Executive Summary
This paper discusses Corporate Social Responsibility (CSR). CSR refers to the responsibility of that an organization has to avoid actions that harm the society.CSR is important dues to various reasons. First and foremost, it helps companies to solve societal problems. Secondly, it helps in attracting customers and thirdly it contributes to the satisfaction of customers. Fourthly, CSR enables organizations to engage in positive public relations and fifthly it reduces the operational costs. Sixthly, CSR increase the business opportunities for companies and seventhly it increase the innovation capacities if companies. Lastly CSR helps companies to differentiate their Brands. The process of CSR incorporates the external and internal stakeholders. CSR has transformed Management Accounting because it requires the Management Accountants to come up with reports that are true and reliable.
1.0Introduction
The contemporary marketplace is characterized by multicultural intricacy and globalization hence the firms are faced with unique stakeholders' interest due to the complex interactions between them. Accordingly, the firms require a comprehensive approach to the market that should extend beyond the traditional realm in a bid to achieve their objectives (Lee, Lee & Li, 2012). The customers are organized, demanding and informed thus firms must strive to offer products and services in ways that meet the customers' expectations. The social networks such as Face book and Twitter among others has pressured the managements of various companies to pay keen attention to their business ethics and their behaviors (Maon, Swaen & Lindgreen, 2010). The firms are required to be socially responsible, and this is essential to the survival and long-term performance of all businesses. Markedly, CSR impacts on the good will and reputation of an organization. Corporations have an obligation to develop the society and to protect the environment because in this era importance of CSR has increased significantly. In other words, CSR has become an obligation and responsibility for all companies. Notably, 80% of the International Chief Executive Officers (CEOs) consider CSR a significant component of their profitability (Pearce & Doh, 2012). This paper elaborates the concept of CSR, its importance to a company, the process of CSR and its impact on Management Accounting.
2.0What is Corporate Social Responsibility
CSR refers to a corporation's duty to make wealth may ways that do not harm the society. The major elements of CSR include the voluntary social programs, market forces, and the mandated social programs. The voluntary programs exceed regulation in matters that deal with discrimination, safety, and pollution. Besides, the voluntary social programs respond to the national consensus through charity work (Scalet & Kelly, 2010). More importantly, CSR aims at making changes in the society by engaging in activities that are beyond the consensus of the public. The main idea behind CSR is that the corporations have responsibilities that are beyond the execution of the economic objectives. The doctrine of CSR has been evolving over time to the extent that requires expansive actions. The stakeholders have earned the power to impose the interests and agendas. Moreover, the legal and ethical philosophies underlying CSR have matured (Lee, Lee & Li, 2012).
Corporations have an obligation to develop the society and to protect the environment because in this era importance of CSR has increased significantly. In other words, CSR has become an obligation and responsibility for all companies (Maon, Swaen & Lindgreen, 2010).Currently, CSR is an essential component of all business organization, and it focuses activities that increase the benefits of the company to all the stakeholders. Companies engage in social and environment-friendly activities in a bid to enhance their reputation and goodwill. Accordingly, the impact of CSR cannot be overemphasized because it touches on all aspects of business (Pearce & Doh, 2012).
Companies across the world are under pressure to embrace Corporate Social Responsibility (CSR) because the notion is a hard-won and valuable social asset. CSR has gained popularity because it promotes transparency, sensible development, accountability, communication, integrity and a mutually beneficial exchange between the internal and external stakeholders (Scalet & Kelly, 2010).CSR has transformed from a nice thing to do to a mandatory thing to do because the ranking of organizations in the contemporary world depends on their corporate services to the environment, the community, the society and the disadvantaged people in the society. In other words, social activities are crucial factors because they determine the performance of corporate citizens. Accordingly, companies are supposed to embrace CSR by balancing the environmental, economic and social dimensions in their activities and at the same time build the value of shareholders (Lee, Lee & Li, 2012).
3.0Why CSR is important to a Company
3.1 Solving Social Problems
The rise of modern organizations has increased social problems in the society; hence, the players in the corporate world should play a part in finding solutions to the problems. It is in the best interest for companies to engage in the CSR because it the long run it reduces the chances of strict government regulations. The large firms possess huge reserves of financial and human capital hence they should devote part of the resources to dealing with the social issues (Maon, Swaen & Lindgreen, 2010). As an illustration, the Walt Disney Company practices CSR, and it is incorporated into its business model. The company focuses on labor standards, the environment, and community. Its charity work focuses on the natural disasters like the Haiti earthquake of 2010. Regarding volunteerism, Disney Company offers free tickets to millions of people who offer volunteer services, and this has encouraged a lot of persons in the U.S.A to volunteer in community activities. In reference to the environment, Disney Company fosters environmental; education through the Disney Motion Picture Studios that share compelling stories regarding the natural world. In addition to that, the company has impacted positively on the community through the Disney Worldwide Conservation Fund that was created in 1995. The fund aims at safeguarding ecosystems and wildlife (Pearce & Doh, 2012).
3.2 Attraction of customers
The CSR initiatives improve the attitude of the customers towards the companies that are socially responsible. The positive attitudes lead to high loyalty and low chance of switching to other brands and companies. More importantly, the activities encourage the existing customers to recommend a company to new customers. The CSR-conscious customers are usually willing to pay extra for products with social dimensions than similar products without social dimensions. In other words, CSR impacts positively on the customer’s attitudes. Additionally, the impact is stronger in cases where the fit between CSR and brand identity is high (Scalet & Kelly, 2010).
CSR may evoke either positive or negative emotions in customers depending on the strategies that are used to communicate information concerning the social activities. Organizations should be aware of the customers' skepticism when passing information about CSR because it the information is met with skepticism, it will not impact of the customers buying behavior. However, if the information is met with optimism, the customers' buying behavior will increase. Consumers trust the companies that live up to the CSR obligations and thigh trust contributes to the willingness to pay high prices for commodities and high brand loyalty (Lee, Lee & Li, 2012).
3.3 Satisfaction of employees
CSR leads satisfaction of the employees thus they feel proud to be associated with the company. The activities foster positive attitudes in the employees and this reduce their rates of turnover (Maon, Swaen & Lindgreen, 2010). For example, Starbucks Company is committed to doing business in a responsible and ethical manner and this. First and foremost, it is committed to the origin of its coffee; hence, it makes investments that are beneficial to the communities, coffee producers, and families that supply it with coffee. Secondly, Starbucks is committed to the environment because of its recycling programs and the "Green Teams" that foster conservation of the countries that grow coffee. Thirdly the company contributes to the development of communities where it operates. Lastly, the company is committed to its partners; hence, it treats the employees with dignity and respect (Pearce & Doh, 2012).
3.4 Positive Public Relations
The CSR activities provide the companies the chances of sharing its stories through the traditional and online media. As such, the companies do not spend money on advertising campaigns that are very expensive. The CSR yields free publicity as a result of the word of mouth marketing that comes with the CSR ventures (Scalet & Kelly, 2010). To illustrate, Microsoft Corporation's CSR performance is one of the best in the world because the company has been applying for its CSR program consistently. The company's reputation in the countries where it operates is good, and this has enhanced its brand name a great deal. Microsoft takes part in charity work, and its practices are socially responsible, and more importantly, it engages in activities that minimize its ecological footprint on the environment (Maon, Swaen & Lindgreen, 2010).
3.5 Reduction of costs
The CSR initiatives reduce the costs of companies because they help companies to hire and retain the best workers. The introduction of energy saving programs reduces the companies’ operational cost significantly. Through the CSR, companies manage potential liabilities and risks in an effective way. More importantly, the CSR helps companies to reduce their investment in the traditional forms of advertising (Pearce & Doh, 2012).
3.6 Increased business Opportunities
The CSR strategy helps companies to adopt an outside oriented approach in their dealings. It helps the company to have a constant dialogue with the suppliers, customers, and other stakeholders. The continuous interactions increase the companies' chances of learning about new business opportunities as soon as they emerge (Pearce & Doh, 2012).
3.7 Innovation
CSR offers companies the opportunity to come up with new ideas. Specifically, it helps the company to come up with ideas that increase the sustainability of the organizations in the market (Scalet & Kelly, 2010).
3.8 Brand differentiation
CSR helps companies to differentiate their brands from those of the competitors. The CSR enables the companies to find their voices in the market due to the incorporation of sustainable practices in their business models (Scalet & Kelly, 2010).
4.0The process of CSR and how changes apply
The process of CSR and changes that apply is summarized in the figure below.
Figure 1: CSR process
Source: (Maon, Swaen & Lindgreen, 2010).
The first step towards implementing CSR in an organization starts with the development of a CSR Strategy. The CSR department is responsible for coming up with a comprehensive and practical CSR strategy. At the second step, the institutional mechanism is operationalised, and it aims at involving the implementation of the CSR. The due diligence of the partner that helps in carrying out the CSR activity is ascertained at the third step. At step four, the project is developed, and it includes all the steps that will be followed (Maon, Swaen & Lindgreen, 2010). The project must be approved by the management and the investors before the agreement is finalized with the implementing agency. The CSR project should be monitored to ascertain whether it is progressing in the right direction. The organization should measure the impact of the project on the stakeholders by conducting qualitative and quantitative studies. Finally, the CSR department should draft a consolidated report regarding the project. More importantly, the department should communicate to both the external and internal stakeholders reading the CSR initiative (Maon, Swaen & Lindgreen, 2010).
5.0How CSR impacts Management Accounting
The demands that are imposed on the Management Accountants have increased thus they are required to incorporate the environment and social reports in the Management accounts. Accordingly, the management accountants prepare sustainability reports, and they capture non-financial information in the reports. The advent of CSR has provided the management accountants the opportunity collecting the non-financial information, and this guides the strategic directions of the companies (Pearce & Doh, 2012).
CSR pressurizes the management accountants to save of cost, and this has increased the sustainability practices in such organizations. The CSR has changed the business landscape, and it emphasizes on the environmental and societal considerations. The organizations that are members of CIMA involve the management accountants it the sustainability strategy. The management accountants in the organizations play a special role meeting the expectations of customers as far as sustainability is concerned. The management accountants collaborate with the top management by integrating the financial well-being with the stakeholder and community well-being (Pearce & Doh, 2012).
The management accounting profession has accepted the challenge of spearheading accountability and transparency thus it incorporates the economic, social and environmental impacts. CSR has increased the sustainability management activities that are carried out by the management accountants. Specifically, CSR has emphasized the needs of managing risks, measuring performance, managing the performance and reporting the performance to the internal and external stakeholders through the compulsory and voluntary initiatives. In the same way, CSR has emphasized on the external reporting of the sustainability information. Accordingly, the management accountants are expected to report on data that is complete, relevant and accurate. The professional Management accountants are required to comprehend the essence of quality data. As such they are required to use robust systems when capturing, maintaining and reporting performance (Maon, Swaen & Lindgreen, 2010).
6.0Conclusion
Most companies have embraced CSR as means of satisfying the wants and needs of various stakeholders. The examples of companies that have shown exceptional performance in CSR include Starbucks, Walt Disney Company, and Microsoft. The firms' approach to the contemporary market complexity is holistic because it includes social activities aimed at improving the societies where they operate. Consequently, firms across the globe allocate a significant amount of financial resources to the social activities that are beyond the regulatory requirements. Evidently, CSR is a strategic response to most customers because it enables firms to respond to the customer pressures by focusing on ethical behaviors and protection of the environment. Subsequently, CSR has been instrumental in increasing the competitiveness of the companies. CSR affects all the department sin a firm because it includes both the external and internal stakeholders. The impact of CSR is omnipresent in most organization thus most business leaders have adopted the concept. Consequently, CSR has evolved and transformed from “goodwill” concept to a strategic component of management hence it is an instrumental component of an organization’s strategy. Finally, CSR has transformed the management accounting activities of the organization by making the complete, reliable and sufficient.
References
Lee, Y. K., Lee, K. H., & Li, D. X. (2012). The impact of CSR on relationship quality and relationship outcomes: A perspective of service employees. International Journal of Hospitality Management, 31(3), 745-756.
Maon, F., Swaen, V., & Lindgreen, A. (2010). The impact of CSR commitments and CSR communication on diverse stakeholders: The case of IKEA. Global challenges in responsible business: corporate responsibility and strategy, 161-190.
Pearce, J. A., & Doh, J. P. (2012). The high impact of collaborative social initiatives. Sloan Management Review, 46(2).
Scalet, S., & Kelly, T. F. (2010). CSR rating agencies: What is their global impact? Journal of Business Ethics, 94(1), 69-88.
