Corporate social responsibility - Essay Example

Corporate Social Responsibility Corporate Social Responsibility (CSR) is a concept adopted by organisations which escorts them to participate in activities beneficial for the society. CSR enables the small and medium size organisations to engage in activities that constructively impact not only the customers and suppliers, but it works in those communities where even the interests of competitors, stakeholders and shareholders are protected. Practicing CSR enables the managerial procedures into practice (Maignan & Ralston, 2002) and indicates a pluralistic society that maximises freedom of expression, action, and responsibility which in turn results in a widely diversified set of loyalties to many different causes and organisations and minimises the danger that any one leader of any one organisation will be left uncontrolled. All of these advantages and disadvantages, along with its structure and composition, are in part some of the cause for the differences in viewpoint on what social responsibility is, what it should be, what it should encompass, and what it should accomplish (Anderson, 1989, p. 5). CSR at one end indicates 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. Such people do not consider social responsibility as an issue. At the other end, 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 (Sims, 2003, p. 45). We can say that the concept of social responsibility is actually that of social responsiveness which is a continually evolving concept and means different things to different people. There is no particular definition of CSR, in fact numerous studies conducted since 1970s and 1980s attempted to relate CSR to various kinds of socially responsive activities which when presented before the business manager, measures and tabulates the relative frequency of response. Stakeholders believe that business has a moral obligation to correct the social problems that beset society while at the same time, many of these stakeholders feel that much of the business community has not and is not adequately dealing with many of these social problems of concern. Strategically managed CSR contributes towards organisational performance and growth (Husted & Allen, 2006). On the other hand corporate executives feel they must include social policy guidelines into the strategic plans from which formulating and reshaping CSR policies would be easier (Thompson & Smith, 1991). The responsibility of MNEs (multinational enterprises) towards public is reflected in changing public attitudes about their social obligations, therefore in a manner CSR enables the MNEs to participate in opposing worldwide corruption (Luo, 2006). This way the burden of implementing and achieving the social as well as the political goals lie on the shoulders of middle and lower management resulting in effectively translating the concept of responsibility into practice and increasing profits at the same time. This is the basic approach that some of the larger profitable businesses are taking today while understanding CSR, for which Peter Drucker expresses his concern by mentioning the significance of doing good in order to do well, (Anderson, 1989, p. 7) that is to convert social needs and problems into profitable business opportunities, a phenomenon rarely considered by today's advocates of 'social responsibility'. Corporate or social responsibility emphasises at various understanding and at various levels different stakeholders' activities which they consider as responsibility towards the local economy in which every stakeholder participates in context with the society and the environment, as well as towards the local business stakeholders such as suppliers, customers, officials, and employees (Conference Board, 2005). However it is not necessary to limit the role of CSR in the local context, as in some cases, corporate responsibilities and stakeholders require organisations to respond to both global issues and local issues so that the underlying argument must be revealed in order to diversify stakeholders and conflicting value systems (Logsdon and Wood, 2005). Lantos concept of CSR Theorists like Lantos believe CSR is an effective tool to market the organisation (Lantos, 2001). Furthermore Lantos categorised CSR into some standards like ethical CSR, altruistic CSR and strategic CSR. Ethical CSR awakes the moral responsibility within the organisations to prevent injuries and harm that could result from their activities. Altruistic CSR is usually considered as optional and is deployed in circumstances where personal or organisational sacrifice is required, for example signing a contract. Similarly Lantos devised strategic CSR in order to indicate that whenever a firm undertakes certain caring corporate community service activities that accomplish strategic business goals, it is said to fulfill the strategic aspects of CSR. Lantos in his various researches used ethical frameworks to prove that altruistic CSR is unethical because no organisation can sustain or grow through personal means in which sacrifice is the utmost to consider, therefore altruistic CSR should not be practiced by public firms. However there are conditions where altruistic CSR is necessary to implement because of the expected outcome that is likely to be achieved by the social contract between a firm and society (Broomhill, 2007). Lantos suggested that CSR should focus on two aspects, 1) Preventing those harms that could result from business activities, whether physically or logically such harms are perilous for they can destroy the public attained image of organisations, implementing CSR 2) Realising strategic business goals and working accordingly. Ethical aspect makes it clear to recognise that every managerial act affects the attitudes, motivation, and behaviour of the members of the organisation. A moral, ethical and socially responsible attitude must consciously direct managerial actions toward enhancing the quality of the organisational member's work life than not to do so (Sims, 2003, p. 31). Usually the contention that exists is that as long as the manager's intention is not to harm the employee and to try to increase the quality-of-work life, the conscious management of employee work-related attitudes, motivation, and behaviour is not an unethical act per se. There are some exceptions that are often not followed under the moral obligations. For example a company usually obligates not to do harm to the communities in which they operate, not even violating anyone's rights, but there are situations in response to the harmful events that arise in this context as the potential for harm is greater in an unstable and developing economy (Larsen & Wiggen, 2004, p. 202) than in a stable and developed economy. Carroll's concept of CSR Archie Carroll (1979) has defined CSR as an economic and legal responsibility that fulfills the expectations of organisations that deploy them in context by relating them to more socially oriented concerns. These social concerns are inclusive of all ethical as well as philanthropic responsibilities and include four kinds of responsibilities which elaborate and build upon the definition proposed by other theorists. Carroll portrays and develops the concept of CSR as a four level pyramid form, beginning with the building block of economic performance at the base (Sims, 2003, p. 44). Carroll considers law as an important aspect of business that must be obeyed because the law is society's codification of acceptable and unacceptable behavior. It is the responsibility of the organisation to remain ethical, whatsoever be the causes and consequences so that the obligation to do what is right, just, and fair be fulfilled and harm should be minimized to stakeholders, employees, consumers, the environment, and others. Carroll divides CSR into four categories that uphold the four faces or one can say four dimensions of corporate citizenship, economic, legal, ethical, and philanthropic (Corporate Public Affairs, Dec 2005). Each face, aspect, or responsibility reveals an important facet that contributes to the welfare of the society as a whole. Carroll links CSR to a multifaceted, three-dimensional framework representing corporate social performance (CSP). The other two dimensions are an elaboration of the categories of business social responsibility and social issue areas that reflect current, and thus ever changing, public concerns. Carroll's categories of social responsibility are listed down in significance and considers economic issues to be businesses' first and foremost responsibility i.e., to produce and distribute goods and services for economic exchange (Besser, 2002, p. 18). Carroll in the legal category specifies that in the process of producing and distributing goods and services, businesses must abide by the laws of society. The third area of business responsibility as presented by Carroll requires businesses to conduct their affairs in an ethical manner. Generally, this translates into expectations that businesses comply with the spirit of society's laws and with the normative base that under girds them. The fourth category deals with what Carroll names as discretionary responsibilities (Besser, 2002, p. 18). Social betterment activities like philanthropy and community leadership are examples of discretionary responsibility. While talking about Carroll's proposed CSR, corporate social performance model (CSPM) signifies the circles of business responsibility as more clearly specified and the business responses to those responsibilities and specific social topics to which they apply are added. To illustrate the usefulness of Carroll's CSP model, let's consider the social issue of the recreational infrastructure within a given community. For some businesses, this social issue is in the category of economic social responsibility. Examples to such issue would be construction companies who have a shot at building the facilities, development companies who own potential sites and hospitality businesses adjacent to the planned infrastructure. If enhanced local recreation facilities assist businesses to attract and retain employees, they would be categorised as related to economic social responsibility (Besser, 2002, p. 18). Where none of these circumstances apply, then business involvement in the provision of community recreational infrastructure would be a discretionary social responsibility. For this particular social issue, the legal and ethical responsibilities would not apply. Benefits of Good Corporate Citizenship Corporate citizenship so far is best defined by the Conference Board as an all-encompassing and practical tool to manage effectively a company's actual and potential economic, environmental and social impact on the communities in which it operates and on society as a whole, while enhancing corporate reputation and increasing profits. It defines but does not limit to the interactions with stakeholders' employees, environmental groups, community activists, and shareholders. Although the benefits of good corporate citizenship to stakeholders are apparent but, the extent to which the benefits of good corporate citizenship impact the firm requires a review of studies attempting to discern the benefits to companies of corporate citizenship, defined broadly, revealed empirical and anecdotal evidence supporting the following. 1) It reshapes the relationship between employer and employee by improving many criteria that encompasses employee recruitment, retention, morale, loyalty, motivation, and productivity. 2) By enforcing improved customer relationships, CSR focuses on technical aspects like increased customer loyalty, acting as a tiebreaker for consumer purchasing and enhancing brand image. 3) Escorts the business performance towards betterment e.g., positively impacts bottom-line returns, increases competitive advantage, encourages cross-functional integration. 4) Helps in making efforts in company's marketing department by creating a positive company image and helping a company manage its reputation; CSR also supports higher esteem pricing, and enhances government affairs activities. This aspect of CSR that promotes Good corporate citizenship helps in continuing to find ways to be responsive to their various stakeholders, each with its own particular needs and interests, while still meeting its own needs to survive and thrive in the marketplace (Sims, 2003, p. 58). Economic aspects of CSR Whether it be national or international level, economic rewards for discretionary social responsibility are considered to be favorable treatment by social investors. Communities that deliver and present social investors before organisations, base their investment choices on the social responsibility of companies, thus partially countering the impact of short-term investors whose only concern in making investment decisions is quarterly profit statements. The Kinder, Lydenberg, and Domini scale of CSR (1990) was developed to assist them to make informed choices. In addition to individual investors, large pension funds are more likely to invest in socially responsible companies. Researchers when conducted experiments to promote CSR, discovered that pension fund investors actively encourage socially responsible behaviour in businesses in which they own stock. The economic returns available to a business with a good reputation from other businesses can take the form of access to capital from local bankers, being treated fairly by suppliers, professional vendors, and enhanced opportunities to join lucrative joint ventures. For example Brian Uzzi (1999) demonstrated that networking with bankers provides businesses easier access to capital at favourable rates. Furthermore they revealed the positive business returns associated with networking among business people in various industries in New York City. Many theorists think that CSR should be a dual process i.e., in addition to rewards to businesses perceived to be good citizens, there must be some be punishment for those judged to be 'free riders'. Philanthropical and legal aspect of CSR CSR is usually identified as four broad areas of cooperation however the main premise of the four areas is found in the basic nature of the service, which is a privately based on the economic entity with jural standing, whose members are expected to make decisions that will have a significant impact on a number of constituents (Brummer, 1991). It is not necessary that all theorists and researchers should come to a central point that a corporation has all four responsibilities. In fact some do not believe that corporations have a moral responsibility; others believe that moral and social responsibilities come after economic and legal ones. However, the dilemma concerning the issue of harmonising the firm's economic alignment with its social orientation still lingers which initiated a four-part conceptualisation of CSR. It induced the notion that the corporation has not only economic and legal obligations but ethical and philanthropic responsibilities as well (Carroll, 1979). Philanthropy is justified under the name of CSR and presents a considerable overlap in the shared-fate and the public relations rationales, but the justifications themselves are quite unique. Even so, companies may use both to justify an act of philanthropy. In the public relations rationale, public recognition for philanthropy has facilitated a partial transformation of a public good so that exclusive gain can accrue to some businesses and not others. The transformation is not complete because the economic gain is still difficult to measure precisely; nevertheless, the free-rider problem has been partially addressed. Social responsibility in the context of legal reaction is based on the premise that a corporation reacts to prevailing social norms, values, and performance expectations (Karake, 1999, p. 21). This view emphasises the bigger picture of what a society expects of corporations, to go beyond the provision of goods and services. At minimum, corporations must be accountable for the ecological, environmental, and social costs incurred by their action whereas at maximum, corporations must react and contribute to solving society's problems (Karake, 1999, p. 21). This view is often misinterpreted, i.e., it is perceived in a narrow sense which limits it to assume the involving corporate voluntary actions only. From this interpretation one can seek assistance in separating corporate actions that are required by economic or legal imperative and those that are initiated voluntarily. Karake (1999) does not focus on the voluntary or involuntary corporate actions, rather he defines the broader aspect of interpreting the social action to identify it as socially responsible actions that go beyond the law. Such corporate actions not only tell us about reactions to the expectations of specific corporate constituents shareholders, but it also explores what social activists and unions believe. Legal social responsibility values entail an organisation to abide by various laws, which play a significant role in regulatory agencies, and implementing policies consistent with court rulings and legislation. Therefore various researches have indicated that managers at upper level perceive their organisations to be less 'law abiding' than lower level managers. However research indicates that upper level managers due to more exposure towards interaction with external constituents on a regular basis are more sensitive to legislation and future legal trends (Scherer et al, 1993). Currently ISO is involved in developing a particular standard to enable CSR so that establishing a comprehensive and harmonising approach would be easier to implement not only on a local basis but also on a global platform that would provide practical guidance related to operationalising social responsibility, identifying and engaging with stakeholders and enhancing credibility of reports and claims made about social responsibility (ISO Advisory Group, April 30, 2004). The standards chosen by the ISO to implement are management system standards that identify internal organisational processes while analysing those management practices that firms procrastinate to obtain certification without imposing specific performance targets (Christmann & Taylor, 2006). References Anderson W. Jerry, (1989) Corporate Social Responsibility: Guidelines for Top Management: Quorum Books: New York. Besser L. 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