Advantages and Disadvantages of Corporate Social Responsiblity to Stakeholders

Question

What are the Advantages and Disadvantages of Corporate Social Responsibility to Stakeholders?

Answer

One advantage of CSR (Corporate Social Responsibility) is that it improves profitability and value. The organisation’s image receives a massive boost, and so, people invest in its operations. The reputation among investors is heightened, for example, mutual funds that integrate CSR into their stock selection. This benefits the shareholders who own a share of stock in the corporation as the company’s stock value increases and its access to investment capital is eased. At the same time, CSR shifts the focus of the company from the objective that made it a financial entity in the first place (profit maximisation). The effect on cash flow is a disadvantage for shareholders as profit-making obligations are not being fulfilled. The community and customers also benefit from charitable contributions, product safety and quality, and corporate involvement in community education, employment and homelessness programs.

However, the customers may also experience disadvantages as a result of CSR. More often than not, CSR programs increase the expenditure of an organisation. This is passed on to customers in the form of increased prices of products, which the customer has to pay. This mainly affects small organisations, as large firms can absorb this increased expenditure. Employees (and managers) also benefit from the implementation of CSR programs. Human resource (HR) based CSR is when organisations focus on the well-being of their own staff and improve their living/working conditions. HR CSR includes but is not limited to medical insurance and compassionate leave so that employees can have a better welfare. Managers can have higher salaries and employees earn higher wages if a company’s value increases due to CSR. However, CSR expenditure may not allow for any wage/salary gains to be made in particular, in small organisations. Finally, CSR benefits all stakeholders in the sense that CSR is about achieving long term results and business continuity.