Sustainability of Ethics - Essay Example

ETHICS AND SUSTAINABILITY Introduction In the recent decades the topic of corporate social responsibility has obtained thenew course and reflection both in theory and practice. According to Bosch-Badia, Montllor-Serrats and Tarrazon (2013), the interest in CSR appeared because of its importance to the companies’ ability to return profits to the society. The multiple definitions of CSR put a common emphasis on the business’s performance of ethical practices, which help to increase the well-being of the community where they operate (Beal, 2013). These practices include social and environmental initiatives, which encompass economic and ethical expectations of a community. However, some scholars such as Milton Friedman have argued about the other reason standing behind being corporations socially directed. This is the idea of simple increasing profit. For that purpose, the following paper will argue on the findings of Friedman and their applicability to the modern business activities. It will also critically discuss the costs and benefits of corporate social responsibility as well as to provide an explanation to the reasons which organizations see in promoting their sustainable and ethical practices. Argument This essay argues that in terms of impact on company’s profit, social responsibility plays the same role as any other resource and activity which executives use to obtain more financial outcome for their companies, according to Milton Friedman (1970). He states that corporate executives’ responsibility toward society is restricted by laws and rules and serves interests of an employer rather than being completely voluntary and directed on conducting philanthropy business. Moreover, when the executive follows social responsibility activities, such as concern about the environment, one actually disregards interests of employer affecting the income and output of a business in its striving to make money, but not to donate them for the social benefits only (O’leary, 2004). Evidence The argument against the concept of CSR is usually reflected by the findings of Friedman, who sees the involvement of social responsibility in maximizing company’s profit while social issues are not the concern of businesses and should be resolved by the free market system (Carroll & Shabana, 2010). Whether the free market is not capable to solve these issues then it should be done through the engagement of business, but upon the government to commit this job. This means that managers should not nurture social skills or make any socially directed decisions. The other argument that stands against the social corporate responsibility is in the primary purpose of any business. It is obvious that a company or an organization is created to bring profit, while being socially responsible is another way to reach the goals of earning the profit, but not in changing the company’s primary target. As stated (Kashyap, Mir & Mir, n.d.), businesses have enough power, hence there is no necessity to use other power of social impact. Moreover, in the attempt to promote social initiatives, there appear greater gaps in the business operations and thus companies are able to lose their competitive advantage. Another important point to support that argument that businesses would not implement social initiatives if there was no benefit from them. Thus, according to Reinhardt, Stavins, and Vietor (2008), such initiatives and corporate decisions as they are made by the managers and directors, who make socially-directed decisions based on the interests of profit-minded shareholders. However, that does not mean that investors agree to accept such CSR profit sacrificing activities as they may cost the company its earnings. Along with Friedman’s considerations about the business to have no social responsibilities beyond making money, there are many companies that apply CSR policies within their performance in order to be a good global citizen. However, such intentions o after profit seeking aspirations, hence, cannot be used as socially-oriented initiatives (Sprinkle & Maines, 2010). In addition, companies, in their desire to attract more investors and stakeholders, use CSR concept to show their social perspective. Here, however, CSR adds another cost of doing business, but it also has certain benefits. Businesses are tend to believe that CSR principles are able to recruit, motivate and retain employees and offer numerous advantageous benefits for staff. Thus, for Nestle, a Swiss based food and beverages company, the CSR principles can be observed through its Creating Shared Value initiative, which takes social and environmental concerns under its consideration (Creating Shared Value, 2015). In terms of other group of stakeholders, the consumers, using CSR principles helps companies to be more trusted businesses and gain good reputation. Such company is Tom’s Shoes, an American for-profit shoes and eyewear company, which by means of CSR principles positively impacts numerous communities in need (Corporate responsibility at Toms, 2015). However, the costs of using the CSR approach within this company are high as they are connected with Tom’s shoes strategy to give a pair of shoes to those in need when one pair is sold through the store. In addition, not all CSR initiatives can be successful. Thus, according to Weber (2008), using social approach in providing food for people in the developing countries, the Nestle Company failed to meet the requirements of water protection, as the result of which the death rate among product users grew. Such situation caused losses in financial area as well as damage of reputation and a drop in employee morale within the company (Weber, 2008). For the modern companies, social responsibility has become a big business, despite the fact that many of them fail to meet stakeholders’ expectations. However, through promotion and demonstration of their sustainable and ethical business practices, it is possible to earn trust of the stakeholders and thus obtain good reputation. Thus, according to Guardian article, PepsiCo, an American food and beverage company presents its sustainability policies through stakeholder engagement and shareholder meeting where it identifies and discloses climate change, issues on water protection and public health (Confino, 2014). General Electric, an American corporation uses HR department in order to integrate its sustainability among the employees and training them. An America Coca Cola Company displays its improvement in water consumption and identified the need for a third-party evaluation of the water management. Discussion With the arguments against the concept of CSR and Friedman’s consideration about the inability of companies to follow socially-oriented way of business without thinking about the profit, there appear, however, some points to think about. According to an article (Friedman, 2013) a business is as responsible as a person working in it, even if to take the sample of paying the bills, which each company should take into account each month. Therefore, each company that wants to have more customers and more profit should take into account the needs of its stakeholders, especially when it comes to the modern companies. For that reason, there is an argument that companies are responsible and they, despite Friedman’s considerations, if not want but should follow the rules of the business game beyond those codified into law. Moreover, as the primary aim of the company is to operate for longer time, thus being responsible regarding society and environment is the main goal. Employees within a company are also treated responsible as they receive pays and join the community with its rules and regulations, which ensure the business to be responsible. Broomhil (2007) states that there is little possibility that a voluntary corporate social responsibility would have a significant difference on the business, rather corporate accountability is more demanding. Since CSR initiatives are the public efforts, they make it more complicated, which media, organizations and trade unions use to protect human rights, employees and the environment, rather than help to make a profit for a company or its good reputation. However, that does not mean that companies that use CSR and those which failed to meet certain requirements are good or bad. The question is rather about the possibility to fail to meet social standards in the future. Evaluating the benefits of CSR, it is possible to understand the potential for advancing social control over businesses, which are already controlled by the stakeholders and this pressure goes through economic decisions. In addition, companies are able to unite social and environmental needs in their activities while economy makes them seek new values to join in the economic decisions. There is also an idea that business profit and CSR go together, however, whether from the theoretical perspective this idea can be proved. It is obvious that a company gets its reputation and thus profit by doing something significant and socially-oriented. However, after the major boost it will not obtain as much as an effect when it expands the initiatives of CSR. To some extent, the costs of CSR initiatives expanding will overbalance the business benefits. If to say simply, there is no guarantee that a company will gain its millions just because it builds a hospital or a school (Kolstad, 2006). Conclusion This essay has argued of the inability of companies to use CSR concept without thinking about the further impact on their profit and outcomes. As criticized by Friedman, corporate social responsibility spoils corporate value limiting philanthropic expenses. However, the concept of CSR has integrated into value creation and as a result even if CSR does not maximize earnings directly, it influences business profit (Bosch-Badia, Montllor-Serrats & Tarrazon, 2013). This explains why companies especially within the modern business environment use the concepts of CSR. They tend to use social approaches as the concerns about the environment and social well-being as new ways for understanding and attraction of employees, consumers, investors and government agencies in order to continue to provide services and goods to people and making profit. Along with it, while societal goals are laudable (Sprinkle & Maines, 2010), businesses cannot want to follow the for-profit strategies, rather they need to assess what they get and give from their strategies and CSR decisions. 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