Factors Determining CSR Responsiveness - Report Example

Corporate social responsibility Table of Contents Introduction to CSR 3 CSR benefits in respect of cost for the business 3 CSR importance in respect of other corporate objectives 4 Influence to determine responsibilities 5 Factors determining CSR responsiveness 7 Value and limitation of social reporting to businesses and stakeholders 8 Government influence on CSR 8 Conclusion 9 Reference list 10 Introduction to CSR A firm is a part of the society and is therefore responsible towards maintaining the quality of the business environment in which it operates. The corporate social responsibilities (CSR) of a firm broadly encompasses aspects such as responsible use of resources procured from the external environment, controlling and preventing environment degradation, sustainability factors, reporting business activities accurately to stakeholders and providing goods and services which increase the value of the society as a whole (Basil and Weber, 2006). CSR initiatives facilitate making an organization socially responsible and ensure that the present and future generations are not impacted negatively by the activities of the company. CSR benefits in respect of cost for the business Many organizations avoid meeting their CSR initiatives in a proper manner as it is generally considered that they increase the cost of operations. In order to operate in the most sustainable and environment cautious manner, companies are required to invest in superior and clean technologies. Such technologies are cost intensive and causes a firm to incur greater capital expenditure. However such expenses do not lead to losses as the end products manufactured by the company are considered to be less hazardous and of high quality. The costs incurred for manufacturing such sustainable products are transferred to the consumers by charging higher prices (Turker, 2009). A suitable example in respect of the notion that CSR leads to cost advantages can be understood from the case of Apple Inc. The company incurs a large amount of finance for procuring materials from suppliers who use clean technologies. This ultimately impacts the final costs of the products. Products are sold at an enhanced price, but due to the high goodwill and brand image of Apple, consumers are seen to accept the prices. Hence it can be stated that if the brand image and position of a company in the market due to compliance with CSR is adequate, the costs incurred in respect of clean technologies and raw materials gets covered through enhanced profits. However it becomes essential that companies inform their stakeholders regarding the manner in which they carry out production. This enables consumers to wisely choose those brands who manufacture products in the most sustainable manner (Frost and Burnett, 2007). Similarly it can also be seen due to the use of clean technologies and a sustainable supply chain system, Starbucks cost of operations are considerably high. Hence the end products of the company are highly priced. However the fact that Starbucks operates in a highly environment conscious manner and takes up many initiatives to improve the conditions existing in the society is well known to consumers. This has led to high brand image which facilitates the company to achieve higher profits (Kolk, 2005). However incorporating CSR which thereby leads to a price rise must be controlled so that consumers are not required charged heavily. In the recent times Apple Inc. was drawn into a controversy whereby the consumers in the U.S claimed that the company was charging very heavy prices by which other firms were also getting influenced. Although Apple has a huge brand name, its CSR initiatives are often criticised and the prices of their products are not accepted by many. Not only is it possible for companies to attract consumers and earn higher profits by achieving CSR goals, it also facilitates firms to procure higher investments. Investors are seen to opt for those companies who fulfil CSR related norms effectively. In order to enhance investment opportunities companies such as Apple and Starbucks are seen to remain keen upon fulfilling their CSR related initiatives more keenly. Investors consider that firm who posses sound CSR and sustainable initiatives are more ethical and act responsibly. Investors are assured of the fact that firms with CSR initiatives would not indulge in fraudulent practices and hence their investors are likely to remain secure (Frederiksen and Nielsen, 2015). CSR importance in respect of other corporate objectives With increased globalization and the existence of strong competition in most types of industries, it has become increasingly important for organizations to be able to remain ethical and responsible in their business practices. CSR initiatives are seen to remain directly or indirectly associated with other objectives. As a result it can be stated the objectives set by a firm in respect of its CSR is one of the most crucial. The Royal Dutch Shell Plc is seen to be a suitable example in this context. The company is seen to set almost all their operational plans keeping in mind the needs related to sustainability. Careful and synchronized efforts are taken so that the carbon emissions occurred during the extraction and energy production phase remain minimum. Shell understands that the world at present is threatened by major climate changes and therefore it is essential to produce energy which not only ensures economic development but also assures low negative impact upon the environment. Hence every effort relating to sustainability, at every stage of production of energy fuels is taken up by Shell. Shell understands that CSR is a process that involves meeting the expectations of the society. The company believes that it is essential to build trust with their stakeholders as their interests are play an essential role in organization success. The company had taken critical measures to reduce CO2 emissions during flaming process. Integrated efforts had also been taken to use water in the most sustainable way possible. In order to facilitate the development of environment conscious energy, Shell works with a number of oil companies to develop innovative clean technologies. Emphasis is also given to encourage industries and households to use energy efficient and less carbon emitting fuels (Ite, 2004). However not all c0omanies are able to mange their overall corporate goals alongside of their CSR goals. Oil spills and lack of operational efficiency had led British Petroleum into a number of controversies and had created a negative reputation. The company was claimed to remain incapable of aligning all types of corporate responsibilities with the their long term visions and operations. Nevertheless a number of corrective measures and expansion plans have been taken up by the company to improve their goodwill in the market. Analysis of Shell’s operational strategies reveals that the company is seen to align most of their corporate objectives with the CSR initiatives. By doing so the firm is able to produce products whose environmental footprint remains low. Additionally Shell also provides a safe and growth oriented environment for its workers and employees. In order to manage relationship with their stakeholders, reporting initiatives are taken on the basis of global reporting initiative. Shell’s reporting team has been successful in acquiring a large amount of investments facilitating them to invest more in innovation related activities. Hence it can be seen that by fulfilling the CSR related initiatives, Shell is able to enhance their dynamics of their production related activities and produce products which are of high quality (Polonsky and Jevons, 2009). Influence to determine responsibilities The manner in which a firm determines their CSR initiatives depends hugely upon their manner of functioning. For instance in case of firms which operate in the financial sector, reporting related activities are more crucial. However, most organizations set their CSR principles on the basis of the needs of their stakeholders and their target market segments. Microsoft in the year 2012 was ranked as the company with the best CSR policies and it was fundamentally due to the fact that their CSR policies were framed in a manner such that the interests of all stakeholders are met duly (Jamali and Mirshak, 2007). Microsoft’s CSR initiatives can be broadly divided into three categories, which are discussed as follows. Citizenship- Being a part of the social system, Microsoft considers that it requires acting as a responsible citizen by developing products and services which add value to the society as a whole. As a responsible citizen, Microsoft supports different causes associated with the conservation of the environment. The company also ensures that there business operations, especially their supply chain systems are set in a manner such that environmental impacts are low. The company stresses upon developing partnerships with suppliers who manufacture products and services which have little or no impacts upon the environment (David, Kline and Dai, 2005). Governance- CSR initiatives of Microsoft are framed in an ethical manner. Transparent business dealings are formed and encouraged to be followed by all the business departments of the company. The company has developed strict initiatives to provide timely and accurate reports to their stakeholders. Microsoft has always maintained a very strong relationship with their investors and shareholders. The company takes integrated efforts towards involving their major shareholders while taking important business decisions. The governance procedures of Microsoft also involve ensuring that their suppliers follow ethical business practices. Additionally, Microsoft also takes into consideration the needs and the policies which are set by the political authorities of the nation of their operations. The computer software and electronics sector is governed by diverse policies in different nations. Microsoft ensures that the policies set by government authorities are fulfilled and their interests are duly met. In many nations, Microsoft has also extended its hands towards partnering with the government for taking initiatives which enhance the value of the society (David, Kline and Dai, 2005). Workplace- Apart from meeting the needs of the external stakeholders, Microsoft gives much importance to their internal interest groups as well. Internal interest group refers to the organizations employees and managers. Without the input received from employees and managers it wouldn’t be possible for the company to develop products and services which are acceptable to the society and facilitates earning profits. Microsoft ensures that their employees are provided with a stimulating and safe work environment. Employees are provided with a number of benefits and it is ensured that their remuneration related expectations are fulfilled. Microsoft considers their workers as important resources and therefore develops practices which facilitate retaining them for longer durations (David, Kline and Dai, 2005). Factors determining CSR responsiveness The extent to which a firm is fulfils there CSR related responsibilities depends on a number of factors. They mainly include the efficiency of the management, compliance with laws and the legal framework and whether the firm is a private or public institution. Starbucks for instance is seen to go beyond minimum legal requirements to act in a manner such that the society is benefitted in diverse ways. The company has developed innovative ways by which carbon emissions can be reduced beyond the measures which the government suggests. Such a responsible attitude indicates the environment consciousness which the organization possess and does not limit itself to only fulfilling the minimum requirements. It is also believed that the responsiveness towards CSR initiative also depends upon the fact whether a firm is public or private. Public institutions have an inborn sense of remaining accountable towards the society and consistently work towards the benefit of the society keeping aside their profitability needs. However, private firms are seen to possess less impetus to act for the benefit of the society and do the same only in a profitable manner. Starbucks, although is not a public firm is seen to act highly responsibly towards social development. This is mainly due to the existence of skilled and highly knowledgeable workforce who consider that their actions not only impact the organization, but the society as a whole. Hence it can be stated that when the employees and managers of a firm act responsibly and ethically, CSR initiatives can be easily be fulfilled. Another crucial aspect which impacts CSR activities is the influence of the actions of competitors. Starbucks management had identified that smaller retail coffee chains were seen to do well in many regions due to their highly responsible manner of operations. This encouraged Starbucks team and developed the understanding that when organizations remain dedicated towards strong commitments to the society, it is highly likely that consumers would identify the company as ethical and develop attachment with the brand with greater ease (Ceo, 2004). In the context of identifying the needs of stakeholders and accordingly setting the CSR initiatives, has not been effectively been practiced at Apple. The company’s objectives have remained more concentrated upon earning profits and towards research and innovation. The company at numerous instances failed to meet the needs of their stakeholders such as adequate reporting and meeting environmental goals due to greater emphasis upon profit earning. Value and limitation of social reporting to businesses and stakeholders Business ethics in modern day organizations are seen to provide numerous benefits. When organizations fulfil the requirements which are associated with social reporting effectively they are seen to be able to acquire greater investments and also attract better suppliers and develop strong ties with consumers. When social reporting related norms are fulfilled in an adequate manner it is seen that stakeholders perceive the organization with greater values. This impacts the goodwill of the firm and ultimately causes an increase in their share values. Fulfilling the social reporting related needs also leads to achievement of economies of scale. The additional revenue saved through achievement of economies of scale can be used for innovating new products and services and provide end products to consumers at cheaper rates (Basil and Weber, 2006). However, meeting the social reporting needs is costly for a firm. Additional initiatives of reporting, acquiring clean technologies and developing products which are sustainable are requires firms to invest in equipments which are costly. It is also essential to acquire employees who are highly knowledgeable and can be retained for long. Hence higher payments are required to be made to employees and workers so that the organizational value continues to increase. Social reporting is also a widespread task. A firm is required to report its activities to wide number of stakeholders involving creditors, suppliers, government, consumers, employees and the society. In order to develop a CSR plan which covers the need so of all these interest groups, investments must also be made in extensive strategic analysis (Turker, 2009). Government influence on CSR The role of the government is seen to be important in most nations for framing the CSR policies of organizations. Government bodies must encourage corporate firms to rapidly undertake CSR related initiatives considering the rate at which the quality of the environment is getting deteriorated. Additionally as business organizations grow more and more complex, it becomes essential to report activities more transparently so that resources can be utilised more efficiently (Basil and Weber, 2006). Conclusion In order to operate in a responsible manner, organizations are required to invest highly upon procuring those types of technologies and systems of operations that facilitate meeting the CSR initiatives. CSR initiatives not only benefit the stakeholders of a business, but also provide a number of benefits to the organization itself such as increased brand image, better relationship with consumers and suppliers and enhanced strategic position in the market which facilitates overcoming competition. It is however seen that modern organizations perceive CSR as a tool for gaining profits rather than actually doing things for the betterment of the society. Such a notion is required to be changed so that economic as well as environmental conditions can be improved. Reference list Basil, D. Z. and Weber, D., 2006. Values motivation and concern for appearances: the effect of personality traits on responses to corporate social responsibility. International Journal of Nonprofit and Voluntary Sector Marketing, 11(1), pp. 61-72. Ceo, S., 2004. How Starbucks Works With NGO’s. California Management Review, 47(1), p. 92. David, P., Kline, S. and Dai, Y., 2005. Corporate social responsibility practices, corporate identity, and purchase intention: A dual-process model. Journal of Public Relations Research, 17(3), pp. 291-313. Frederiksen, C. S. and Nielsen, M. E. J., 2015. CSR Reporting Seen from an Ethical Perspective: An Empirical Investigation. Corporate Social Responsibility and Governance, 1(1), pp. 211-225. Frost, S. and Burnett, M., 2007. Case study: the Apple iPod in China. Corporate Social Responsibility and Environmental Management, 14(2), pp. 103-113. Ite, E. U., 2004. Multinationals and corporate social responsibility in developing countries: a case study of Nigeria. Corporate Social Responsibility and Environmental Management, 11(1), 1-11. Jamali, D. and Mirshak, R., 2007. Corporate social responsibility (CSR): Theory and practice in a developing country context. Journal of business ethics, 72(3), pp. 243-262. Kolk, A., 2005. Corporate Social Responsibility in the Coffee Sector:: The Dynamics of MNC Responses and Code Development. European Management Journal, 23(2), pp. 228-236. Polonsky, M. and Jevons, C., 2009. Global branding and strategic CSR: an overview of three types of complexity. International Marketing Review, 26(3), pp. 327-347. Turker, D., 2009. How corporate social responsibility influences organizational commitment. Journal of Business Ethics, 89(2), pp. 189-204. Read More