Corporate Social Responsibility Practices - Essay Example

?Corporate Social Responsibility Practices Introduction The main objective of an organisation is maximisation of shareholder’s wealth and profit. However, the focus of the management of the company is towards fulfilment of customer expectations and creation of shareholders value. The adverse effects of business activities on the environment and community have led to the development of corporate social responsibility (CSR). CSR has become a means of sustainability for most of the organisations. This has led to the development of the entire organisation. The main objective of the study would be to evaluate the concepts of CSR and its impact on the society and community. The concept of CSR assists the management in revenue generation in an ethical way and also by contributing significantly to the environment and society. The study will also highlight the importance of CSR in the contemporary corporate practices. The author of the study has conducted research on the CSR practices by Australian corporate organisations and compared it with the sustainable practices performed by organisations of the developing nations. The study will try to discuss the relationship between the corporate and sustainability practices, which have led to the betterment of the society and environment. Thus, various facets of CSR will be unfolded and understood to provide a comprehensive view to the reader of the study. Corporate Social Responsibility Relevance, Limitations and Its Implications It is observed that intense competition plays a crucial role in creation of sustainable development practices and enhancement of the quality of products and services (Aras, Aybars and Kutlu, 2010). Corporate responsibility is regarded as the degree to which an organisation complies with the legal guidelines and looks after the welfare of the society. The contemporary business practices show significant levels of understanding between the responsible and good corporate practices. Stakeholders and shareholders have understood the value of CSR and are focused on integrating business activities with huge societal concerns that can lead to good management practices. CSR is regarded as a technique which helps the organisation in evaluation of the business activities and its impact on the society and environment through ethical and transparent decision making (Nicolau, 2008). The World Business Council for Sustainable Development states that the CSR approach is a ‘business contribution to the sustainable economic development’ (WBSCD, 2013). CSR includes activities such as health and safety, corporate governance and ethics, environmental stewardship, human rights and sustainable development (Hohnen and Potts, 2007). It focuses on aspects such as community and societal involvement, development and investment, corporate philanthropy, employee volunteering, customer satisfaction, anti-bribery, anti-corruption measures and adherence to the principles of fair competition (Hohnen and Potts, 2007). Business activities play a pivotal role in wealth and job creation, but the central management concern of CSR would be efficient utilisation of natural capital (Halal, 2000). CSR activities help in efficient utilisation of human resources and capital and increasing the employee retention rate. The brand image of the company is enhanced because of the CSR activities performed by the organisation. Companies which recycle their products can effectively lower their expenditure. Customers are attracted towards companies which perform CSR activities efficiently. Whether or not a company implements CSR tools and techniques, the way it performs its business activities signifies clear intentions of the company. According to Hopkins (1999 cited in Sen and Bhattacharya, 2001), business organisations need to perform commercial and non-commercial responsibilities with an equal amount of importance. The non-commercial responsibilities undertaken by the company should include the well-being of the society, community, environment, government etc. The stakeholder’s importance and various other business concepts should be considered equally essential apart from the shareholders, investors and owners (Galbreath, 2010). The Triple Bottom Line approach proposed by John Elkington in 1997 in his book Cannibals with Forks: The Triple Bottom Line of 21st Century Business, was later adopted by the United Nations in 1987 (Slaper and Hall, 2011). The concept explains the utility of social responsibility for economic development practitioners, policy makers and businesspeople. CSR is becoming increasingly important to justify the business activities and practices to the society in general and to the stakeholders in particular. The organisations are becoming are highly active in engaging themselves into various kinds of social activities to act as a dutiful and responsible citizen. It has been observed that 90 percent of Fortune 500 companies are engaged into CSR actions. According to Smith (1999 cited in Lee and Newell, 2012), an increase in budget for social activities helps in enhancement of the business activities. The management of the organisation employs CSR as an approach which is instrumental in developing plans that satisfy shareholders and stakeholder’s demands. CSR is also directly linked to the financial, social, and environmental performance of the company. Significant investment in innovative activities has helped the companies in yielding profitability (Newell, 2005). Accountability is referred to the behaviour of the individual under a social structure or situation. The concept separates the responsibility from accountability. The implementation of certain tools will help in understanding the difference between accountability and CSR (Chen, 2011). CSR tools implemented effectively will involve meeting the needs of the stakeholders and shareholders against some forms of ethical basis. The key principles of CSR are to treat all employees equally and fairly, operate ethically and with integrity, to respect basic human rights, sustain environment for future generations etc (Moir, 2001). There is very little information on how corporate decision makers can reconcile differences between the public and private interest goals. There is no accurate understanding of the limitations of the CSR concept as a means of aligning the business and personal goals. There are various potential difficulties in utilising the company documents and in construction of an in-depth approach and business activities. Corporate responsibility is just a relative approach and has an objective basis, which is known as unsustainable development. It is considered as a radical approach and various other CSR approaches help in development of continuums which focus on integration of business operations with societal activities. Organisations have developed several measures for dealing with the strategic and societal needs, environmental and community needs which have led to the incurring of a huge amount of expenditure of the organisations. Small and medium enterprises do not have the necessary resources in developing or implementing the CSR tools and approaches. When a company wants to improve its social performance, it plunges into social activities such as providing charitable donations, organising charitable associations, sponsoring activities etc. Apart from laying emphasis on specific actions, the company needs to broadly conceptualise the managerial obligations and take actions accordingly. The actions taken should have the ability to enhance the performance of the company. The domain of the CSR approach is wide and lays emphasis on community support, diversity, innovation, employee security, job security, environment and job involvement. The CSR approach has a definite impact on the product evaluation and consumption pattern. This is because the relationship between the consumers and business companies are greatly impacted by tangible and acquirable aspects of the company. For example, when the company performs product evaluation and manufactures products as per the needs and wants of the consumer, then it is fulfilling the consumer needs by delivering an exemplary social performance. This has a moderating effect on the customers because the evaluative judgments of the products have often articulated the judgmental standards or reference points implicit in the context in which judgments are made. Corporate decisions regarding product development require sufficient implication with the help of the CSR approach. For example, the companies are presently developing products which are environment friendly and also cater to the needs and wants of the customers. Comparison of CSR approaches in Australia and India The CSR approach has become an important issue in Australian and New Zealand corporate practices. This tool gains much importance in Australia because of its vitality in maintaining an equal balance between financial and social performance to actively manage the activities including charitable donations. As per the survey conducted by the ANZ HR professionals, it was observed that less than five out of ten companies (48 percent) actively participated in activities which laid emphasis on the improvement in the environment and the society (Manpower, 2009). Figure 1: CSR Participation (Source: Manpower, 2009) Company policies pertaining to the CSR approach require the active participation in corporate social responsibility programmes and design of selective activities and frameworks. Companies which do not follow the CSR approach may feel the mounting pressure from external communities, consumers and government. As per the results of the ANZ survey, it was found out that CSR contributes wholly to the financial performance activities of the company and has been claimed as ‘the enlightened shareholder approach’ (Manpower, 2009). This approach signifies that corporate decision makers usually consider a range of matters right from environmental to social issues while making business decisions which maximise long and short term financial gains. The Australian companies which did not perform social activities and did not contribute significantly to the CSR approach from their budget have witnessed a downfall in the financial performance. The current economic conditions in Australia have led to the creation of an environment in which the CSR approach plays a significant role and has become equally challenging. The CSR approach is regarded as an investment tool and not as an expenditure tool. The company develops its social strategy and is instrumental in driving the business activity contributing to the financial and social success of the company. As per the results of the survey conducted by the ANZ professionals, it was found out that the sustainability practices of the corporate organisations of Australia complement well with saving money and improving the environment. For example, the energy costs represent a large proportion of the company’s expenditure and the energy efficient measures. It was observed that sustainable development requires an adequate amount of initial investment, which has the potentiality of yielding long term benefits if they are well processed and have become a substantial part of the company’s culture. Companies have an understanding that in implementation of the environmental, social and economic practices they will be in a better position to survive the downturn of the business. The sustainable development practices have provided opportunity to the employees in making a difference in their communities. However, the emergence of social investment and reporting has become a fundamental topic in developing countries such as Nigeria, China, and India. It has become an important tool of understanding the various facets of social responsibility (Tapang and Bessong, 2012). In Nigeria it is considered instrumental in reducing the environmental hazards and wastes and means of preservation of the environment and society. Although profit maximisation is one of the main objectives in developed economies such as Nigeria, it is understood that by maintaining environmental protection measures, the company does not reduce its chances of earning profits. Shell Nigeria has actively participated in activities which have been a significant contributor to the economic development of Nigeria (Burger, 2011). The company has been successful in bringing light in various cities and towns of Nigeria. The company has been successful in educating, training and providing health opportunities to common people (Burger, 2011). Although Shell is one of a few companies to follow the sustainable development practice stringently, it was observed that the companies generally have started following the concepts of stakeholder theory, agency theory and the concepts of social responsibility accounting. The annual report is considered extremely important in dissemination of environmental and social responsibility information. Thus, we can observe that the CSR approach is emerging in developing economies and in serving the purpose of a guide to attain financial and social objectives. However, on the other hand, companies in developed nations such as Australia are in the stage of preparing advanced CSR tools for the benefits and betterment of society. Recommendation & Conclusion There are various forms of CSR activities which help in enhancing the brand image of the company. A company’s ability to develop alternative solutions for economic and social problems will help in evaluating the impact of the business activities on the society. The costs related to the social investment activities are borne by common people because of the increased product prices and increasing customer satisfaction. Firstly, the company can implement a CSR framework which includes the integration of economic, social and environmental performance. A CSR assessment needs to be conducted by developing leadership teams, identifying legal requirements and engaging stakeholders in key corporate decisions. Secondly, an external framework should be developed for the managers, such as a proper code of conduct which would help the managers to guide the employees of the organisation and improve their efficiency. Thirdly, the company can apply the stakeholder approach which applies to the entrepreneurship ability and to multinational corporations. This will help in bringing a co-operative relationship with the stakeholders and management. Thus, we can observe that the CSR approach will help in improving the productivity of organisations. CSR approaches have had a profound impact on the business activities and the results have been very specific in case of product development and services. This approach has been considered as an important social corporate endeavour or corporate social performance. References Aras, G., Aybars, A. and Kutlu, O., 2010. Managing corporate performance. International Journal of Productivity and Performance Management, 59(3), pp. 229–254. Burger, A., 2011. Shell in Nigeria: Oil, Gas, Development & Corporate Social Responsibility. Triple Pundit, [online] 29 July. 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