Corporate Social Responsibility as a Critical Issue for the Multinational Organisations - Research Paper Example

? GLOBAL BUSINESS ENVIRONMENT Table of Contents Introduction 3 CSR and Challenges Faced by MNCs 4 Conclusion 10 References 12 ‘MNCs face particularlydemanding challenges when it comes to managing their corporate social responsibilities’ Introduction CSR has been a recent buzz in the business environment and it has become a concerning issue for most of the organisations operating their business activities worldwide. CSR can be defined as the means of operating a business by an organisation which meets or even exceeds the legal, ethical, public and commercial expectations which the society has from the organisation. According to the requirements of CSR, every company is needed to have some obligations towards society and environment at large (Kotler, and Lee, 2008, p. 3). Multinational Corporations (MNCs) are found to experience intense pressure for performing socially responsible activities in their global operations. However, the corporate social responsibility (CSR) from the global perspective and its management by the MNCs are still less understood. There has been an increased promotion of CSR activities followed in the business environment worldwide. In addition to this, various voluntary initiatives and global guidelines are emerging to facilitate improvement of CSR in global operations. MNCs can be considered to be consisting of differentiated network which are significantly complex in nature. They are associated with internal heterogeneity and are required to face various complex situations related to managing across units that are globally diverse and dispersed (Barlett, Doz, and Hedlund, 1990). MNCs have to face diverse environments related to their stakeholders spread over all their international operations in various geographical areas of the world. The MNCs are required to address diverse issues of their stakeholders in diverse contexts and multiple levels of their operations. Managing of CSR by MNCs globally also involves cross border management and transfer of CSR activities across different geographical locations where they operate. MNCs are also required to manage the local CSR practices that are suited to the regional and local context of their subsidiary units. Hence, the MNCs have to face multiple and demanding challenges regarding management of their CSR activities across the globe. This paper entails about all those demanding challenges that are being faced by most of the MNCs worldwide today and how they are managing to do so in an effective manner to ensure their sustainable growth and development in future. CSR and Challenges Faced by MNCs The interests of the society are recognised through the CSR practices followed by an organisation and it takes the responsibility of the various impacts that its business activities can have on the shareholders, employees, community people and the external environment. CSR can help in serving different purposes for a business organisation. It helps to ensure the fact that the business process is being conducted by the organisations in an ethical way and in alignment with the corresponding interests of the community. It helps in responding in a positive manner to the emerging priorities in the society. CSR serves the purpose of developing willingness amongst the organisations to act beyond the regulatory confrontation. It also helps in maintaining a balance between interests of the shareholders of the company and the wider community. As mentioned earlier, corporate social responsibility has received renewed attention in the business world in the recent years. CSR is now considered to be a critical issue that is needed to be followed by the MNCs mainly because of the increasing demands and expectations from the society, and are also driven by various factors like the campaigns organised by the NGOs, managers of the companies who are ethical minded, and seeking opportunities to improve the reputation of the organisations. It is unfortunate that most of the companies begin with big words and come up with responsibility policies and statements, and a large number of codes of conducts to be followed by the organisation are issued and then communicated to all the stakeholders of the company. However, the big question is what ultimate result of such statements is and how much it is contributing to the wellbeing of the society as a whole. It is very easy for the MNCs to state and declare the codes of conducts, policies, etc. But the process of realising CSR and them integrating them into the day to day operations of the firm is a big challenge. The MNCs are faced with various problems while managing and implementing CSR (Gminder, and Bieker, 2002). Some of those challenges faced by the MNCs have been stated below: The existing system of management in most of the MNCs has their focus solely on their financial performance and their primary motives are to generate profits out of their business activities. Social responsibility of the MNCs is more directed to the employees of the organisations and the contributions made by them to improve the financial performance of the companies. One such measure taken up by most of the organisations is taking measures against absenteeism of the employees. It has been observed that social responsibility in most of the MNCs is entirely delegated to the Human Resources (HR) department of the companies. The HR departments are again found to perform their activities more operationally rather than strategically. They are more concerned about administering the employee activities within the organisation and are less concerned about the overall development of the human resources of the companies. Social facts are considered to be ‘soft’ and thus it is a difficult task for the MNCs to manage them as compared to the financial ‘hard’ facts. Sustainability of MNC is not just confined to the employee friendly management of HR but requires the company to look at the whole society or the community in which it is operating its business activities. Hence, all these factors suggest that it is a challenging task for MNCs to manage CSR particularly, while integrating them with the company’s management system. According to Hopkins (1999), business organisations not only have commercial responsibilities but are also equally responsible for other non-commercial responsibilities and thus are required to take into consideration this aspect seriously for the wellbeing of the society at large. It implies that stakeholders’ importance and several business ethics concepts should also be considered apart from the interests of the investors, owners or the shareholders of the company. According to Smith (2003), the companies are found to invest on CSR activities on a continuous basis not only because of the fact that it is the right thing to do but it is one of the smartest thing to do as well. According to the stakeholder theory framework, the influence of external environment on the stakeholders is critical towards the success of any business firm (Falck, and Heblich, 2007). The business organisations are an integral part of any society and the firms are required to be responsible to the societies in addition to the profit making and economic role played by them. The MNCs are needed to conduct their business activities in a responsible manner that would be advantageous and beneficial for the society at large (Margolis and Walsh, 2003). The Socialized perspective of business is found to be challenging the market system or economic institution perspective of business that is found in the neoclassical economic traditions. However, there is a continuous debate related to the definitions of CSR and the driving force that acts behind the CSR activities followed by the business organisations. The term CSR is actually referred to the responsibilities of the organisations towards the process of integrating the concerns of the stakeholders in their day to day operational activities. The stakeholders of the companies include employees, suppliers and customers who are their primary stakeholders, and the communities and the environment as well. The business operations performed by the MNCs are faced with demanding challenges related to their managing the CSR activities mainly because of the large number of stakeholders involved in the process and because they are associated with diverse characteristics as well. The CSR expectations from the MNCs are extensive in nature and they have to face increasing pressure in all fronts to behave responsibly in all the global operations they undergo. The diverse and numerous stakeholders of MNCs include the global investors, customers, employees, creditors, as well as various large regulatory bodies like the United Nations and its associated agencies, the OECD, the European Commission, international NGOs, and so on. Moreover the CSR activities followed by MNCs and the expectations raised by their stakeholders vary across different nations and cultures because values differ with cultures. The definitions and perspectives of CSR vary with different cultures found in various societies of the world. Apart from this, it has also been observed that the expectations of the stakeholders, the values, norms, social issues which are dominating in nature and the sociological and institutional requirements also vary with time. Moreover the temporal patterns found in social issues are also found to be context specific. As for example, if we consider the social issues that are existent in the developed nations might have been addressed already, and the preventive and corrective business actions might also have been already institutionalized. At the same time those particular issues that have been already addressed in the developed nations might be still in the emerging stage in the other developing nations of the world. Thus, the social expectations, social acceptance, and social issues are not same and differentiated across the globe, both in terms of time and space. MNCs are required to simultaneously manage all those diversities while operating its business activities in different geographical areas of the world. In addition to this the environment in which the MNCs operate their business activities are said to be interconnected, collective and plural in nature. The MNCs have to face complex legitimacy issues that are encountered mainly because of the diverse economic, political, sociological, and institutional environments in which they operate their business activities worldwide. Moreover, the environmental conditions are discontinuous in nature and marked with uncertainty as well. Hence, all these factors result in precluding the corporate policies followed by MNCs universally because what might be acceptable in one particular region or nation or at a particular time might not be acceptable in other place or at other instance of time (Logsdon, and Wood, 2002). On the other hand, several factors are responsible which have an impact on the global CSR operations followed by MNCs worldwide so as to facilitate the homogenizing CSR activities across the globe so that the universal and fundamental social values are upheld and protected everywhere. A large number of policy regimes at the national level, global level, multilateral or bilateral agreements between the nations, various international guidelines and certain trade treaties like World Trade Organisation (WTO) and North American Free Trade Agreement (NAFTA) are all a part of those homogenizing forces. With the passage of time, different descriptive and normative standards related to the performance levels of CSR activities to be conducted globally have emerged. Some of those examples include the Tripartite Declaration of Principles for MNCs, the Human Rights Principles and Responsibilities for Transnational Corporations, OECD guidelines for MNCs, etc. At the same time several other markets based standards and voluntary initiatives are also emerging like EMAS, ISO, AA1000, GRI, SA, etc. that serve for the purpose of providing basic environmental and social standards for operating business activities across the globe. International Business activities performed by MNCs involve their responsiveness towards the local or regional environments in which they operate their business activities. In particular the marketing and HR activities followed by most MNCs are more of a locally responsive in nature and are therefore differentiated and decentralized. On the other hand, the accounting and finance practices followed by MNCs are found to be more consistent internally and are integrated within the organisation (Rosenzweig, and Nohria, 1994). The integration or differentiation of the practices followed by MNCs across diverse environmental conditions involves the utilisation of a combination of coordination and control mechanisms that are undergone by the companies to facilitate differentiated or integrated practices in seeking efficiency or legitimacy gains. A good example of challenges faced by MNCs while managing their corporate social responsibilities worldwide has been presented in one of the research study conducted by Ling, Kee, and Kueng (2011), which relates to the management of CSR by a multinational corporation named Foxconn, headquartered at Taiwan. Foxconn is engaged in the business of contract manufacturing of Consumer-electronics, Communication and Computer (“3C”). China is regarded to be one of the largest and fastest growing economies of the world. The Chinese economy opened up in the year 1978 and since then a lot of MNCs have established their business operations in the country. However, the biggest challenge for a MNC like Foxconn was to address all the issues related to performing their business activities in a way such that it behaves ethically and helps in improving the quality of life led by the workforce of the company and the society at large. The employee management and the management style of Foxconn were studied and the findings suggested that the company managed its workforce using the accommodative strategy and its management style was reactive in nature. However utilising these strategies Foxconn was unable to manage its CSR activities in an effective manner because evidences of a number of suicides by the workers of the company were observed. This suggests the importance of CSR to MNCs and how they are facing challenges to manage their CSR activities. Post et al., (2002) utilized the stakeholder perspective of CSR to examine the stakeholder relationships maintained by three of the MNCs. Those MNCs were US based companies and operated their business activities in China. Post et al. studied the different types of business activities that were followed by those three MNCs across several stakeholder groups. CSR activities are found to be both contextually determined and value based. This is so because on one side the CSR concepts are found to have a normative basis and on the other side CSR meanings, definitions, and expectations are derived from the context within which it is found to occur. This very particular nature of CSR makes it difficult for the MNCs to manage CSR globally. In order to achieve consistency in the performance of CSR across business operations performed by the MNCs globally, they require transferring not only the CSR practice but also it’s underlying meaning and value across borders. The MNCs are faced with the issue of varied expectations from the diverse group of stakeholders as well as the CSR requirements at the local levels. This results in MNCs requiring practicing differentiated CSR at the local or regional levels where they operate their business activities as a response to the local context. This is how competing and demanding challenges are faced by MNCs while managing CSR globally. Conclusion The findings and analysis of this study indicates that CSR is a critical issue for the multinational organisations worldwide. Apart from the profit making motives of the companies, they are required to be responsible towards the society as well. Maintaining a good relationship with the stakeholders is essential for the success of any organisation. However, the MNCs are found to face demanding challenges in relation to their managing the CSR activities worldwide. It is mainly due to the diverse group of stakeholders associated with the MNCs having varied expectations from the organisations. Apart from this the companies are required to comply with the local regulatory norms and standards as well. Hence, slowly and gradually it is becoming a daunting task for the MNCs to manage its CSR operations globally and some of the MNCs are found to have developed strategies to align its CSR activities with its profit making motives as well. References Barlett, C. A., Doz, Y. 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