Corporate Social Responsibility - Essay Example

18-05-2007 Corporate Social Responsibility Essentially all socially desired (legal) economic activities pursued for the purpose of earning profit could be defined as business. Thus economic activities directed to wards creation of utility for the satisfaction of wants may be termed as business. Eventually creation of utility leads to creation of surplus and this is the crux of all business activities. Various functions are performed by business enterprise and the obvious motive of business activities is profit making. But this should not lead us to think that profit is the primary objective of business. The primary object of business is to supply quality goods and services to the consumers through the creation of utilities. Peter Drucker (1974) enumerates 8 key areas in which objectives of performance and results are to be set. They are marketing, innovation, human organization, financial resources, physical resources, productivity, social responsibility and profit requirements. Every business organization like everyone, lives in the midst of laws of the land, government regulations, economic conditions, changing consumer preferences, technological changes, culture, values system and business ethics of the society. All these factors constitute the business environment. A business organization and its environment are mutually interdependent, interacting with each other continuously. Environment is the supra-system of which the firm is only a small subunit. It can survive and thrive only when the environment desires its output of goods and services and is prepared to approve of an endorse its activities. Business organization had grown from the time immemorial, with the advent of industrial revolution, business organization, controlled by few thrive towards profit maximization. Industrial revolution changed the whole concept of business and capitalistic approach and individual profit making takes the prime objective. But during the 20th century it has changed. More democratic governments and their control but a brake on profit maximization tendencies of the organization and diverted them towards employee welfare and social welfare activities. Governments through various legislations are safeguarding interest of employees. Later on due to technological innovations and global connectivity the whole concept of business has changed. Development of technologies posses’ opportunities and uncertainties as well as risk and challenges, which can make or mar the future of business. Economic environment such as changes in competition, demand, lifestyle, consumer attitudes and behavior and market segments have an impact on business organization. Social environment have an impact on business organization and with the changes in life style, growing consumerisms, behavior, education and lots of other factors influences business organization. Apart from above factors cultural environment, political environment legal and demographic environment are changing the face of business organizations worldwide. Modern business organizations are facing the onslaught of technological revolution. Technological developments are strong and pervasive forces in the business environment. Technology has influences on business in two major ways: through its impact on society in general and through its direct influence on business operation and activities. Technological forces are rapidly changing life styles and have tremendous impact on all business operations. Technologies have affected all-round activities of human being. It affects daily living, living standards, culture, consumer behavior etc. the recent additions to business organization, are geographical and ecological or environmental factors. Geographical considerations also determine number of business decisions. Geographical environment includes size, area physical features, climate and fertility; land, population, resources etc. Due to development of business organizations and activities, a lot of negative impact has been observed on the environment. Indiscriminate growth and use of natural resources, business organization willingness to generate maximum profit plays havoc for the environment and natural resources. So business organizations of the 21st century are adopting corporate social responsibility as the prime objective towards sustainable development. We know that in the early 1900s the mission of business firms was exclusively economic. Today partly owing to the interdependencies of the many groups in our society, the social involvement of business has increased. The concept of social responsibility is not new. Although the idea was already considered in the early 20th century but Howard R. Bowen (1953) suggested that business should consider the social implications of their decisions. Corporate social responsibility is seriously considering the impact of the company’s actions on society (Paluszek, 1976). A newer concept, but still very similar to social responsibility is social responsiveness which in simple terms means “the ability of a corporation to relate its operations and policies to the social environment in ways that are mutually beneficial to the company and to society” (Davis et al. 1988). In any business organization various stakeholders exists. Shareholders are generally described as individuals, communities or organizations. (Adopted from the website http://www.smekey.org) As the diagrams shows a company has a diverse range of stakeholders. The regulatory environment and the corporate governance arrangement for an organization determine the minimum obligations for an organization towards its various stakeholders. Therefore, a key strategic issue, within organizations is the ethical stance, which is taken regarding obligations to stakeholders. The ethical stance is the extent to which an organization will exceed its minimum obligation to stakeholders and society at large. Different organizations take very different stances and there is likely to be a strong relationship between the ethical stance and the character of an organization. Now within the broad ethical stance corporate social responsibility is concerned with the ways in which an organization exceeds the minimum obligations to stakeholders specified through regulation and corporate governance. This includes considerations as to how the conflicting demands of different stakeholders can be reconciled since the legal and regulatory frameworks pay uneven attention to the rights of different stakeholders it is useful to distinguish between contractual stakeholders-such as customers, suppliers or employees who have legal relationship with an organization and community stakeholders- such as local communities, consumer (in general) and pressure groups- who do not have the protection of law to the same extent as the first group (Chakram, 1992) . Therefore the corporate social responsibility policies of companies will be particularly important to these community stakeholders. There are number of issues like employee welfare, working conditions, job design and intellectual property are termed as internal aspects and Green issues (environmental aspects like pollutions, energy conservation), products (danger arising from careless use of products by consumers), market and marketing (deciding not to sell in some market or advertising standards), suppliers (fair term of trade or blacklisting suppliers), employment (positive discrimination in favor of minorities) or community activities are some external aspects that provides a checklist against which an organizations actions on corporate social responsibility can be assessed. Some authors recommend social auditing as a way to ensuring that these issues of corporate social responsibility get systematically reviewed (Cluterbuck, 1998). There is today a growing perception among enterprises that sustainable business success and shareholders value cannot be achieved solely through maximizing short term profits but instead through market- oriented yet responsible behavior. Companies are aware that they can contribute to sustainable development by managing their operations in such away as to enhance economic growth and increase competitiveness whilst ensuring environmental protection and promoting social responsibility, including consumer interests. Now wide numbers of organizations are embracing the culture of corporate social responsibility (CSR). Now CSR is becoming a behavior by business over and above legal requirements and they are adopting it voluntarily because they feel that it is in their long-term interests. To carry on with sustainable development companies have to integrate the economic, social and environmental impact in their operations. Companies must not take CSR as an optional add-on to business core activities but take it as an essential part for their sustainable growth. CSR has found recognition among enterprises, policy makers and other stakeholder, as an important element of new and emerging forms of governance which can help them to respond to changes and challenges posed by Globalization and communication technological revolution. This brings organization closer to each other and other competition becomes fierce. In these competitive situation consideration of image and reputation plays an all-important role. In today’s informative world, consumes and social organizations need and ask for more information about the conditions in which products and services are generated and the sustainability impact thereof, and tend to reward, with their behavior socially and environmentally responsible firms. But the conflict between various stakeholders necessitates the governments to impose certain regulation for minimum obligations towards environments and society on the business organizations. But nowadays more and more companies are adopting CSR as their policies and use it to their benefits. They understand the potential of CSR policies towards strengthening the symbolic relationship between enterprises and society which has already been demonstrated in areas such s sustainable growth, education and social cohesion. CSR can support the creation of an atmosphere of trust within companies, which leads to a stronger commitment of employees and higher innovation performance. A similar atmosphere of trust in cooperation among other stakeholders (business partners, suppliers and consumers) can increase the external innovation performance. Consumer confidence fostered through CSR can be a major contributor to economic growth. CSR policies can also boost the societal benefits that enterprise creates with regard to innovation. Innovation practices aiming at better jobs, safer and employment friendly work places, gender mainstreaming and innovation in technology transfer to local communities and developing countries leading to a more equitable development (Report on CSR, 2002). References: 1. Article “The business case for social responsibility in small and medium-sized enterprises” (1999) Accessed from http://www.smekey.org on 15-05-2007. 2. Bowen, Howard R. (1953) Social responsibilities of the businessman, New York: Harper & Brothers. 3. Charkham, J. (1992) Corporate Governance Lessons From Abroad, European Business Journal, Vol. 4, no. 2, pp. 8-16. 4. Clutterback, D. (1998) Corporate responsibility audit, in V. Ambrosini with G. Johnson and K. Scholes (eds.) Exploring techniques of analysis and evaluation in strategic management, Prentice-Hall. 5. Davis, K. and Fredrick, William C. (1984) Business and society, 5th ed. New York, McGraw-Hill Book Company, p. 564. 6. Drucker, P. (1974) Management: Tasks, responsibilities, practices, Harper and Row: New York. 7. Paluszek, John L. (1976) Business and society: 1976-2000 New York: AMACON IN George A. Steiner, John B. Miner and Edmund R. Gray, Management policy and strategy, 3rd ed. New York: The Macmillan Company, 1986. 8. Report on “Corporate social responsibility: A business contribution to sustainable development” (2002) Accessed from http://europa.eu.int/comm/employment_social/soc-dial/csr/csr_index.htm on 15-05-2007. Read More