Social responsibility is an idea that has been of concern to mankind for many years. Over the last two decades, however, it has become of increasing concern to the business world. This has resulted in growing interaction between governments, businesses and society as a whole. In the past, businesses primarily concerned themselves with the economic results of their decisions. “Today, however, businesses must also reflect on the legal, ethical, moral and social consequences of their decisions” (Anderson 15). This paper will discuss the concept of corporate social responsibility. It will give the definition of the phrase, and identify some of the global factors that necessitate corporate social responsibility. It will discuss the importance of corporations setting up corporate social responsibility projects, and the impact these have on society. Social corporate responsibility and the maintenance of high ethical standards is not an option but an obligation for all business.
Corporate social responsibility is no longer defined by how much money a company contributes to charity, but by its overall involvement in activities that improve the quality of people’s lives. Corporate Responsibility has come up as a significant subject matter in the international business community and is progressively becoming a mainstream activity. There is mounting recognition of the momentous effect the activities of the private sector have on the workforce, clientele, the society, the environment, competitors, business associates, investors, shareholders, governments and others groups. It is also becoming progressively clear that organizations can contribute to their individual wealth and to overall community wealth by taking into account the effect they have on the entire globe when making decisions (Anderson 5).
Ethics of multi-corporations involves actions that are morally upright. It is common knowledge that most of the activities corporations are engaged in may not meet the required ethical standards. This is because, many businesses tend to focus on profit making rather than any other thing. Business ethics is an upcoming issue mainly due to the sheer number of persons involved. The actions of a few persons may seem safe on a small scale but on a large scale, such actions could be devastating. An example of such situations that may be considered unethical is the firing or employees to keep the profit margin of a company high. In the wake of the financial breakdown, many people lost their jobs. Most of the persons who lost their jobs included civil servants who are middle class persons. In order to ensure that the corporations save some money, most of these workers were laid off. Such an action is considered unethical. This is because; even though the companies are somehow at a loss, the firing of all those employees means that so many people are going to suffer. The multi-corporations could definitely live with the loss incurred but would rather avoid that by firing a number of their workers.
Businesses are an essential part of the society within which they operate. Excellent executives are aware that their long-term prosperity is founded on sustained good associations with a broad range of persons, groups and organizations. Intelligent organizations know that businesses can never be prosperous if they operate within societies that are unsuccessful. This is regardless of whether the society is failing due to social, governance or environmental challenges. Furthermore, the common public has lofty expectations of the private sector with regard to responsible and ethical behavior. Consumers expect goods and services to mirror socially and environmentally accountable business conduct at reasonable prices. Shareholders also are seeking improved financial performance that interlinks social and environmental elements, as regards the opportunities they present (Banerjee 13).
There are several factors which explain the growing interest in corporate social responsibility. The first factor is the new concerns and expectations of citizens, consumers, public authorities globalisation and industrial change. The second factor is the increasing influence of social criteria on the investment decisions of individuals and institutions, as investors or consumers. The third factor is the growing concern about environmental degradation. This is a particularly important concern given the fact that environmental conservation has become an increasingly significant for everyone in society today. With multi-corporations raking in millions, it is only justified that they give back to the community. The wanton disregard of the environment by a few companies when it comes to handling of industrial waste, the use of recyclable paper or sheer indifference when it comes to environmental protection is shocking. As aforementioned, corporate social responsibility involves activities that give back to the community, or ensure fairness in the running of activities (Crowther and Rayman-Bacchu 69).
The protection of the environment has become the center stage of many humanitarian organizations. Most of these humanitarian organizations argue that the protection of the environment should be the key concern of any corporation. This is because; the environment is the only natural resource that is invaluable to the human race. The issue of handling industrial waste by many corporations has always been at the forefront of many environmental organizations. This is because; corporations are guilty on more than one accord of irresponsibly handling their waste. Evidence such as the great pacific garbage patch exists to show how many corporations are not handling the dumping of waste seriously. The great pacific garbage patch is a myriad of human waste that has found its way into the ocean after being improperly dumped. The great pacific garbage patch leads to problems such as loss of aquatic life and the contamination of the water not mentioning the introduction of many pollutants into the water (Werther and Chandler 55).
Corporate social responsibility makes it clear that it is certainly unethical for these corporations to be making profits at the expense of the environment and other aspects of the human life. Corporate social responsibility makes it clear that corporations should therefore find better ways to handle their waste disposal. Even though it is currently not clear on what is the best way to handle some waste such as hot water, responsibility means that before waste is disposed, it should pass some tests. The tests could ensure that the waste is safe for disposal and would not in any way harm human beings and other life. Corporate social responsibility is therefore viewed as a control mechanism to ensure that multi-corporations are responsible for their actions (Werther and Chandler 70).
The global financial meltdown uncovered many social norms previously unimagined. The number of people who lost their jobs due to the financial situation is appalling. Interestingly, this does not mean that multi-national corporations are necessarily suffering. Most of the established companies with branches all over the world took the excuse of the financial breakdown to benefit. All of a sudden, it was okay to lay off people on the pretext of financial gloom. This means that a few people were benefiting from the woes of a thousand more. The issue of corporate social responsibility presents itself in this situation in that, the multi-corporations are run by a board of governors.
The board of governors is usually composed of a few individuals that call all the shots. It is common knowledge that these corporations employ a huge number of persons in many sectors of the economy. When the profits of these gigantic companies fail to reach a certain goal, the running costs of the business have to be checked. This is why, the few persons at the top, not wanting to lose, resort to firing some people. This is done so as to maintain the profits at a certain level. The problem is that when all of the multinational companies resort to firing a few employees, the net effect is that, a large number of persons end up losing their jobs.
Corporate social responsibility ensures that corporations the world over are engaged in other activities that give back to the community (Crowther and Rayman-Bacchu 172). Many activities that are considered helpful include; organizing activities that seek to involve the community in such events as fund raising for the needy, events that seek to help out the disadvantage in society and other similar activities. In the financial and corporate world, corporate social responsibility a given with a positive impact on performance. There are, however, several factors that show the need for corporate social responsibility. The first factor is population. The expanding population in developing regions will create larger markets dominated by younger individuals with questionable access to the developed world’s standard of living. Statistics show that more than eighty five percent of the world’s population will live in developing countries by 2025 (Crowther and Rayman-Bacchu 165). This presents a challenge to companies seeking to involve themselves in corporate social responsibility, since it is clear that a lot of financial support will be required for these populations.
The second factor is wealth. Despite the fact that global wealth is rising, the income gap has grown wider, threatening civil society. Seventy eight percent of the world can be classified as poor, with eleven percent in the middle class, and only eleven percent can be classified as rich. Each and every company should strive to be involved in attempting to balance this distribution of wealth. The trend of the rich growing richer while the poor grow poorer should be eliminated, since it is unethical for some people to have so much, and others to have nothing at all. The third factor is nutrition. There are millions of people who are malnourished, amidst an abundance of food. Thousands die of hunger every year, while rich corporations blow millions on fancy holidays for their executives. It is crucial for each company to take time and reflect on the finances it spends on benefits for its executives, as compared to that spent on helping the needy in society. While these benefits are vital for employee motivation, they should not be taken overboard at the expense of the suffering masses.
Education is another critical factor that should be considered in the design of corporate social responsibility programs. Basic education is widespread, but opportunities for learning continue to elude many. Over one hundred million children are not in school, with ninety seven percent of these being in developing countries. One in every five adults globally is illiterate, which are staggering figures given the widespread opportunities to learn available today. Corporate are faced with the challenge of promoting education by setting up schools, and funding educational development programs. Education can also be encouraged by taking in interns and trainees and giving them an opportunity to learn the tricks of the job, which will enable them compete fairly in the corporate world (Crowther and Rayman-Bacchu 169).
In conclusion, this paper has shown that corporate social responsibility is a vital element for nay business corporations. It has been shown that there are many different areas in which a company may choose to focus its corporate social responsibility. The first area of focus in corporate social responsibility is with regard to the environment. Other areas that should be considered in the development of corporate social responsibility programs are education, health, nutrition and employment. “Social responsibility investment combines investors’ financial goals with their obligation and dedication to factors that ensure the well being of society such as environmental friendly practices, economic growth and justice in society” (Anderson 9). These elements are not only aspects of corporate social responsibility, but also a show of the ethical standards of a company. It is unethical for some individuals to own so much and earn so much, at the expense of other suffering members of society. It is also unethical for companies to engage in environmentally degrading practices that result in illnesses and loss of life. It can be concluded that Social corporate responsibility and the maintenance of high ethical standards is not an option but an obligation for all business.
Anderson, Jerry. Corporate Social Responsibility: Guidelines for Top Management. Westport: Greenwood Press, 1989. Print.
Banerjee, Subhabrata. Corporate Social Responsibility: The Good, the Bad and the Ugly. Northampton: Eward Elgar Publishing, 2007. Print.
Crowther, David and Rayman-Bacchus, Lez. Perspectives on Corporate Social Responsibility. Burlington: Ashgate Publishing, 2004. Print.
Werther, William and Chandler, David. Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. Carlifonia: Sage Publications, 2006. Print.
Corporate Social Responsibility
There are many different definitions and interpretations for corporate social responsibility, but all with considerable common ground. Different societies have different perceptions of what corporate social responsibility is but all definitions refer to the way in which the core business is managed. (Weber, 2008, pp. 247--261)
The World Business Council for Sustainable Development in its publication Making Good Business Sense by Lord Holme and Richard Watts, used the following definition: (Mallenbaker.net, 2014) 'Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.' (Mallenbaker.net, 2014).
It can therefore be said that social responsibility actions are those that go beyond a company's obligations according to social or environmental regulations, in order to be perceived by the public as supporting their interests (Mallenbaker.net, 2014).
'Social responsibility is a form of self-regulation that businesses adopt as a part of their corporate conscience and citizenship. Often referred to as corporate social responsibility or CSR, this policy spurs businesses to develop means to monitor the public's social perception of them as a responsible business. The business goal of social responsibility is to encourage the company's actions toward the positive impact of consumer, community and employee responsibility.' (Davis, 2014). This not only has an impact on economic growth, but also affects the social and ecological environment. Companies are becoming more and more aware of the impact that their business activities have, especially due to the fact that the media and society hold companies accountable, which attracts a considerable amount of publicity. Business leaders now have to consider incorporating corporate social responsibility into their business strategies a priority (Weber, 2008, pp. 247--261).
Diagram : The Business in Society (Mallenbaker.net, 2014)
Heightened attention to corporate social responsibility of companies is not completely voluntary. Many companies only become aware when they are surprised by public responses with regard to issues that they did not think was part of the scope of their responsibilities. (Porter and Kramer, 2006, pp. 2-13). 'An example of this is Shell Oil's decision to sink the Brent Spar, an obsolete oil rig, which lead to Greenpeace protests in 1995 and made international headlines' (Porter and Kramer, 2006, pp. 2-13).
There are 5 main areas which businesses can benefit from CSR:
1. The positive effect on companies reputation and performance ' Gray & Balmer defined image as 'the mental picture of the company held by its audiences', which is influenced by the messages that are communicated. The way in which a company is perceived influences the company's competitiveness. CSR influences a company's reputation (Weber, 2008, pp. 247--261).
2. 'Positive effects on employee motivation, retention, and recruitment' - Companies can directly influence employees by having them be more motivated as a result of working in a better environment. Potential employees may find volunteering and CSR program attractive and current employees may be more motivated by doing good work or 'having a sense of purpose' (Weber, 2008, pp. 247--261).
3. Cost savings ' As a result of substituting materials for more sustainable ones, efficiency gains could be a result. Capital could be easier to gain as a result of investors being sensitive to sustainability issues (Weber, 2008, pp. 247--261).
Wal-mart reduces the number of store reports that are printed automatically. They expect that this will lessen printing of 350 pages, saving them $20M. (Walmartstores.com, 2014)
4. Revenue increases from higher sales and market share - An increase in revenue could be achieved indirectly as a result of an improved brand image or directly by a CSR driven product or market development (Weber, 2008, pp. 247--261).
5. Risk reduction or management 'Risk related risks can be avoided or managed by incorporating CSR such as negative media or NO boycotts. (Weber, 2008, pp. 247--261)
Some of the ways companies incorporate CSR to be more sustainable include:
Voluntary Hazard Elimination
Companies that are socially responsible often act to remove production practices that could cause harm to the public, even if the law does not require them to do so. This is a voluntary action that companies take upon themselves in an effort to be more socially responsible. (Weber, 2008, pp. 247--261) A company, for example could educate the public on how to stay protected from harmful substances as part of a hazard control program. A chemical plant could implement a checklist for a safety inspection to help staff to handle substances that could be potentially dangerous to them. A company could gather information on local residents to determine the way the noise pollution that the business creates that affects them and adjust their activities or takes steps to soundproof or lessen the noise accordingly. (Davis, 2014) Wal-Mart is working to lessen the amount of waste generated by their facilities. They are looking for new solutions for excess materials and food. They are also working with suppliers to improve the packaging of their products. 'The majority of their excess food is donated to 'the Feeding America program' which delivers the food to food banks in all states. In 2009, more than 127M pounds were donated, which then got distributed to people across the nation. Wal-Mart has also improved their recycling and waste redirection efforts. In 2009 they redirected more than 64% of waste generated' (Walmartstores.com, 2014).
Companies, businesses and corporations concerned with social responsibility align with appropriate institutions to create a better environment to live and work. For example, a corporation or business may set up a foundation to assist in learning or education for the public. This action will be viewed as an asset to all of the communities that it serves, while developing a positive public profile (Davis, 2014). 'In 2003, Philips and Caritas Austria (a Catholic relief, development and social service organization) founded the Philips Pupils Fund of Caritas. The fund, which is managed by Caritas, provides financial support to socially disadvantaged school children in Austria. Each year, Philips Austria donates 70,000 EUR to the fund. Additional donations come from Philips employees and business partners. Philips also offers 'future vouchers' to the children supported by the fund offering to help them in the future e.g., by finding an apprenticeship position upon graduation.' (Weber, 2008, pp. 247--261) This is a prime example of community development.
Philanthropy is when a company makes a monetary contribution that will provide aid to local charities, organizations that are health or education related to help less fortunate, impoverished communities. This can help in many ways, such as providing people with the skills necessary to be marketable and therefore aiding in reducing poverty and help the environment. E.g. the Bill and Melinda Gates Foundation donates computers to various schools as well as funds work on vaccines preventing HIV (Davis, 2014). Another example is Goldman Sachs, which 'committed $100 million over five years to one such initiative, '10,000 Women,' which provides a mix of practical business education, support services and access to capital for under served women business owners in more than 20 countries' (Eckhart-Queenan, 2010)
Creating Shared Value
Often corporate responsibility is referred to as CSV or creating shared value, which refers to the way in which social well-being and corporate success are related/connected. A business needs a healthy, educated workforce to strive. Businesses must thrive so that they may help develop society and help them to survive. By doing so, they created shared value. (Davis, 2014)
Social Education and Awareness
Companies that engage in socially responsible investing use positioning to exert pressure on businesses to adopt socially responsible behavior themselves. To do this, they use media and Internet distribution to expose the potentially harmful activities of organizations. This creates an educational dialogue in the public by developing social community awareness. This kind of collective activism can be effective in reaching social education and awareness goals. Integrating a social awareness strategy into the business model can also aid companies in monitoring active compliance with ethical business standards and applicable laws. (Davis, 2014) e.g. Walmart has displayed in its stores, which stresses the importance and global need for safe drinking water. (Walmartstores.com, 2014).
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