Corporate Social Responsibility - Essay Example

Corporate Social Responsibility (CSR) is a concept where companies integrate social and environmental concern into their business operations and interactions with their stakeholders on a voluntary basis (Perrini, 2007). According to Idowu and Towler (2004) CSR was first recognized as the rights of the employees but subsequently it was changed. The European Commission defined CSR as a “concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment’’ (Dijken, 2007). Opinions differ and there is no consensus on the definition but ultimately the company is responsible for its wider impact on the society. CSR initiatives should be voluntary and companies should not restrict their activities just to comply with the law. Of late companies have become conscious of their responsibility towards the society. They consider CSR as adding value to their company; CSR helps them to reap richer dividends. Organizations set high objectives like social responsibility, customer-centered approach and environmental protection and thus engage in different activities. As far as entrepreneurs are concerned, Seelos and Mair (2004) contend that they create social value as their primary product and generate economic profit more as a byproduct. The entrepreneurs across the world have their otherwise pattern of discharging their responsibility towards the society. Small firms are the driving force of CSR (The Briefing, 2007). Three-quarters of firms with turnover less than 1m pounds engaged in social and environmental causes. They extend support in different ways ranging from using local products and suppliers to sponsoring community events and donating employee time. They also raise funds for local charities. Small businesses are usually family owned and they demonstrate a unique perspective of socially responsive business behavior. The entrepreneurial initiatives are challenging the status quo and think about what is possible (Seelos & Mair, 2004). They come up new solutions starting from the local needs rather than centralized assumptions of large corporations about what needs to be done. These are the social entrepreneurs who have found new ways to serve the society. They locate oppurtunities to improve systems, create solutions and invent new approaches. Social entrepreneurs find it challenging to formulate unique strategies with limited resources to create social value. They thus have to be exceptionally skilled at mustering and mobilizing resources – human, financial and political. In social entrepreneurship the owner dedicates the business itself to the social causes and change (Uhlaner et al, 2004). They may develop environmentally protective products, or employ disadvantaged youth or provide community health services. Female managers in small firms share a set of values that balance concern for profit and for the community. Local owners feel a greater bond with the community than those who live outside of it. Social entrepreneurs exist in huge numbers in Latin America, India and Bangladesh (Seelos & Mair, 2004). They provide vital public infrastructure and services. They also engage in diverse activities like poultry farming, land and housing, banking and education. In the US social entrepreneurship comprises of activities conducted by charities and trusts while in the UK it is associated with bottom-up community based programs which help in assisting the homeless and alleviating poverty. In Netherlands the social sector has mobilized the private sector and has been able to establish efficient partnerships. Family businesses focus on organizational vision, control mechanisms, creation of resources, and firm capabilities (Niehm, Swinney & Miller, 2008). The self-interest model suggests that socially responsible actions by a community-based firm will receive support from loyal customers. This leads to the creation of social capital as the business and the communities develop trust, commitment, reciprocity, and a sense of shared vision. Family businesses give back to the community through responsiveness to the community needs. Size does not matter when it comes to giving and getting support in CSR strategies. The needs of the humans are ever increasing and at the same time the public service does not reach the poor. Even if it does reach, the service provision is inefficient and of poor quality (Seelos & Mair, 2004). The entrepreneurs across the globe have been taking initiatives to defy all the hurdles in servicing the poor. The entrepreneurs find and employ novel resources and a new phenomenon known as social entrepreneurship ha s emerged. Drug companies face logistic and economic barriers in developing drugs for the developing countries. To overcome these barriers, a research scientist from the US founded OneWorld Health as a non-profit pharmaceutical company. This company aims to deliver medicines to the most in need in the developing countries. It challenges the traditional way of thinking in terms of profitability and attempts to redesign the entire value chain of drug delivery. OneWorld Health has been able to create a new set of partnerships with different organization and creates value for all involved. Scientists and volunteers donate time, effort and knowledge; biotechnology companies find an appealing outlet for intellectual property. Thus, the entrepreneur has been successfully utilizing the scientific and manufacturing capability of the developed world to deliver affordable, effective and appropriate medicines to where it is needed most. This same concept can be found in Belgium where there is a group of smaller companies for whom financial profit is only a medium to create social, human and ecological value (Cosore, 2002). They are called "Human and Environmentally Friendly Companies" and they have innovators and pioneers in CSR. Germany and Italy too have a long tradition of being socially responsible. They work alongside with the politicians, scientists and representatives of charitable associations. They even concentrate in improving the lives of the employees in the communities where the companies operate. In Portugal, the political changes in 1974 and the subsequent inclusion in the European Union gave rise to the consciousness of CSR for the citizens. Small enterprises carry on a lot of philanthropic activities but do not publicize about it or they may not even give it the label of CSR. More than 50% of the small companies in Belgium Germany, Italy and Portugal are engaged in some form of CSR. According to Dixon and Clifford (2007) global sustainability requires creative destruction and innovative new comers are required to create new lenses on the global market. This is an area which large corporations may be reluctant to take up and where entrepreneurs find excellent business opportunities. Such entrepreneurs are known as ecopreneurs and an ecopreneurial organization is one that is a “system-transforming, socially committed . . . break-through venture”. The ecopreneurs concentrate on environmental, economic and social issues. Traditional entrepreneurs generate social value as a by-product of economic value whereas for social entrepreneurs and ecopreneurs the reverse is true. Ecopreneurs have to change their business strategies as they evolve and undergo different stages in business. In the beginning, challenges are dealt with high level of energy and enthusiasm; they are also cash-rich or have the ability to borrow funds. As the firm grows they need to hire quality staff and they need to have a system in place to sustain growth. To secure funds ecopreneurs partner with corporations which is beneficial to both – the entrepreneur receives funds while the corporations benefits from the entrepreneur’s ability to spot oppurtunities. Ecopreneurs face the constant challenge between running a viable business and straying true to ideals. Dixon and Clifford conducted a study of Green-Work Enterprises which is a unique business model in the UK with social concerns being its primary objective. They are driven by commitment and enthusiasm and they have proved that waste is an opportunity rather than a problem. The entrepreneur was aware of a latent market for reused and recycled office furniture. He made a breakthrough in this line and designed a new business model. Entrepreneurs usually have to face the challenge of how to build credibility because someone has to take an initiative to buy their products, being and ecopreneurs, one major bank took the bold step of procuring Green-Works furniture for resale. This also provided the company with a major PR opportunity. The company lacked major resources like warehousing, staff and logistics. Because of the networking of the entrepreneur, he was aware of a charity that was looking for oppurtunities to invest in the job creation with a low skill base. Thus a series of partnerships led to the creation of a viable business model. The company gradually entered the ‘growth’ phase, and since the entrepreneur was ‘pushed’ by his mission, while being ‘pulled’ by the requirement to extend the organization’s reach, he could set up a viable business. Although the company faced initial cash flow problems, they could become economically viable because they could reinvent the social enterprise pricing model. Such social entrepreneurs also receive unpaid work from volunteers and board members including managerial supervision. Green Works has also partnered with a commercial office relocation firm which has given it sustainable competitive advantage. In this new model, the company has helped the nation in meeting the challenge of landfill for waste. By recycling and supplying furniture, it becomes cost effective to other companies. The social entrepreneurs learn new managerial skills due to effective collaboration with its partners. It is able to create job opportunities for low skills base employees. Thus such entrepreneurial ventures in the field of CSr have manifold benefits for the society. Sekem, an Egyptian firm, combines economic, social and cultural value creation and has made an impact on the Egyptian society (Seelos & Mair, 2004). This has grown into multi-business firm and the profits from these firms are used to fund education for children as well as adults and also a medical center. They have also opened a university for holistic education. All these institutions cater to the basic needs of the people. Apart from these, they have filled an institutional void in Egypt as such structures have helped people to develop trust, to overcome poverty and have better control over their lives. In the field of environmental protection, the organization has developed a new system of plant protection in cotton, which has led to a ban on crop dusting through out Egypt. This has reduced the use of pesticides and the organization has been rewarded for integrating commercial success with social and cultural development. Bangladesh too has demonstrated such challenges that entrepreneurs have taken in the area of CSR. Since the commercial banks would lend money only to qualified people, an entrepreneur set up Grameen Bank to provide credit to those who do not qualify as customers for established banks. They do not take any collateral and they have three points of differentiation from other banks – they give priority to designing the system so that loans are paid back on schedule; even the poorest and the landless villagers are eligible and thirdly, they make an effort lend money primarily to women who are socially and economically impoverished. This scheme ash inspired the global micro-credit environment and has spread to 65 developing countries covering 17 million borrowers (Seelos & Mair, 2004). International organizations partner with social entrepreneurs in an effort to discharge CSR. The World Bank has started the Development Marketplace where they link social entrepreneurs with poverty-fighting ideas to partner with resources to help implement their vision (Seelos & Mair, 2004). They provide seed money to small-scale innovative development projects across several nations. This becomes essential because the social entrepreneurs depend on funding assistance at least in the initial stages until their customers make a contribution to the value created. Entrepreneurs are much better than corporations at tapping oppurtunities and building up grassroots efforts from very limited capital. If they are assisted with corporate funds, the social entrepreneurs can tap into the additional resource pool of corporate knowledge, managerial skills and capabilities to implement their CSR projects. Together they develop new markets by transforming people with basic needs into customers and they are able to build trust necessary to acquire a license to operate. Uhlaner et al (2004) found a variety of motives for supporting particular groups or causes including family and religious values, childhood experiences of the owner or commitment to a particular industry that has been favorable to a business. A study into the way that Dutch and Belgian small businesses relate with the environment and the society revealed that such firms are environmentally consciousness because of the reputation that it would bring to the firm. The Dutch firms support the sports club either in-kind or cash donation. Some firms even sponsor a team and provide uniform with the company’s logo printed on it. Some even do it with less self-serving motives like a desire to help the community and boost the community spirit. These firms feel responsible for the stakeholders that are closely related to the business like employees, clients and suppliers. The firms view of these stakeholders as their extended family. These firms did not undertake projects like those undertaken by social entrepreneurs but were restricted to small acts of kindness. They also made cash donations to the Church and mostly the motivation was that the grandfather had been the founder or was involved in the Church earlier. As far as the physical environment is concerned, they only did so to abide by the ethical and legal standards. In these firms the local culture played a vital role in determining their attitude towards the different stakeholders. Thus there are two types of entrepreneurs who offer service to the society. There is still one segment that does small philanthropic activities like cash donations to the local charities of the local Church. There is another segment of entrepreneurs globally that are entering into new business segments and taking up challenges in fields not heard of before. These are the social entrepreneurs that can now be found in several nations whose primary mission is not economic benefits but to give to the society. Then there are the ecopreneurs that concentrate on the environmental protection. They are usually short of initial capital but several institutions globally you funding such ventures. Entrepreneurs cater to environmental issues, job oppurtunities, social causes, help to alleviate poverty, cater to the basic human needs and overall attempt to upgrade the living conditions on the poorer sections of the society. The most interesting part is that they, in the process acquire managerial skills and corporate knowledge as several corporations are wiling to offer these without any charges. They also receive voluntary service from board members. Culture usually does not affect the entrepreneurial ventures although each nation takes up projects that pertain to their local culture. While these firm start with the objective of social benefits, gradually they are able to make these beneficiaries their customers. This itself demonstrates that the living conditions of people have improved. The social entrepreneurs are able to identify oppurtunities which large corporations are unable to. Together they bring about immense changes and benefits for the society they live. They usually cater to the local communities, work for the communities, with the communities and for the communities. Each of the social entrepreneurs goes through different stages and as they grow or evolve, their strategies change. They are able to draw upon support from larger corporations and institutions. Refercnces: Cosore, 2002, Historical contexts and development of CSR, Reviewed online 30 October 2008, from Dijken, F 2007, Corporate social responsibility: market regulation and the evidence, Managerial Law, vol. 49, no. 4, pp. 141-184. Dixon, S E A & Clifford, A 2007, Ecopreneurship – a new approach to managing the triple bottom line, Journal of Organizational Change Management, vol. 20, no. 3, pp. 326-345. Idowu, S O & Towler, B A 2004, A comparative study of the contents of corporate social responsibility reports of UK companies, Management of Environmental Quality: An International Journal, vol. 15, no. 4, pp. 420-437. Niehm, L S Swinney, J & Miller, N J 2008, Community social responsibility and its consequences for family business performance , Journal of Small Business Management, vol. 46, no..3, pp. 331-350. Perrini, F 2007, Encouraging CSR in Italy: The enabling role of government in mandating, motivating, and supporting responsible business practices, Corporate Social Responsibility initiative, Working Paper no 35. Cambridge, MA. Seelos, C & Mair, J 2004, Entrepreneurs in service of the poor models for business contributions to sustainable development, Reviewed online 30 October 2008, from The Briefing, 2007, Infozone, Caterer and Hotel Keeper, vol. 69, August 2007. Business & Management Journals. Gale. Ashridge Business School - Custom. 30 Oct. 2008 Ulhaner, M L et al 2004, Family business and corporate social responsibility in a sample of Dutch firms, Journal of Small Business and Enterprise Development, vol. 11, no. 2, pp. 186–194. Read More