Corporate social responsibility (CSR) is defined as “Economic, legal, ethical, and discretionary expectations that society has of organizations at a given point of time”(Carroll and Buchholtz 2003, p 36). Corporate social responsibility is the chance every person has dealing with in an organization from any level of hierarchy and to be a positive giver to the need of the society around them, the needs and community of the nation, needs and community of the wider world. Any organization or corporation a person works for feel at dedicate their skills, time and resources and they woulb be proud to be a part of an organization involved in such initiative.So corporation have a role and individuals with in a corporation have a role and it is about connection between company’s commitments, the company’s impact and individuals of that company.
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The question remains why is it gaining attention by the corporate lately? Part of the reason is mainly because of the increase in energy prices and environmental issues related with that but a trend that has been developing now for more than a decade now for the companies to consider the different responsibilities concerning the moral, ethical principals in the business world to earn the trust and loyalty of investors. On a broader view it also concerns with other communes like employees, customers, suppliers, local community, city, state, country or environmental bodies or in short potential ‘stakeholders’. Illustrated in the figure below
Figure 1: Corporate Social Responsibility
There is no traditional or universally accepted definition of CSR but corporate or organizations generally agree on issues of CSR where they disagree is whether engaging in CSR activities would improve a company’s performance or not. Some corporation believe that involving themselves in CSR would increase their brand performance and image and some corporations believe that it reduces their progress and profitability and some also solely believe in true meaning of CSR without expecting benefits out of it we can say out of generosity. It all depends on perceptions of the particular organization or corporation.
The purpose of this report is to understand and reason the arguments about the dilemma regarding CSR, whether an organization should embrace CSR or avoid it by focusing more on the company’s performance or engaging in CSR would help organization to improve their financial profile as well as their overall image.
Why is CSR Double edged sword?
A number of reasons led the Business leaders embrace CSR. Accidents, mishaps, court settlements etc often force businesses into concentrating on CSR initiatives. Wal-Mart did also embrace CSR after the Katrina hurricane incident. Some do it out of generosity with actual intention to serve the betterment of the society and some do it to have a better brand image compared to their competitors. But what are the impacts that would be possible depending upon the choices the organization makes.
Companies CSR centred.
If an organization is just concerned with CSR or their strategies focus more on CSR there can be several implications: the organization might not actually be interested in profit generation we can say a non- profit organization or they may incur losses and would not be able to achieve the expected value or name for themselves. (Aupperle et al.) Suggest that a dilemma between social responsibility and financial performance due to increased costs from engaging themselves in a CSR would be disadvantage for a firm compared to other firms not involved in CSR. An organization sometimes may be deflected from their core business strategies when focusing on CSR. Stedavies a communication consultant gives an example of such consequence: Unilever, an Anglo-Dutch consumer-goods company in 2004-05 joined Oxfam, dedicated themselves for social responsibility. Uniliver supported a sum 300,000 full-time job, surprisingly it generated a total value $630m of which $130m was paid as tax to Indonesian Government. They learnt that they stretched their hands far too much in support to their social responsibility. Stedavies sates that “If doing good to the society misleads a firm from the core business they may actually irresponsible to an extent. A non- profitable business trying to do good to the society is no good.” only a few companies would answer a question their financial benefit from doing good.
Further more Robert Reich, a former labour secretary under Bill Clinton, now at the University of California “argues that the energy spent on CSR diverts attention from establishing rules that advance the common good. In a democracy, he says, that should be the job of elected governments, not profit-maximising companies.”(Prblogger.com )
According to the studies it is very rare that a company would fail to gain any kind of benefits though it requires an investment that doesn’t count in to the company losses. Charities would definitely affect the main stream business.
Companies profit centred
Example of such case would be a tobacco company. Can a tobacco company be socially responsible if its products are harmful to environment and hazardous to health?
Elen Lewis believes that companies producing products concerned with nuclear, arms and tobacco are evil threat to the world. British American tobacco (BAT) world’s 2nd largest tobacco company after Phillip morris owns brands like Dunhils and Rothams. BAT sold 801 million tobaccos in 2001 and generated huge profit. The company was dragged into controversy when they published their social report in 14 markets worldwide. The argument was when a company produces a product which is harmful to health and environment and willing to make profits out it cannot be socially responsible.
Jo Johnston clarifies that the “tobacco companies do exceptionally well financially but it is the money making that kills people”
Mallen Baker, a writer, commentator and strategic advisor on corporate social responsibility (CSR), and the chief executive of Business Respect provides us with several arguments against the CSR.
The money invested belongs to the shareholders the use of money by the CSR managers is not right for the part of share holders.
Most effective business are not concerned with CSR. CSR is jus a cover for some business to support their bad reputation.
It is very essential we focus main stream business line it is very difficult to get back after we lost track.
Government authorities and regulatory bodies are required to manage the social responsibility.
Corporation main business is to make profit. They do not care about the environmental aspects.
Friedman (1970) also states that using all its resources and engaging in increasing the profits its the only social responsibility for businesses as long as they are played well under rules and regulations.
These arguments are valid for an organization who is concerned only about their business and their financial performance but these hold true up till some extent. There are many arguments about appealing firms to adopt CSR principles, it is agreed that government is responsible for addressing these issues but, a firm’s role in these issues can be largely considerable. 51 US corporation and 49 nation states contribute to 100 largest global economies measured by GDP, this as depicted by OECD. There role in contributing to the social concerns could be substantial. Government authorities set up rules, regulations and standards and it is a firm’s responsibility to abide by rules and regulations but the work environment can further be improved by improving the quality of work practice, stable environment and good facilities for employees etc.
CSR and Financial performance go hand in hand!!
There are examples of many Corporations which are doing exceptionally well with both CSR and financial performances. Socially responsible companies can gain several bottom line benefits though the benefits are not immediate.
Socially responsible companies have managed to gain a brand image and reputation.
Consumers are usually drawn toward companies addressing social related issues.
A company with good CSR would manage to have a good social network and possibly potential trading partners and capital investment.
A company with CSR reputation would avoid unnecessary road bumps or rare negative events which can cause severe losses.
Companies that adopt CSR principles are in less exposure to risks like corruption and bribery as they have transparent trading methods and no illegal ways of getting the job done. More focus on the quality would ensure less chances of recalling defective product lines. The workers or employers enjoys a good working space and in turn work efficiently with is most essential for a company. Since it’s the best possible strategy we would look into it in details.
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A good example of such Company is INDITEX. It is one of the largest fashion retailers in the world with 8 different concept stores like Zara, Berksha, Pull & bear, Oysho, Massimo Dutti, Zara home, Stradivarius, Uterque. It has around 4706 stores across 77 countries. It has more than 100 companies operating under design, manufacturing and distribution. The Company has wonderful financial data and its total revenues have increased from €10.4 m to €11.08.
year
31/1/2007
31/1/2008
31/1/2009
31/1/2010
Total revenue million €
8,196.30
9,434.70
10,407.00
11,083.50
Table 1.0 Total revenues generated.
Figure 2.0 chart showing total revenues growth.
Clearly it shows the Growth in company Inditex. Apart form this company Inditex also has a great social responsibility. It operates on a large scale globally with social economic and environmental implication. In 2006 Inditex launched environmental strategy plan (PEMA 2007-2010) with an intention of using environment variable in the business process.
Over the years Sustainability was developed to be a main strategic concept keeping in mind the company’s financial growth. Inditex has successfully implemented the PEMA plan. Their action of lines includes all the areas like corporate office and factories, product, logistics stores and society.
Implementing all these strategies has following commitments.
50% usage of renewable resources or high efficiency energy resources in head offices and logistic centres.
Road transport distribution CO2 emission reduction by 20%.
20% energy consumption reduction in stores.
Reduce the carbon foot print from the products.
Figure 3: Inditex action of lines (Inditex, 2009)
Apart form these Inditex is also involved in several human development projects. It offers proper training to its employees with all the basic amenities, maintains good health and safety standards. Community development programmes were established to improve education facilities, technical training facilities emergency programmes like recently it donated € 1 million to the relief fund for the Japan showing its commitments towards social responsibility. Hence Inditex is a best example doing exceptionally well with both CSR and financial performances it manages to cost unnecessary production costs, wastages in terms of monetary aspects as well as energy aspects.
Conclusion:
For the fact there is no dilemma whether corporation is supposed to embrace CSR or not, CSR indeed helps a corporation directly or indirectly immediately or over a period of time. A good CSR would definitely improve a company’s brand image and customers get attracted to corporation having a good brand image and social responsibility and show a commitment towards human welfare. The trend over past decade is changing the corporations are more concerned about environmental and social aspect and are developing strategies to implement CSR and also to have good financial performance as seen in Inditex example.
It becomes very essential for a company to understand how a to implement CSR into a strategy which could fetch them a
Figure 4.0 Strategy in the context of society. Competitive advantage, benefits to the share holder and benefits to the society at large.
The figure3 gives an explanation of how to develop a strategy considering all the factors like company development, industry development, country development and societal development. This has impact on Quality of life, economic growth and prosperity, meaning and fulfilment, competitiveness, reputation (local, national, global) and sustainability for a greater tomorrow.
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