The Role of Corporate Social Responsibility in Business World - Term Paper Example

? Corporate Social Responsibility (CSR) Business world is undergoing drastic changes as a result of globalization and the development of scientific management principles. In fact many of the traditional concepts about business have been changed a lot over the past few decades. Selfish motives of the corporate world have given way for more realistic approaches to business. Corporate world have released that the environment and the communities are providing them the resources needed for doing successful business and it is their duty to give something in return to the society and the environment. They also realized that injudicious exploitation of the communities and the environment is nothing more than making graveyards for themselves. The importance of a healthy community and environment has been realized quite late by the corporate world. The above realization resulted in the development of topics such as corporate social responsibility, sustainable development etc. he needs of nature and societies should be balanced with the needs of the corporate world in order to create a healthy business environment. Earlier, business world were concentrated more on their own needs which resulted in weakened relationships between the business and the society or nature. In short, current companies are aware of doing something to the communities and the environment in which they operate. This paper briefly analyses various dimensions of corporate social responsibility. Corporate Social Responsibility (CSR) Change is an inevitable aspect of human life. One can see tremendous changes in every aspect of human life if he compares the current standards of living with respect to that a couple of decades before. Business circle is also undergoing lot many changes over the past few decades. The introduction of globalization, privatization and liberalization forced corporate companies to implement many changes in their business strategies. Earlier, organizations were more focused increasing their profits. They did so at the expense of the interest of the people. However, current organizations realized the importance of doing something in return to the community in which it operates. Corporate Social Responsibility is thus evolved as a new term in organizational world recently. Nexen (2009) defined Corporate Social Responsibility “as a commitment to behave ethically and contribute to economic development while improving the quality of life of our workforce and their families as well as the local community at large” (Nexen, 2009). Ethics and morality are rapidly disappearing words from human life; however in the corporate world, these topics are much debated ones now. Relationship building is accepted as the core of every business activity by the modern companies. They are keener in establishing or developing strong relationship with the community in which they operate. Companies often strengthen their relationship with the communities with the help of doing some favors to the communities for the re4sources they exploited from the community. In short, modern companies are so particular in protecting the community and the environment in which they operate. Corporate social responsibility is currently accepted just as another business strategy by the modern organizations. Various dimensions of Corporate Social Responsibility (CSR) Hawkins, (2006) has pointed out that it is “the society which provides both customers and resources to fulfill the business objectives of the corporate companies” (Hawkins, 2006, p.2). A company can never operate in vacuum. Moreover, a company can never operate with the help of their own resources alone. For example, Coca Cola is the biggest soft drink manufacturer in the world at present. It operates in more than 200 countries worldwide. The major ingredient of every soft drink is water. Coke can never generate water from vacuum. They are exploiting both ground water and under water resources to produce their soft drinks. Exploitation of water resources will create drinking water shortage. In other words, the heavy exploitation of natural resources like water will affect the communities or people negatively. Coke cannot survive in a community if they fail to give something in return to the water like community resources, they are exploiting. Moreover, Coke is causing lot of environmental problems because of the plastic containers of Coca cola products. Plastic is not a biodegradable substance and the world is facing severe environmental problems as a result of plastic accumulation. Coke like soft drink manufacturers are contributing heavily to the accumulation of plastic substances on earth. it is the duty of the Coke like companies to recycle the industrial waste they are producing in order to stay in good relation with the communities. “The society has already accepted the tension between corporate rationality and social responsibility as an inescapable condition of living prosperously” (Steven et al, 2007, p.17). The harmony between communities and corporate world is essential for the smooth functioning of the companies. Since the companies are operating in a community, they cannot stay away from community problems. For example, in Japan, the recent tsunami and earthquake caused many damages. Corporate world cannot stay away from assisting Japan in the relief and rebuilding process. It should be note that many of the prominent companies in the world are of Japanese origin and it is the duty of these companies to help the Japanese people to come out from the current crisis situations. CSR is visualized differently by different countries. In the United States, CSR has been defined in terms of a philanphropic model in which the companies make profits, unhindered except by fulfilling their duty to pay taxes and donate a certain share of the profits to charitable causes. In European model, CSR focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons (Baker, n. d) American and European companies are currently giving more focus to their social responsibilities, even though they function slightly differently. British Petroleum, the leading oil companies in the world has recently faced stiff challenges because of the Gulf of Mexico oil spill. It is believed that around 4.9 million barrels ^ of crude oil spilled over the water as a result of this accident, destroying marine and wild life near the Gulf of Mexico. This accident also affected the tourism and fishing industries in this region. “The U.S. completed negotiations with BP Plc to establish the $20 billion fund that will compensate victims of the Gulf of Mexico oil spill” (Blum & Snyder, 2010). BP is currently facing bankruptcy because of the heavy compensation they forced to pay as compensation. In other words, BP’s commitments to the community can be realized from the above gesture. Corporate social responsibility can be exercised in many ways. It is not necessary that corporate social responsibility means providing financial help to the community or protecting the environment. Vogel, (2006) has pointed out many examples to demonstrate how differently corporate social responsibility can be demonstrated. Citibank, along with other major financial institutions has developed criteria for assessing the environmental impacts of its lending decisions in developing countries. PepsiCo along with more than a dozen oil companies and consumer goods manufacturers has withdrawn its investments from Burma because of human right concerns. Chiquita has implemented stringent environmental practices for its suppliers of banana in Central America (Vogel, 2006, p.2) “Companies play important roles in public policies not only in countries where standard of governance is low, but also in countries in which the international governance mechanisms are low” (Blowfield & Murray, 2008, p.11).Some of the corporate companies are powerful than some of the governments. For example, Microsoft, Apple Inc, Google, Exxon Mobile etc are some of the biggest corporate companies which may have more financial resources than some of the poorest countries in the world. Recently, Bill Gates and Warren Buffet started an exercise intended to help the poor communities with the help of accepting contributions from the richest people in the world. Warren Buffet agreed to contribute around 90% of his assets to the charity purposes. In other words, richest people already realized the meaninglessness of accumulation of wealth especially when people around the world struggling for survival. Poor countries do not have enough financial resources or infrastructure facilities to mobilize their resources. Such countries will be immensely benefitted if the efforts of Bill gates and Warren Buffet taste success. “When business is booming and the bottom line comfortable, corporate responsibility seems an achievable goal.  But in difficult times, “responsibility” and “accountability” are – surprise, surprise – much trickier terms to define and employ” (Connor, 2009). In many cases, organizations talk too much about their corporate social responsibility, but do little to keep their words. Many of the organizations do something to the community when their company performs well. On all other occasions, they will keep the subject of social responsibility at some corners. In short, corporate social responsibility has direct linkage with the performances of the company. At the same time it should be noted that corporations which have given more emphasize to social responsibility, succeeded in performing well in the past compared to other organizations. Corporate responsibility should not be linked with the performances of the company. It should be observed strictly irrespective of the performances of the company. “As the impact of business on society grown, the range of stakeholders whose concerns a company needs to address has fluctuated from a narrow view of owners to a broader range of constituents including employees and customers” (Werther Jr & Chandler, 2005, p.3). Corporate world is functioning on a much wider spectrum at present because of the introduction of globalization and liberalization policies. The customer base and the stakeholder ranges increased a lot a result of globalization. In other words, corporate social responsibility should be perceived on a much wider canvas at present. Biggest organizations are now functioning internationally or cross-culturally which means they have to expand their social responsibility canvas on much wider aspects. There are many myths associated with the term corporate social responsibility. Some of the common myths prevailing about social responsibility are; “the market can deliver both short-term financial returns and long-term social benefits; the ethical consumer will drive change; there will be a competitive 'race to the top' over ethics amongst businesses; countries will compete to have the best ethical practices etc” (Source watch, 2009). The above myths have no connection or association with facts. The interests of business people and that of the ordinary people cannot go in one direction. Business always tries to make profits as much as possible which they often accomplished at the expense of the interests of the ordinary people. In fact social responsibility like subjects introduced in the business world, not for assisting the public in real sense, but as a strategy to develop the business further. “Even though, companies publish huge volumes of literatures with respect to their works for the wellbeing of the society, in practice many companies define their obligations in a much more limited” (Geoffrey, 2008, p.2) “MNC’s could radically improve the lives of millions of people and help bring into being a more stable and less dangerous world” (Prahlad & Porter, 2003, p.3). As stated earlier, biggest companies in this world have enough wealth to eradicate poverty completely from the world. These companies accumulated their wealth by exploiting the natural resources, on which all the people in this world have equal claims. In other words, corporate world exploited the resources of the poor people and they have the moral and legal responsibility to assist the people in their development. Thus corporate social responsibility is the duty of the corporate world rather than a charity service. . “While CSR does not have a universal definition, many see it as the private sector’s way of integrating the economic, social, and environmental imperatives of their activities” (Corporate Social Responsibility, 2009). Many people have the misconception that only the private companies should exhibit their social responsibility. This is because of the general belief that public companies are functioning to safeguard the interest of the public whereas the private companies are functioning to safeguard their own interests. However, both private and public companies have equal responsibilities in preserving the interests of the community in which they operate. How can we justify the activities of a public company, if it fails to strengthen the effort of environmental protection? For example, at present, Japan is struggling to stop the radioactive radiations coming out from their atomic reactors. All these atomic reactors were operated under the public companies which were supervised by the government. Some of the earlier, nuclear disasters at Chernobyl and Three Miles Islands were also occurred because of the negligence of the governmental companies. In short, nobody can claim that public companies are always safeguarding the interests of the public and only the private companies have the moral responsibility of exhibiting social responsibility. Dobers & Halme (2009) have pointed out that “there is urgency for concerted efforts by the private sector, public sector and non-governmental organizations to develop structures and institutions that contribute to social justice, environmental protection and poverty eradication” (Dobers & Halme, 2009). Private companies are more prominent in some countries compared to public companies. For example, in America like capitalist countries the number of private enterprises is more than that of the public enterprises. It is impossible for the government organizations alone to raise the living standards of the poor. Since both public and the private companies are operating or working on the resources of the general public, both of them have the responsibility of raising the standard of living of the poor people. Conclusions Corporate social responsibility, sustainable development etc are new terms which entered the corporate world only in the recent times. Earlier, big companies were focused more on making profits rather than servicing the community or protecting the environment. However, current companies have realized the importance of establishing a meaningful relationship with the community and the environment for sustainable development. Corporate social responsibility is not a charity service, but a moral and legal responsibility of the corporate world. Both private and public companies have equal responsibilities in protecting the interests of the communities and the environment, since both of them are exploiting the community resources for making profits. Natural resources and the environment are the assets of all the people irrespective of rich or poor. Corporate world has no right in exploiting these resources for their own selfish interests. They should realize that they are operating in the market with the help of the customers and communities. Financial abilities or smart management will never help companies in achieving their long term goals if they work against the interests of the people and the environment. Globalization brought many changes in the business world and the social responsibilities of the companies increased a lot as a result of the spreading of cross cultural business. Most of the countries are more interested in attracting foreign direct investments at present. At the same time, companies should realize that no country will allow them to operate in an irresponsible manner, either socially or environmentally. In short, establishing harmonious relationship between business, communities and nature is essential for the sustainable development of corporate world. References 1. Baker, M. (n. d), Corporate Social Responsibility - What does it mean?, Retrieved from http://www.mallenbaker.net/csr/definition.php 2. Blowfield M. & Murray A. (2008), Corporate Responsibility: A Critical Introduction Publisher: Oxford University Press, USA (March 15, 2008) 3. Blum, J & Snyder, J. (2010) BP, U.S. Agree on Establishment of $20 Billion Gulf of Mexico Spill Fund. Retrieved from http://www.bloomberg.com/news/2010-08-09/bp-20-billion-oil-spill-compensation-fund-agreement-completed-with-u-s-.html> 4. Corporate Social Responsibility, (2009), Retrieved from http://www.ic.gc.ca/eic/site/csr-rse.nsf/eng/home 5. Connor M. (2009), Trying Times for Corporate Responsibility, Business Ethics, The magazine of corporate responsibility Mon, 02/23/2009, Retrieved from http://www.business-ethics.com/node/123 8. Dobers P & Halme M (2009), Corporate Social Responsibility and Environmental Management, Willey Inter science, Retrieved from http://www3.interscience.wiley.com/journal/122557911/abstract 9. Geoffrey H. (2008), When Principles Pay: Corporate Social Responsibility and the Bottom Line Publisher: Columbia University Press (May 1, 2008) 10. Hawkins D.E.(2006), Corporate Social Responsibility: Balancing Tomorrow's Sustainability and Today's Profitability Publisher: Palgrave Macmillan (September 4, 2006) 11. Nexen, (2009), Glossary,Retrieved from http://www.nexeninc.com/Sustainability/glossary.asp 12. Prahalad C. K.& Porter M. E. (2003), Harvard Business Review on Corporate Responsibility Publisher: Harvard Business Press; illustrated edition edition (July 10, 2003) 13. Source watch (2009), Corporate Social Responsibility, Retrieved from http://www.sourcewatch.org/index.php?title=Corporate_Social_Responsibility 14. Steven M.K., Cheney G. & Roper J. (2007), The Debate over Corporate Social Responsibility Publisher: Oxford University Press, USA (April 12, 2007) 15. Vogel D. (2006) The Market for Virtue: The Potential And Limits of Corporate Social Responsibility Publisher: Brookings Institution Press (August 1, 2006) 16. Werther Jr, W.B.& Chandler D (2005), Strategic Corporate Social Responsibility: Stakeholders in a Global Environment Publisher: Sage Publications, Inc (November 11, 2005) Read More