Corporate Social Responsibility
There is an increasing demand on businesses to have a “social conscience” and taking serious responsibility for providing employment, eliminating discrimination, ethical working environment and whatever else is related to having a “social conscience”. In today’s business world, corporate social responsibility (CSR) is an essential element for all corporations. Business around the world are progressively applying CSR, believing that it will be able to bring them competitive advantage and sustainability.
Before we progress into our discussion, we will have to define the meaning of corporate social responsibility (CSR) and the pyramid of corporate social responsibility. One of the most important elements of corporate social responsibility, Stakeholder Theory, will also be discussed. Defining sustainability and the guidelines to it will also be discussed in the essay. Last but not least, we will also be discussing about future sustainability models and a case study that has incorporated corporate social responsibility to make their business operation more sustainable will be discussed.
Corporate Social Responsibility Essay Example
An infinite number of definitions of CSR exist, going across from the simplistic to the complex, and a range of associated terms and ideas, including corporate sustainability, corporate governance, the triple bottom line and business sustainability. The terminology itself has changed over the course of time has also suggest that the meaning attributed to concepts such as CSR will continue to evolve in synch with business, political and social developments around the world.
Carroll (1999) evaluated the definition of CSR and concluded with this definition, “The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that a society has of organizations at a given point in time. He started examining in the 1950s’ about social responsibility and described Howard Bowen as the modern ‘Father of Corporate Social Responsibility’ and strongly believed that his work would mark the beginning of the revolution of CSR. (Carroll 1999, p. 70) CSR has constantly progressed throughout the 1950s to our current time. There have been various issues about CSR that has been highly-publicised such as the collapse of Enron, the James Hardie asbestos scandal in Australia. The debate about the role of CSR in the global world economy continues on, with authors such as Scherer and Smid emphasizing that multinational companies ‘should take responsibility for the improvement of world-wide social and environmental conditions’. (Scherer and Smid in Windsor 2001, p. 45) Windsor demonstrates the point further by investigating examples of Western oil production projects currently operating in a number of war-torn, impoverished African states that are noted for corruption and the severity of human rights abuse in those countries. James Buckee, the CEO of one of these oil companies, is quoted as saying that ‘it is socially responsible for a corporation to invest in certain places that some elements of popular opinion find objectionable’. (Buckee in Windsor 2001, p. 46) This clearly illustrates Windsor’s conclusion that ‘There are fundamental differences of opinions and values in the global economy’. (Windsor 2001, p. 246) In conclusion, CSR concepts remain as a crucial element for businesses today as it captures the relationship between businesses and society. The Pyramid of Corporate Social Responsibility has four key components which can be arranged into a pyramid form. Starting from the bottom up, the components are lined up as followed, Economic Responsibilities, Legal Responsibilities, Ethical Responsibilities and lastly Philanthropic Responsibilities.
Economic Responsibilities means that the organization must have adequate profit to be profitable and also be able to cover their operational and financial expenses, which includes paying investors. Legal Responsibilities means that all organisations are expected to follow and obey the relevant laws globally. Law refers to standards and guidelines for fair and ethical practices. Organisations should and must include legal issues into corporation management and always consider legal implications/issues when making business decisions.
It is very important that organisations ensure that their operations and procedures comply with the minimum standard of the law and also be ethical at the same time. Ethical Responsibilities also known as moral management is also deployed by organisations. Social issues are very often hard to be address by the law and organisations are encouraged to think and consider how their decisions can affect socially. Ethical responsibilities also put focus on the relationship between corporation behaviour and society.
Lastly at the top of the pyramid is Philanthropic Responsibilities. This is by far the most challenging and difficult component to businesses globally. Businesses are constantly challenged to have the belief that paying back to society can improve the standard of life. The activities at this level are often known as charity and voluntary. Organisations that engage themselves in philanthropic activities are making a better future for communities and stakeholders. (Carroll 1991 and 1998)
Stakeholder theory had its roots in the work of Ed Freeman and it can be defined as “any group or individuals that can affect or is affected by the achievement is a corporation’s purpose. ” (Harrison el al. 2009) Stakeholders have more power than organisations as they can disrupt their operations if the organisation is not able to meet their standard and may shut it down. There are basically primary and secondary stakeholders. Primary stakeholders consist of employees, customers, communities, financiers and suppliers.
Secondary stakeholders consist of the government, competitors, media, special interest group and consumer advocate groups. By understanding the welfare of the various stakeholders, firms are able to run safely and continue operating. Due to many social influences, innovations, firms entering and exiting, stakeholders’ welfares and utility function are interchangeable. Firms must have a clear understanding of the stakeholders’ utility function and welfare. By doing so, firms can put themselves in to a better competitive advantage in the market because they know what each stakeholders’ utility is.
The term sustainability is often used in businesses today. It is best described as ‘having to do with the flourishing of life on Earth over an indefinite time frame, and where this flourishing of life goal incorporates ideas of human and ecological wellbeing, grounded in principles of intra- and inter-generational justice. ’ (Clifton and Amran 2010) In other words, sustainability also means maintaining the ecosystem and the Mother Nature by changing human wellbeing. The guideline that is used often for sustainability is the Triple bottom line theory.
Triple bottom line was first created by John Elkington in 1997 in his book entitled “Cannibals with forks”. In the early 1980s, John focused on the impact of sustainable development meant to businesses and became popular in promoting the value of sustainability. A lot of effort was placed to bring companies in the public sector and non-government organisations together with the aim of collecting collective reflection on pursuit economy, social and environmental sustainability. (Dalma Berkovics 2010) The triple bottom line contains three lines of performance which are financial, social and environmental.
This model can be refined by including ecological and social measure elements. Triple bottom line model can also be referred as the three Ps (People, Planet and Profit) and the three Ps correlate with one another. (Slaper & Hall 2011) There are several elements to measure sustainability in which customer awareness will be the first. The relationship between buyer behaviour and organic product has been seriously studied. One interview revealed that about fifty percent of customers are willing in buying organic product.
On the contrary, the real buying behaviour is more geared to non-organic products because of the cheaper price compared to organic prices. The majority of customers have the interest to buy organic products but more research and effort have to be done to change the mindset of the main market and move towards organic products. (Viam 2011) Mohr el al. (2001) concluded that corporate social responsibilities are based on the customers’ self-interest and customer’s knowledge about corporate social responsibility.
Research showed that there are significant relationships between corporate social responsibility and buyer behaviour. Active companies who are involved in corporate social responsibility activities are gaining more consumers compare to inactive companies who do not engage themselves in corporate social responsibility activities. The author also believes that it is also important for companies to fully understand consumer expectations with the aim of developing a better brand recognition and trust in the consumer’s mind.
The second element is the relationship between corporate social responsibility and employees’ benefit. Studies have been made and results showed that there are significant relationships as employees perceive that companies involved in corporate social responsibility activities are meaningful. Seeing their employers to be active in social responsibility, employees tend to prefer to stay in their companies. (Hansen el al. 2011) Active companies who engage in corporate social responsibility activities are able to improve their employer-employee relationship.
Ultimately, job satisfactions are guarantee because employees feel that they are part of the organisation. Employees will voice out when they found disingenuous policy and employers must bargain in good faith to find solution that guarantee future success. (Karnes 2009) The third element is financial performance. There is no significant relationship between financial performance and social responsibility. However, there are initial results that showed increase in sales and equity in companies adopting corporation social responsibility.
It is believed economic drivers that have been identified by the World Economic Forum and Business in Community can help explain the adoption of CSR is voluntary approach. The economic drivers comprise of employee recruitment, motivation and retention, learning and innovation, reputation management, risk profile and risk management, competitiveness and market positioning, operational efficiency, investor relations and access to capital and lastly licence to operate. (Brine el al. 2006) Making profit is a short term goal and the way for companies to survive is to understand that they have to be sustainable for the future as well.
Understanding that natural resources will decrease and might not be available in future and nature environment is polluted with human waste is of key importance. Economic development around the world is slowly killing families and communities. Mirchandani (2008) was concerned about the quality relationship between the earth and its inhabitants, he stressed on the principle and framework for future sustainable organisations. Mirchandani proposed that the Earth’s natural ecosystems are interconnected. One good example is the ozone layer, greenhouse effect and oceans levels are interconnected.
Organisations need to learn about its management role to allocate and manage their resources in the most sufficient and efficient way to achieve max production. Managers and executives play noteworthy roles in organisation sustainability as they make decisions, review and refine organisation plans. The world we live in is constantly changing and managers must have the ability to adapt and respond and quickly making optimal strategies to counter obstacles. The manager’s failure will directly affect the company’s operations. Coombs 2010) Leaders need to have a close relationship with employees because it allows them to help and engage their employees. Leaders who understand the importance of Triple Bottom Line can match their own goal with the company’s goal. Leaders must also provide information about the company which include the participation in corporate social responsibility activities to all employees. Employees then should have a clearer understanding of the company’s strategy so that employee can match their personal achievements with the company’s goal. Quinn & Baltes 2007) Starbucks Coffee ranks as one of the 2011 most ethical companies by Ethisphere under cafe categories. Starbucks has actively participated in corporate social responsibility since 1971. Focused on long-term sustainability, Starbucks took their stakeholders’ thinking and took action for continuous improvement. Starbucks’s triple bottom lines include Ethical Sourcing, Environmental Stewardship and Communities. The main approaches for ethical sourcing are coffee purchasing and farmer support.
Fairtrade coffee beans are used and this helps to keep small-scale farmers in shape by supporting funds to improve the livelihoods of farmers. In the environmental stewardship, emphasis is put on recycling and reusable cups. Starbucks has continued to improve the design and materials used for cups to help the recycle system. By doing so, they are helping the development of green power market. Starbucks also implemented new water-saving equipment in their stores to minimise water usage. Lastly, Starbucks participates in community service and have initiated their own Youth Action Grants.
It is their way of ‘giving back’ to society via charity and helping to build better environment. This would be a philanthropic approach. As a result, their brand recognition has risen among consumers and the public. In summary, organisations cannot overlook the importance of addressing their social responsibilities and placing profit to be their main aim. Having a sustainable business and incorporating corporate social responsibility activities can bring organisations greater benefits. It is a big challenge to get involved in corporate social responsibility but nevertheless it cannot be avoided.