reporting is a concept without the implementation of which, at the corporate as well as personal level, the survival and prosperity of the organization can become a target to great jeopardy. Although with the growing awareness of it, it has started getting recognized as an issue that needs to be focused on along with other factors for corporate sustainability, but still the organizations seem to be lagging behind in terms of it systematic management. Plus, the organizations also need to focus on the whole aspect of corporate social responsibility; not just restricting it to adherence of the rules, laws and regulations, but also the human aspect of it that focuses on the betterment of the humans as well the overall external as well as internal environment. Corporate governance, ethics and accountability, all of which are included in the spectrum of corporate social responsibility should be inculcated in the organizations agenda and should not just be adopted as a way of work but in fact all of it should be inculcated and adopted by us as a way of life. References Corporate social responsibility. 2009. Small Enterprise Education and Promotion (SEEP). Washington DC. Retrieved on 14th Oct, 2010 from http://www.seepnetwork.org/Resources/6034_file_SPMap_01_Corporate_Social_Responsibility.pdf Corporate social responsibility. 2005. Manila Bulletin. Gale Group. Retrieved on 14th Oct, 2010 from http://www.questia.com/read/5011460668?title=Corporate%20Social%20Responsibility Black, L. D. 2006. Corporate social responsibility as capability. Australian Centre for Corporate Social Responsibilty. Australia. Retrieved on 14th Oct, 2010 from http://www.accsr.com.au/registered/pdf/CSR_as_capability_LBlack_JCC2006.pdf Chattergee, A. 2008. Social compliance, social accountability and corporate social responsibility. Main Stream. Retrieved on 15th Oct, 2010 from http://www.mainstreamweekly.net/article646.html Giri, R. 2007. Business ethics and corporate governance. Adhyayan publishers and distributors. India Solomon, J. 2007. Future directions for corporate governance and accountability. Corporate governance and accountability. John Wiley & Sons. England. Utting, P. 2005. Rethinking business regulation. United Nation’s Research Institue for Social Development. Retrieved on 14th Oct, 2010 from http://www.unrisd.org/80256B3C005BCCF9/httpNetITFrame?ReadForm&parentunid=F02AC3DB0ED406E0C12570A10029BEC8&parentdoctype=paper&netitpath=http://www.unrisd.org/published_/pp_/tbs_/utting/content.htm Daskalova, N. 2007. Company approaches to corporate social responsibility. Institute for Social and Trade Union Research. Retrieved on 14th Oct, 2010 from http://www.eurofound.europa.eu/eiro/2007/06/articles/bg0706029i.htm Bissacco, I., Maccarrone, P., Spinelli, C., Milano, P. 2005. The strategic approaches to CSR by large companies: a contingent model. BSE. Italy. Retrieved on 15th Oct, 2010 from http://www.crrconference.org/downloads/bissacco.pdf Blackburn, V. L., Doran, M., Shrader, C. B. 1994. Investigating the dimensions of social responsibility and the consequences for corporate financial performance. Journal of managerial issues. 6(2). 195+. Corelli, C. 2010. The rules of accountability- from the organizations top to bottom. Retrieved on 16 Oct, 2010 from http://www.christinespeaks.com/accountability.htm Maggard, J. P. 1976. Positioning Revisited. The journal of marketing. 40 (1). 63-66. Thompson, J. K., Smith, H. L. 1991. Social responsibility and small business. Journal of small business management. 29 (1). 30+ Read More