In 1960s, people were more concern about ethics in business and feel that company should respond in environment and social more than before. At that time, the aim of company was only maximize profit for investors. As a consequence, a new principle about more responsibility in running business was established. Business ethics are the accepted principles of right or wrong governing the conduct of business people. Kim Y. lecture (2009) The most common issues engage employee, human right and environmental regulations. After that, it was developed to Corporate Social Responsibility or CSR in 1970s. The entirety of CSR can be discerned into the three words contained within its phrase: ‘corporate,’ ‘social,’ and ‘responsibility.’ Therefore, in broad terms, CSR covers the responsibilities corporations have to the societies within which they are based and operate. The University of Maimi (2009) The word corporate means a company that run an activities in order to gain the profit from an investment. Social means a group of people more than 15 people who have relationship or the same goal. The most important word is responsibility which means acceptance both of good and bad effect that occur by the company including the responding to prevent and correct the effect.
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The real definition of CSR has still discussed although there is considerable common between all of definitions. There are the different definitions. ‘The social responsibility of the firm is to increase its profits.’ Friedman (1970) ‘The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.’ Carroll (1979) In the Commission’s policy Communication, CSR was defined as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”. It is essentially to prepare to take to the lead and show the board and stakeholders voluntarily that they take CSR seriously. CSR is a win-win situation that companies increase their profitability and society benefits at the same time. The EU’s Lisbon Strategy for Growth and Jobs aims to build a business-friendly environment, so EU CSR policy is consequently compatible with this. Europa press releases (2009)
The early CSR models represented by Sethi had three tiers for classifying corporate behavior which he labeled “corporate social performance”. First level is a social obligation which base on responding to legal and market constraints. Next level is social responsibility which is addressing societal norms, values and expectations of performance. The last level is social responsiveness which base on anticipatory and preventive adaptation to social needs. Sethi, S.P. (1975)
Building on the former model, Carroll presented his CSR model as a pyramid that had four classes (economic, legal, ethical and philanthropic) in 1991. Carroll, A.B. (1979) The first class is economic responsibilities. It is a normal objective of company that is being profit. The next step after being profit is legal responsibilities. Law or rule controls the activities of the company. If the company does not obey the law, it might be charged or has to pay penalty fee or tax. These two steps are common in the business. Ethical responsibilities are the next level. The company can choose to do what is right and fair and avoid harm. For example, a company decides to donate some of profit to poor children. The highest level is philanthropic responsibilities which is a voluntary action no rule or no force to command.
In 1980s, a new concept of CSR, stakeholder theory, was raised by Freeman. In the traditional view of the company, the shareholders or the owners of the firm get the most importance priority to achieve their need. In this model, the company converts the input of investors, suppliers and employees into salable outputs which customers buy in order to gain returning some capital benefit to the company. By this model, the companies only take in hand the needs of those four parties (investors or shareholders, suppliers, employees and customers). However, stakeholder theory argues that there are more other parties involved such as governmental agents, competitors and civil society. All of stakeholders get effect and take influence by the company. The stakeholder theory like a combination of traditional company and CSR which balances a maximize profit of investors and social responsibility in order to achieve business sustainability.
Classifying by business process, there are two steps: CSR in process and CSR after process. Campaigns of reducing emissions or reducing the carbon footprint in production are examples of CSR in process which is not only following CSR campaign but also cost reduction. Other well known campaigns are mostly CSR after process. Europa press releases (2009)
According to Wettstein’s article about Beyond Voluntariness, Beyond CSR: Making a Case for Human Rights and Justice, CSR is a normative perception dealing with what corporations should do and how they ought to act. It is an inherently moral in nature. It is more than mere compliance with given laws and regulations. So it must automatically be voluntary, not be mandated by laws. WETTSTEIN F. (2009)
There are many debates on CSR which is focus on recording of donating a share of their profits to charity by corporation. The core of CSR used to be seen as philanthropic responsibilities, so companies try to represent their social responsibility by increasing donating share of their profits to social. CSR was seen as external force in running a business. It was not a basis for legitimate business conduct but it was an equipment to give something back to the society that was neither commanded nor expected, but rather merely appreciated. Werrstein F. (2009)
The examples of CSR Company
There are a lot of companies that adopt CSR in their strategy and also a lot of ways to integrate CSR into the company both in process and after process such as donation, producing green products, improvement of human resource and protection an environment. The examples of CSR companies help to understand the step in the global strategic planning process.
The first example is fashion field firm. In report about “How ethical is your fashion?”, Jane Shepherdson, who became chief executive of the Whistles womenswear chain, give her view that “we need to be tempted into buying beautiful, ethical, sustainable clothes” BBC News website (2008) In report about “Primark fires child worker firms”, there is more concern about CSR in fashion industry. For example, Nike has responded to consumer concerns about ethical standards by publishing details of all suppliers. Primark, the UK clothing firm on high street, has fired three Indian suppliers due to using child labors to make goods. The sub-contracted suppliers of Primark used child labor to carry out embroidery and sequin work. BBC News website (2008)
The next example is in the pharmaceutical field. In 1987, Merck, the second-largest pharmaceutical company in the world and a global leader in consumer products and animal care, lunched the Merck MECTIZAN® Donation Program (MDP) which is the largest on-going medical donation program. The MDP provides MECTIZAN for the treatment of river blindness in endemic countries. Since 1987, the MDP has approved more than 530 million treatments of MECTIZAN. With only one annual dose, MECTIZAN is well suited for distribution in isolated areas and the only well-tolerated drug known to halt the development of a disease. The company hoped that transmission of river blindness will be interrupted and the disease will be virtually eliminated by the continued use of MECTIZAN. Merck (2006)
Marks & Spencer (M&S) is one of the UK’s leading retailers of clothing, food and general merchandise such as women’s clothing, menswear, lingerie, beauty and home. The founders of M&S believed that building good relationships with employees, suppliers and wider society was the best guarantee of long-term success so they implement CSR in all business unit that have own CSR strategy. Their CSR strategies based around the brand value of trust and balanced with customer needs and all stakeholder expectations and are grouped into three areas which are people products and community. In 2004, M&S launched The Marks & Start community program focusing in preparing people ready for work. Target groups are the young unemployed, disabled people, parents returning to work and school students. The program provided individuals a taste of life in a working atmosphere and the confidence and ability to achieve employment. M&S allocate their employees as a ‘buddy’. The program has improved staff morale and contributed to make M&S as a great place to work and they felt that they had increased their skills. The philosophy of M&S is ‘helping others to help themselves’ so M&S provide knowledge and experience in order to let them stay in the world buy themselves. Article 13 (2005)
In 2008, Exxon Mobil Corporation, the U.S.-based energy giant, provided a combined $189.1 million in cash, goods and services worldwide. Rex W. Tillerson, Chairman and CEO of Exxon Mobil, said that “the goal of our Corporate Citizenship Report in 2008 is to detail our performance and commitment in our most significant citizenship areas: corporate governance, safety and health, environmental performance, managing climate change risks, economic development, and human rights and security”. The company pays attention to many social responsibilities such as education, environment, health, women’s economic opportunity initiative and worldwide giving. Exxon Mobil received Malaria Award from Global Business Coalition in 2008. Malaria is one of the successful projects. It has fight with Malaria in Africa where the firm operates for more than eight years. The company recognized through their employees in Africa what an impact of malaria on their lives and the economic development. So Exxon Mobil decided to fight against malaria through the company’s Africa Health Initiative. Exxon Mobil’s website (2008)
Last but not least, Nestlé UK has provided assistance to improve farmers’ livelihoods through productivity and quality improvements including setting up an eco-friendly, post-harvest treatment. Nestlé is currently helping over 3,500 of the poorest coffee farmers in El Salvador and Ethiopia where has benefited of fair premium prices in trade for high quality Arabica coffee beans. The Partners’ Blend project helps farmers grow higher quality coffee, develop communities, increase yield and achieve a higher standard of life. With this program, Nestlé applies sustainable approach to particularly poor producing communities in those areas. After successful in the UK, Ireland and Sweden have followed up that will be launching fair-trade certified coffee products. A long term commitment of Nestlé is developing sustainable agricultural practices in order to help relieve hardship and poverty for poor farmers. Supporting their farmers also helps Nestlé to assure continuous supply high quality of coffee beans. This program increases a good reputation and brand of Nestlé in social responsibility area. Nestlé (2006)
The impact of CSR in the business
In tracking the impact of CSR by Jeffrey Marshall, Geoffrey Heal, Garrett Professor of Public Policy and Business Responsibility and professor of economics and finance at Columbia University, was interviewed about impact of CSR. According to the interview, companies are for-profit entities but there is a change going on in terms of the pressures that society puts on businesses to address social and environmental issues. He gave example of companies that pay attention to society and environment. He noted about green company that there are two issues going on this topic. In the one side, customers are willing to pay more if they can buy green product which is likely another factor quality of product. At the same time, the firms are able to increase product price due to insensitive price customer in green products. An argument about short term of financial position of CSR companies was issued in the downturn economic. However, the companies recognize that CSR is long term investment in the brand and reputation. The recruitment is a bunch of different issues. This issue was raised by Mark Tercek, senior executives of Goldman Sachs. It is increasingly critical in recruitment and retention to have a really positive social and environmental profile. New hires concern not just salary or the status of the firm but they want to work for the company that makes them proud to be in that company. CSR is a factor that encourages new hires to work with that company. Jeffrey M (2008)
In 2000, the trend of CSR boomed. The Organisation for Economic Co-operation and DevelopmentHYPERLINK “http://www.oecd.org/” releases guidelines for multinational enterprises. The richest countries in the world launched the rule for their member of blocking company that does not adopt CSR. So without CSR program, lots of traditional company cannot trade with companies in OECD. OECD (2009)
Socially Responsible Investment (SRI) or green investment in the past is a new impact from CSR to investment. Ethical Investment means avoiding invest in bad things such as cigarette, alcohol drinks or weapons. There have investment funds which invest only in CSR companies.
It is clear that CSR is one way of non tariff discriminations in the modern world. It does not stick as a law but it effect doing business in international environment.
The consequences of adopting CSR
Learning about the consequences of CSR help to understand the purpose of mission of CSR. What should they do? what have they done? There are many arguments about the consequences of concerning of Corporate Social Responsibility. In this part of report, the advantages or benefits and disadvantages or risk of adopting CSR are discussed.
Philip Kotler, Marketing Guru, gave an opinion about benefits of CSR. He mentioned that the first benefit is increasing sale volume and market share. He noted that it is not directly relate between CSR and profit. But CSR provides more opportunity for company that concern about CSR. Philip K. 2005
At lease, Working with CSR is better than does not. Reduction on cost of goods sold is another benefit. In the business process, if the firm can drive out more quality of employees or cut out some substances from processes that means reduce cost of process as well. Philip K. 2005 There is often a direct benefit to profitability. CSR is not only for external society but also internal responsibility. If the companies pay attention to their employees such as training , environment in work place and work-life balance, this increase satisfaction and loyalty from their employments. This also helps productivity and product quality. Europa press releases (2009)
However, Public relationship which is the way that companies communicate with public and marketing are the next issue. If the companies present their CSR news, it encourages and sparks correspondents and investors to pay attention in the company. Philip K. 2005
Moreover, an advantage of company image, brand and reputation is another advantage of CSR. Europa press releases (2009) The benefit is brand positioning and reputation. Philip K. 2005
In Philip’s perspective, CSR is a challenge of the company. It is not easy or too difficult to achieve CSR. He recommended three step of developing CSR. First is choosing the suitable topic and then pick the popular or innovation way. Last step is implementing and present the success. Finally, evaluation is important to be a lesson in the future. Philip K. 2005
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In Business green website, it raises the issue that green consumer spending defies the downturn. In this difficult economic climate, consumer spending generally drops. But a major report shows that green market products and services grow by a recession-busting five percent or £6.4 billion in value. According to the report by Guardian newspaper, customer expenditure rose on a various range of green products and services such as green energy tariffs, energy-efficient appliances and small-scale renewable energy projects. However, it noted that while the green market has defied expectations and continued to grow steadily in recent years, this sector still accounts for less than one per cent of total consumer expending. Cath E. (2009)
Even though, this is an economic downturn or economic crisis but CSR remains a priority for the companies being part of long-term strategy. Although, in this situation, the companies might be pressure to reduce their CSR projects. As the same time, in short-term strategy, the board should advocate that companies especially in financial department pay more attention on ethics and social needs. Overall, thoughtfulness of short-term social needs and long-term strategy should persuade companies to keep to their CSR strategies through this downturn time. Europa press releases (2009)
Many of the global problems we are facing today cannot be solved by any single actor alone anymore. They require joint action of a variety of actors and sectors, all with a genuine interest in truly global solutions. Multinational corporations must offer their support where their expertise is key for improving the global human rights situation. New forms of governance such as public policy networks or other forms of public-private partnerships have become increasingly effective in addressing complex global problems. WETTSTEIN F. (2009)
Conclusion
From the past, the traditional view of the role of the company is only maximizing their profit for investors. If the company avoids destroying environment or hiring child labor, it only causes by the law. In the new view of the role of the company or CSR program, the company concerns more in their employees, human rights, environment and corruption. CSR is not rule; the companies do not have to follow but them willing to do the good thing to society and respond for the effect of their actions. As can be seem in examples, there are more and more companies that adopt CSR in their strategy. The biggest advantages of being with CSR are reputation and reduce cost of goods sold. There also are a lot of issues around CSR and CSI that should be research in detail for impact of concerning on social.
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