Corporate Social Responsibility: Pressures - Essay Example

 Gilbert states that "Corporate social responsibility is seen when a company conducts its business in the interest of society as a whole as well as its own interests" (2003, p. 372). This essay is concerned with the nature of the pressures that drive corporations to be socially responsible. Over the course of the past thirty years, the strict private property notion of the corporation has come under attack. The modern trend has been to treat the corporation as a social entity as well as a profit-maximising entity. The implications are profound for the public. The challenges presented are a daily concern for those in charge of corporations. Indeed, corporate directors and officers can no longer concern themselves with simply maximising wealth for shareholders. Reacting to a variety of pressures, they must now account for broader social demands and sharpened public expectations. The field of Corporate Social Responsibility is now a fundamental one in the study of management and business. It has even intruded into the fields of finance and economics. In short, the formulation of policies, and the making of decisions, must take into consideration the perceptions of the public and the social effects of proposed courses of action. This concept of Corporate Social Responsibility is complex. It is complex because there are limits to what a corporation can do without sacrificing its primary function of maximising wealth for shareholders. More significantly, while a corporation is limited in the resources necessary to engage in extensive social engagement, there seems to be an ever-increasing growth of pressure groups and social issues to address. Modern corporations must react to the expectations of stakeholders, they must react to the expectations of a more generalised public opinion (Vallentine, nd), and they must anticipate pressures exerted more visibly through politicians and the media. This essay will provide a brief definition of Corporate Social Responsibility, as this definition continues to evolve, and a discussion of the pressures applied to corporations. These pressures will be described both generally and with the support of specific examples. Defining Corporate Social Responsibility: Shifting Definitions In order to understand the pressures that are driving Corporate Social Responsibility, it is first important to state what the term means. The truth is that, in practice, the Corporate Social Responsibility concept is in a state of seemingly permanent evolution. The pressures on corporations to behave in a socially responsible manner are proliferating rather than contracting. As corporations accept certain socially responsible mandates, they simultaneously seem to be inviting other pressure groups to press their own demands. In short, the traditional notions of Corporate Social Responsibility have been expanded and continue to expand. As profit-maximising entities, corporations were traditionally considered to be socially responsible to the extant that they followed the minimum requirements set forth in applicable laws and regulations (Moon, et. al., nd). These pressures were therefore explicit and codified. A corporation followed the law and thus constituted a socially responsible citizen. All corporations, however, operate in society. Many communities have particular problems and concerns. Gradually, the notion of corporate philanthropy was added to the concept of corporate responsibility. A corporation, as a citizen of the community in which it operated, was expected to contribute to the community’s problems and welfare. These basic features, compliance with the law and philanthropy, constituted the traditional notions of corporate social responsibility. The benchmarks of a socially responsible corporation have increased exponentially in recent decades. Corporations are judged not simply by their balance sheets, but by how well they meet or exceed certain standards of social responsibility. There are socially-responsible products and services, socially-responsible employee relations, and the social sustainability of the corporation itself (Moon, Young & Young, nd). In the final analysis, more and more aspects of the profit-maximising entity are being exposed to diverse notions of social responsibility. Not even the largest and most powerful of corporations are immune. Referring to heightened social expectations, Philip McCrum in a speech given to The Economic and Research Council stated that, The business case for CSR is compelling. It is worth reiterating that the market forces that determine economic and commercial activity apply equally to the delivery of CSR. Today, consumers, shareholders, investors and employees enjoy greater choice than ever before and their decision-making is much better informed. As a result, consumers may be hesitant about buying a product from a company perceived to be complicit in human rights abuses; shareholders and investors may be wary about investing in a company with a dubious environmental record; and employees may be loath to work for a company that ignores the needs of the local community within which it operates (2001) Even the mighty are not immune to the pressures to be socially responsible. The pressures are too diverse and they are applied with increasing visibility and with increasing success. Social Pressures Society has become a stakeholder in corporate affairs; more particularly, the community in which a corporation operates has become a partner in the sense of Corporate Social Responsibility. This is the result of pressures applied by residents of the community, local lobby groups, and larger non-governmental organisations. These social issues, and the pressures exerted in furtherance thereof, can be substantial. In general, these issues deal with policy decisions at the most fundamental levels. How are employees cared for and compensated? A liveable wage is an important social issue as well as health insurance and viable pensions. What are the effects of a corporation’s operations on the environment in which it operates? The pressures can be varied and significant. There are labor unions to organise and encourage strikes. There are employees prepared to work inefficiently or to transfer their work ethics and knowledge to more socially responsible competitors. People, both locally and internationally, may boycott the corporation’s products and services. This notion of the corporation as a social citizen, in effect, can damage its function as a profit-maximising entity. Corporations are also pressed by large, deep-pocketed non-governmental organisations. It is an almost weekly experience to witness a non-governmental organisation publicising and protesting. It might be a multi-national corporation’s alleged abuse of labor in Myanmar (British American Tobacco, 2003). It might be Greenpeace publicising and protesting a corporation’s pollution of rivers in Thailand and Laos (Greenpeace Blasts Banpu, 2005). Local groups may rally around unusually high incidences of cancer, and press corporations producing carcinogenic waste products to prove that they are not the cause. This is in sharp contrast to the traditional notion that defined corporate responsibility as complying with the minimum requirements of the law. By forcing corporations, in effect, to prove that they are not the cause of some negative occurrence in the community reverses the standard presumption of innocence. These types of pressures can, consequently, place corporations in a position worse than an individual citizen. The threat to their reputations and to their profit-maximising capabilities is real. Political Pressures Corporations also must address political pressures arising from their decisions, their practices, and their political environment. Globalisation has increased these pressures as corporations institute operations, whether sales or manufacturing, in social and cultural environments very different from their own. Political pressures most often manifest themselves in terms of threats of intervention to actual intervention in corporate affairs. The nature of the intervention varies from calls for strategic partnerships by national and local governments to implementation of specific legislation. Market Pressures The reality is that the notion of social responsibility has become inextricably linked with profit maximization. More specifically, as social and political pressures mount, there becomes an underlying imperative to become socially responsible in order to be considered a socially responsible corporation. The bottom-line can be directly affected by negative perceptions. Ultimately, how the social and political pressures are translated into market imperatives is the truest explanation for the continuing interest by corporations in Corporate Social Responsibility. It is this very issue, the relationship between Corporate Social Responsibility and market pressures that generates so much debate. In one study exploring the relationship of Corporate Social Responsibility to market competitiveness, it was found that, 67% of executives agree or strongly agree (compared to 46% CSR managers and 48% of CSR staff) that CSR adds to their organizations’ competitiveness contributions. Moreover, executives view CSR as well integrated into their organization at more than double the rate of managers (50% vs. 24%) likely suggesting some critical “disconnects” around the perception and realities of CSR integration overall (CSR Survey, np). This survey offers some interesting insights. How strong are the market pressures? Executives are much more likely to believe that market pressures are real. They conclude in a fairly strong way that Corporate Social Responsibility does add to their competitiveness. The experts, however, are less enthusiastic. Indeed, the Corporate Social Responsibility managers and staff are not convinced that the market pressures are substantial. Market pressures would appear to be an area in need of further research. Conclusion In conclusion, the issue of Corporate Responsibility remains an evolutionary concept. It is evolutionary for a variety of reasons. First, the types of pressures applied to corporations continue to increase. Social demands proliferate and political pressures, through legislative alterations, change the minimum standards by which corporations operate. As minimum standards rise, there are new expectations to replace the old. In addition, the concept is evolutionary because of uncertainty regarding the precise nature of market pressures. We just don’t know the effects of CSR on competitiveness. References British American Tobacco under human rights pressure. (2003, March 6). Corporate Responsibility News and Resources. http://www.mallenbaker.net/csr/CSRfiles/page.php?Story_ID=851 Corporate Social Responsibility—a UK business perspective. (2001, January 11). A Speech Given by Philip McCrum to the Economic and Research Council. CSR Top-Line Findings. The European Conference on Corporate Social Responsibility and BSR 2004 Annual Conference. http://www.bsr.org/Meta/BSRleaders_survey.pdf Greenpeace blasts Banpu for investing in pollution. (2005, October 11). Greenpeace http://www.greenpeace.org/seasia/en/press/releases/GP_blasts_Banpu Moon, J., Young, A.F., & Young, R. (2003, No. 14). The UK Corporate Social Responsibility consultancy industry: a phenomenological approach. International Centre for Corporate Social Responsibility Research Paper Series. http://www.nottingham.ac.uk/nubs/ICCSR/pdf/ResearchPdfs/14-2003.PDF Vallentin, S. (2005). Corporate Social Responsibility and Public Opinion. http://www.promediaproject.dk/publications/steen_valentin/Corporate_Social_ Responsibility_and_Public_Opinion.pdf Read More