CSR & Strategic Thinking - Essay Example

Running Head: Strategic Management CSR & Strategic Thinking By _____________________ A Historical Perspective On CSR There were few corporate acts of charity at the start of the twentieth century. Instead, wealthy business people engaged in philanthropy as they gave as individuals from their personal wealth to charitable and other worthy causes. How, then, did corporate commitment to social responsibility evolve Two principles provided the foundation for contemporary views on social responsibility. The first of these, the principle of charity, is rooted in religious tradition and suggests that those who have plenty should give to those who do not, this concept later turned out to be related with an organisation's strategic thinking while helping it to form long run relationships. Under the influence of this principle, individuals in the business community increasingly decided to use some of their corporate power and wealth for the social good. These voluntary community obligations to improve, beautify, and uplift were quite evident by many business leaders. One early example was the cooperative effort between the railroads and the YMCA immediately after the Civil War to provide community services in areas served by the railroads. Although these services economically benefited the railroads, they were at the same time philanthropic (Shalhoud, 1999). In another example, steel magnate Andrew Carnegie put much of his great wealth to work for education. Henry Ford adopted a paternalistic style of management and made recreational and health programs available to Ford employees. The company town was one of the most visible examples of paternalism. Although business's motives for creating company towns (for example, the Pullman/Illinois experiment) were mixed, business had to do a considerable amount of work in governing them (Shalhoud, 1999). Thus, the company accepted a form of paternalistic social responsibility. Over time, an increasing number of business leaders adopted and spread the idea that business has a responsibility to society beyond simply providing necessary goods and services. A second principle that shaped CSR is the principle of stewardship, which asserts that organisations have an obligation to see that the public's interests are served by corporate actions and the way in which profits are spent. Because corporations control vast resources, because they are powerful, and because this power and wealth come from their operations within society, they have an obligation to serve society's needs. In this way, corporations and their leaders and managers become stewards, or trustees for society which forms an image of trust about the organisation among the society member. Under the influence of this principle, Congress, the popular press, and other factions started to attack many large and powerful organisations whose attitudes they perceived to be both anticompetitive and antisocial. Antitrust laws and other legislation began to place constraints on the actions of organisations. In general, there was a shift in the public perception of a corporation's place within and obligation to society. CSR & Strategic thinking To understand better why some organisations fall ethically, we can explore organisational attitudes toward stakeholders in the form of corporate social responsibility (CSR), the relationship between the CSR and a firm's strategic management can be found from various definitions of CSR. For many organisations, commitment to CSR is shown in references to stakeholders and "triple bottom line" thinking (i.e., financial, environmental, and social responsibility bottom lines). One useful definition of CSR is that it requires "the continuing commitment by business to behaving ethically and contributing to economic development while improving the quality of life of the work force and their families as well as of the community and society at large" (Anderson, 1989). The economy could only be improved in the long run and so strategic thinking is critical. Criticism of business over the years has led to an increased concern for the social environment and a changed social contract. Out of such criticism has grown the notion of corporate social responsibility, or CSR. Let us take a closer look at the nature of social responsibility. Many argue strongly that organisations and their leaders must consider the impact of their decisions and actions on society as a whole and that they must assume responsibility for their activities. It is argued further that organisations should take steps to protect and improve the welfare of society. Some have suggested that organisations exist to serve the needs of society. Therefore, being a steward of the needs of society is a socially responsible, appropriate, and natural act. In short, leaders and managers must evaluate their decisions and actions not merely from the perspective of organisational effectiveness, but also from the perspective of the greater good. An early view of CSR is as follows: "corporate social responsibility is seriously considering the impact of the company's actions on society" (Anderson, 1989). Another definition that may be helpful is, "The idea of social responsibilityrequires the individual to consider his [or her] acts in terms of a whole system, and holds him [or her] responsible for the effects of his [or her] acts anywhere in that system" (Anderson, 1989). A third definition places social responsibilities in context vis--vis economic and legal objectives. That is, "the idea of social responsibility supposes that the corporation has not only economic and legal obligations, but also certain responsibilities to society which extend beyond these obligations" (Anderson, 1989). What these all definitions are suggesting is associated with the individual responsibility of the employees that could affect the society if not fulfilled properly, the effects would again take place in the long run whether the employees are socially responsible or irresponsible, it is all suggesting the relationship that can be formed between the Strategic objectives and the CSR. Finally, a four-part definition of CSR focuses on the types of social responsibilities that it might be argued belong to business. That is, as Archie Carroll says, "The social responsibility of business encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organisations at a given point in time" (Sims, 2003). Carroll's definition attempts to place the economic and legal expectations of business in context by relating them to more socially oriented concerns. These social concerns include ethical responsibilities and philanthropic (voluntary/discretionary) responsibilities. This definition, which includes four kinds of responsibilities, elaborates and builds upon the definition proposed by McGuire. Carroll suggests portraying the four parts of his definition of CSR in pyramid form, beginning with the building block of economic performance at the base. At the same time, business is expected to obey the law, because the law is society's codification of acceptable and unacceptable behaviour. Next is business's responsibility to be ethical, which at its most basic level is the obligation to do what is right, just, and fair and to avoid or minimise harm to stakeholders (employees, consumers, the environment, and others). Finally, business is expected to be a good corporate citizen, to fulfill voluntary/discretionary or philanthropic responsibility, to contribute financial and human resources to the community and to improve the quality of life. All these definitions provide some insight into the ideal of CSR. Social responsibility goes beyond the letter of the law. For our purposes, social responsibility is an organisation's obligation to engage in activities that protect and contribute to the welfare of society. CSR refers to an organisation's moral obligation toward others who are affected by the organisation's actions. An organisation's social responsibilities are always shaped by the culture and the historical period in which the organisation operates. Just as a society's values, norms, and mores change over time, so does the definition of what is socially responsible behaviour. Differences in societal values and the shift of public attitude can be seen in the tobacco industry and in the public's response to the genetic alteration of seeds and dairy products. In the tobacco industry, the old thinking was that "if you smoke cigarettes, whatever happens to your heart and lungs is your own fault. Cigarettes are legal and are voluntarily purchased and consumed. Don't come whining to the courts when you see a shadow on the X-ray. Caveat fumor" (Sims, 2003). During the latter part of the twentieth century, the old thinking shifted to the new thinking that "Big Tobacco knowingly sells a defective product that when used exactly as intended (that is, you smoke the thing), addicts the consumer to nicotine and eventually sickens and kills him. Big Tobacco should pay billions" (Sims, 2003), isn't it associated with the well being of the society in the long run What was once considered socially acceptable and legal is now considered socially irresponsible, and it has been punished to the tune of billions of dollars! Passions in many Western European countries ran extremely high during the 1990s with regard to importing U.S. dairy products, which use growth hormones to stimulate milk production. Similar feelings do not exist throughout much of the United States (Sims, 2003). Conclusion Just exactly what is an organisation's social responsibility At one extreme, there are those who strongly believe that organisations are in business solely to produce goods and services that societies want, be they life-saving devices, legal advice, or atomic weapons, and that they are entitled to make a profit in return. For these people, social responsibility is simply not an issue. At the other extreme, there are those who believe that organisations should be allowed to do business only if they do no harm, help solve social problems, and put some of the profits they earn back to work for society. This disagreement does not lend itself to quick and easy resolution. The concept of CSR grew out of business criticism and increased concern for the social environment and the changed social contract. Many organisations have responded to these new ideas with a commitment to social responsibility that has led to increased corporate responsiveness to stakeholders and improved social (stakeholder) performance (Belkaoui, 1999). Some individuals today prefer the language of "corporate citizenship" to collectively embrace the host of concepts related to CSR. In their view corporate citizenship concepts include CSR, which emphasises obligation and accountability; corporate social responsiveness, which emphasises action and activity; and corporate social performance (CSP), which emphasises outcomes and results. The growth of these ideas has brought about a society more satisfied with business. However, although this satisfaction has countered some criticisms of business, it has also led to increased expectations that will inevitably result in more criticism. It has been suggested that the net result of this double effect is that the overall levels of business performance and societal satisfaction should increase with time in spite of this interplay of positive and negative factors. Should business not be responsive to societal expectations, it could conceivably enter a downward spiral, resulting in significant changes in the business/society relationship. Reference Anderson J.W. (1989), "Corporate Social Responsibility: Guidelines for Top Management", New York: Quorum Books. Belkaoui A.R. (1999), "Corporate Social Awareness and Financial Outcomes". Westport, CT: Quorum Books. Krausz J., Pava M.L. (1995), "Corporate Responsibility and Financial Performance: The Paradox of Social Cost", Westport, CT: Quorum Books. Sims R.R. (2003), "Ethics and Corporate Social Responsibility: Why Giants Fall", Westport, CT: Praeger. Shalhoud Z.A.K. (1999), "Organizational Downsizing, Discrimination and Corporate Social Responsibility", Westport, CT: Quorum Books. Read More