Perspectives on Corporate Social Responsibility - Term Paper Example

CORPORATE SOCIAL RESPONSIBILITY Introduction Corporate social responsibility (CSR) encompasses the relationship between corporations or other large organizations and the societies with which they interact. CSR also includes all the responsibilities which are a part of these relationships, for both the organizations and the societies. All stakeholders and constituent groups that have an interest in the organization's operations are included in CSR's wide and multiple-level definition of society. Corporate social responsibility can be defined as "the broad concept that businesses are more than just profit-seeking entities and therefore also have an obligation to benefit society" (Werther & Chandler, 2006: 6-7). For long-term benefits to the organization, CSR should be made a part of the firm's strategic perspective and operations. This paper proposes to discuss Corporate Social Responsibility (CSR), taking into account various factors including consumer rights, the significance of ethical consumerism, fair trade consumerism, ecological sustainability, and the cause commerce approach which promote the implementation of CSR. DISCUSSION It has been recognized that the activities of an organization influence the external environment, hence it is important that the organization should be accountable to not only its stakeholders, but also to a wider community. This concept initially took root in the 1970s, and grew as a concern for the company as a member of society, with a wider view of company performance including its social performance (Crowther & Rayman-Bacchus, 2004: 3). Though community accountability was acknowledged as essential, the focus of big business on financial results was observed to be an impediment to social responsiveness, especially in the early years of the accountability concept taking shape. There is now an increasing move towards accountability of companies towards all participants, and this recent phenomenon of corporate social responsibility is becoming the norm with all organizations (McDonald & Puxty, 1979: 53). Corporate social responsibility (CSR) refers to a company including in its decision making and operations, ethical values, employee relations, compliance with legal requirements, transparency, and overall respect for the communities in which they operate. CSR is more than occassional community service action, it is a corporate philosophy that is the driving force behind strategic decision making, selection of partners or collaborators, hiring practices and ultimately brand development (Werther & Chandler, 2006: 8). CSR includes how businesses and organizations manage the impact that they have on the environment and society: particularly how organizations interact with their employees, customers, suppliers, and the communities in which they operate. Also significant is the extent to which they attempt to protect the environment, and solve new corporate problems such as the exploitation of child labour which may be occurring thousands of miles away as part of the corporate activity (Crowther & Green, 2004: 174). "Corporate social responsibility encompasses the range of economic, legal, ethical and discretionary actions that affect the economic performance of the firm" (Werther & Chandler, 2006: 10). This includes legal or regulatory requirements faced in day-to-day operations. Being socially responsible and adhering to the law is an important aspect of any ethical organization. However, legal compliance is only a basic condition of CSR; strategic CSR gives priority to the ethical and discretionary concerns that are less precisely defined and for which there is often no clear or collective consensus from the part of society. Corporate social contract is related to the social responsibility that companies have towards the consumers and to the society at large. Thomas Hobbes' concept of social contract regards corporate activity as morally good if it maximises human welfare, in which collective welfare would be considered above individual welfare (King, 1993: 535). Every exchange of goods is an agreement between buyer and seller, and all transactions are based on the law of contract. An area of law underlies and defines the rights of both consumers as well as suppliers (Bryan, 2004: 9). Consumer rights is an important issue in today's business world. Marketing done by most companies is consumer-oriented, and aims to meet customer's expectations. Besides providing quality goods, it is in the best interests of corporations to be socially responsible, and conduct business with an awareness of consumers' ethical perceptions and the environmental and long-term consequences of misusing natural resources and manpower. Consumer rights and and the rise in ethical consumerism has impacted all aspects of marketing. Manufacturers and suppliers leave no stone unturned in order to ensure customer satisfaction, because of increasing competition for gaining customer loyalty. The Reasons for Implementing Corporate Social Responsibility: The main reason for CSR in corporate operations is globalization. Globalization includes not only closer ties between nations, but also the processes of increasing integration of world markets for capital, goods and services. This along with greater communication and information sharing even among far-flung nations due to growth in technology, leads to the creation of a global civil society. With globalization, great changes have occurred in the world, including in the business climate and attitudes. The disintegration of the communist system in the 1980s brought new challenges to businesses worldwide. In today's global economy, the interests of all stakeholders need to be taken into consideration. Society now looks upon business to find solutions to the complex phenomenon resulting from altered internal and external power relations between and within companies, and in the community as a whole. (Nourick, 2001: 14). Besides being a vehicle for economic growth, business fosters social cohesion both alone and in partnership with the government. For helping firms become more socially responsible by confronting the challenges posed by society, government can design incentives and provide the infrastructure that businesses need to operate and grow (Nourick, 2001: 145). Corporate social responsibility is high priority in the policy agenda of the Organization for European Cooperation and Development (OECD) governments. CSR can have different interpretations for various groups, sectors and stakeholders. Organizations in a global environment often play a more important role beyond the creation of employment and wealth. CSR is business' contribution to sustainable development. As a result, it is essential that corporate operations should ensure not only "returns to shareholders, wages to employees and products and services to consumers", but also be responsible for societal and environmental issues. CSR is a holistic concept, a part of business strategy and must provide mutual benefits to society as a whole as well as business. Business has an increasing role in social and economic development, and corporations are faced with three bottomlines to fulfill: economic growth, social and environmental responsibility. Thus, business decisions should take into account the dignity and human rights of individuals and communities (Nourick, 2001: 13). The Influences Which Impact Corporate Social Responsibility: There are a number of influences on any social responsibility decisions. These can be categorized as government and regulatory influences, ethical influences, societal influences, and competitive influences (Stahl & Grigsby, 1997: 105). Governmental influences: In Europe each country has its own government with varying degrees of regulation; the European Union in Brussels disseminates series of regulations for the entire EU. Managers of organizations operating globally need to know the differing regulations in the host countries (Stahl & Grigsby, 1997: 105). Ethical influences: A manager's ethical standards are increasingly being evaluated as part of the manager's performance, and form the "internal self-regulating force for corporate social responsibility decisions" (Stahl & Grigsby, 1997: 105). For a manager to apply his or her own personal ethical standards to corporate decisions can be a complicated process. Societal influences: There are three different ways in which society exercises its influence on a firm's corporate responsibility. The most powerful way is through market forces. The collective buying decisions of individual customers in the market place communicate society's preferences. If members of the community opt for safe automobiles rather than unsafe automobiles, then this is society's vote on this corporate social responsibility issue. The second way is through the electoral process, in which society expresses its preferences by voting for particular candidates who have certain views on social responsibility issues. The third method by which society acts is through influence groups, by lobbying public officials, informing the public on certain issues, and organizing boycotts (Stahl & Grigsby, 1997: 105). Competitive influences: The competitive influences exerted by society encompass a variety of choices that the members of the community have at their disposal, by which they can choose the products from one organization over those of another. This helps organizations to identify the social responsibility decisions that would be most valuable (Stahl & Grigsby, 1997: 106). The two sides of the debate that underline corporate social responsibility are: "greater societal intervention and government control of corporate action" versus "greater corporate autonomy and the free market economic model" (Crowther & Rayman-Bacchus, 2004: 13). The global spread of capitalism is given as the evidence for economic growth leading to social well-being by the latter group, while the former find greater accountability and reporting to be in favour of their view, suspect ecological and social cheating to some extent by the latter corporate team, and also object to a free market economy having a positive influence on society. Companies recognize that corporate responsibility brings reputational risks and opportunities, hence it is an ongoing business priority for these companies to align corporate behaviour with stakeholder expectations. In the practice of corporate responsibility, however, communication is an important factor that remains a missing link (Dawkins, 2005: 108). Though many companies are practising responsible corporate behaviour, they are not getting full credit for their efforts, because of lack of communication of information to a range of opinion leader and mass stakeholder audiences (Dawkins, 2005: 108). Further, certain communication challenges are also posed by the varied information requirements of different stakeholder groups. Dawkins (2005: 108) states that a clear strategy is essential for effective communication of corporate responsibility in which both opportunities and risks to the brand are taken into account, and which tailors messages to different stakeholder groups. Further, research evidence suggests that the company's reputation for responsibility among its key stakeholders can be enhanced by improved internal communication. Also, research conducted by Maignan & Ferrell (2004: 3), indicates that actions towards corporate responsibility taken by the company conform to both organizational as well as stakeholder norms. Managerial proceses are required to monitor, meet and even exceed stakeholder norms, and implementing CSR, is capable of obtaining increased stakeholder support. There are some important factors that promote corporate social responsibility: Ethical Consumerism Consumers may opt for one product over another because of political, religious, social, spiritual, environmental or other motives, and may differ in opinion from one another. One common factor among ethical consumers is that they are concerned about the "effects that a purchasing choice has not only on themselves, but also on the external world around them" (Harrison et al, 2005: 2). Choosing organic foods because of a concern that pesticide use may have a detrimental effect on wildlife and the environment where the produce is farmed, rather than with a primary concern for the consumer's own health, is considered as ethical consumption. However, it is observed that consumers may be motivated by a combination of several factors at the same time. Effect of Increasing Ethical Consumerism on Corporate Social Responsibility It is observed that the U.K. public overwhelmingly supports the concept of ethical purchasing and socially responsible corporate actions. The number of people who considered it "very important" that the company shows a high degree of social responsibility has increased from 28 % in 1998 to 44 % in 2002. Further, 53 % of United Kingdom consumers have considered changing their brands due to issues of corporate social responsibility. 19 % have actually purchased on the basis of a company's ethical reputation. According to the 2005 Ethical Consumerism Report 58 % of U.K. consumers have avoided purchasing a product because of the company's reputation. Additionally, 70 % of survey respondents were found to consider ethical issues in deciding where to shop (NEF, 2007: 10). Companies becoming more ethical helps them to increase their profits and also have a sense of righteousness in their position and the part they play in business. Putting people first, with concern for ecological and environmental factors as well as sustainability for future generations helps businesses to develop due to consumers' support. (Doonar, 2005: 27). Fair Trade Consumerism: "Fair traded products are those purchased under equitable trading agreements, involving cooperative rather than competitive trading principles, ensuring a fair price and fair working conditions for the producers and suppliers" (Shaw & Shiu, 2002: 286). Ensuring fair prices and a regular income for growers and producers is the underlying principle behind the concept of fair trade. The increasing awareness of Third World issues on a global scale, shift towards concern for its sustainable development, growing availability of information about fair trade principles, greater media coverage and expansion in the number of fairly traded products, are the main factors behind increasing spread of fair trade values. Fair trade consumerism gives rise to competitive advantage for socially and ethically aware organizations as it is a traditional aspect of green consumerism. It is a marketing concept in the initial stages of development in the United Kingdom (Strong, 1997: 32). Sustainable Development: Research reveals that there is increased awareness and caring among consumers, greater interest in understanding the commercial motives of manufacturers, and consumer interest encompasses several issues which go beyond environmental and ecological issues which directly affect them. Consumer purchase decision making is observed to have increasing concern towards the fair trade factor of trading relationships with the Third World (Strong, 1997: 32). Achieving sustainable development through societal and environmental concern is the main goal. The concept defines economic development in which environmental quality and the conservation of nature's assets are of prime importance. Earlier, sustainability took into account only the wise use of resources for the sake of future generations. The concept evolved to include a focus on nature preservation, and an "intra-generational justification to the distribution of goods". In recent times the range of issues related to sustainability has increased, thus resulting in a wide concept (Gunning & Holm, 2005: 129). When including sustainability as an important part of company ethos, it impacts planning and policy formulation with clear choices. To sustain the environment, the human factor of production, manufacture and use must be included along with environmental and ecological concerns such as global warming, acid rain deforestation, ozone depletion and other occurrences. Consumerism is the main factor which contributes to the global concerns about sustainability. The decision making power of every consumer impacts long-term sustainability; and ethical consumerism is facilitated by the wide availability of environmentally friendly products (Strong, 1997: 33). The Importance of Cause Commerce Approach in Corporate Social Responsibility: Consumers expect corporations to practice social responsibility in the form of high level of ethical behaviour, community concern and customer care (Densen, 2007: 89). The mission of cause commerce is to improve the prosperity of businesses and also to improve the conditions in the world in all aspects. The approach is based on the concept that if the organization helps their customers to understand more fully particular issues that matter to them, allay the fears, apprehension and cynicism of consumers towards products and companies and helps them to deal with the issues, the consumers will be loyal to the organization and reward it with their business (Densen, 2007: 89). Those companies which communicate clearly all the information regarding their organization and its goods, will be winners in the long run as compared to others which deal ambiguously with their consumers. As increasing numbers of consumers begin to think ethically, large companies will be under greater pressure to incorporate social responsibility and ethics (Doonar, 2005: 27). Ethical consumerism and other factors involved in the drive for corporate social responsibility form a social movement. Institutions concerned with ethical or socially responsible investment such as the Social Investment Forums and Friends of the Earth in the U.K., lobby the government to formulate new regulatory requirements for companies to reveal the social and environmental impacts of their business activities (Harrison et al, 2005: 59). Conclusion This paper has highlighted Corporate Social Responsibility (CSR), which is a new concept being implemented by companies today. Some important reasons for making CSR an important part of company policy have been discussed. The significance of the practice of ethical consumerism, fair trade consumerism, cause commerce, sustainable development; and their impact on increasing corporate social responsibility, are seen. Ethical consumerism and fair trade practices ares seen to be the driving force behind the drive for accountability on the part of businesses; and are gathering momentum in the form of a social movement. The ecological, environmental, human, animal, and social issues raised by unchecked industry and business activities need to be corrected by taking appropriate and adequate measures. These will help to improve the quality of life of contemporary society and to preserve natural resources for future generations. Providing for the needs of the least advantaged in society is essential for achieving a progressive world. Recent research has revealed that U.K. consumers are internationally among the most conscientious in their purchasing habits (NEF, 2007: 10). Thus, companies are increasingly forced to formulate policies and adopt the correct strategies to implement actions that are socially responsible. These are apparent in the changes in companies' advertising: and projection of themselves as socially responsible organizations, their holistic view of carrying out business activities and the compensations offered to employees to avoid the exploitation of labour. 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