Introduction
Corporate social responsibility is the best strategic as well as financial path that most businesses can followFor most businesses there are compelling reasons to be responsibledefining “responsible” is somewhat of a conundrum.”
~ Jeffrey Hollender
It is typical for people and organizations to have expectations. Expectations serve as a reminder that regulates actions and thoughts according to moral, ethical, legal and economic principles. The same mechanism operates in the business industry through corporate social responsibility (CSR). By virtue of a definition given by , CSR refers to the expectations that the society has on a particular organization. This suggests that organizations therefore have a duty to fulfill to its stakeholders. This duty should be prioritized by the organization, the same way that they give attention to achieving a target profit.
It must be noted that the term stakeholder extends to the organization’s employees, customers, suppliers, the community, the government and other sectors of the society. It is not limited only to the investors and owners of the organization.
Therefore, CSR is an extension of two integral components of managing a business which include political governance and ethics in business. Despite this, corporate social responsibility is often the most neglected aspect of business operations. It is one of the urgent concerns that require attention in the majority of issues raised during managerial decision-making process. Corporations could not simply ignore their social responsibility if they wish to survive the perils exerted by the legal, political, ethical implications of their actions.
In addition, the social pressure that most civic groups put on these corporations for non-compliance can be damaging if not totally destructive. It is mote and academic to neglect corporate social responsibility because the absence of such provision in business ethics and political governance would be equivalent to a slow and painful death for the business.
Consequently, researchers address the absences of a benchmark that gauge compliance to and effectiveness of corporate social responsibility, and their relation to the success of the organization . In addition, it is considered that the absence of a standard classification and construct that would distinctly delineate corporate social responsibility from other factors deters researchers from conducting high quality and reliable empirical studies . The authors emphasized that these studies could provide information on how to improve business especially in terms of increasing profits and revenues. Although it may seem peculiar that a simple act complying with environmental requisites on chemical waste disposal can increase profit, someone said it is possible.
Three decades ago, Friedman postulated how businesses can profit by mere compliance to socially-related ordinances without necessarily having to invest irregularly large amount of resources. To establish a point, it would help to evaluate a common practice in any industry.
Managers would usually try to save and assure profit by cutting corners and may even go to the extent of bending the law. In fact, even if it assumed that businesses would be prudent not to deliberately violate any laws, some might end up compromising quality for a price.
Moreover, some would try to be stingy in providing their workforce with the appropriate compensatory benefits and rewards in the belief that this aspect of managing a business does not provide any tangible business outcomes. By virtue of an analytical evaluation of such phenomenon, it is not difficult to conclude that the reduction in cost would have a significant effect to the businesses’ cash flow.
However, deliberate and consistent negligence of these factors could have negative consequences. This may affect how the public perceives the company in relation to its commitment to performing socially responsible acts and other acts of goodwill. In the same manner, this might invite repercussions relating to the legal aspects of business operation.
Understanding the Nature of Corporate Social Responsibility
Charity and social responsibility should not be used interchangeably. There are clear distinctions between the two concepts that warrant their indispensability the wide range of processes involved in business operations. To establish such distinctions, charity is not mandatory as compared to corporate social responsibility.
Charity is also related to marketing and branding because it is being used by companies to advertise and promote whatever product or service they offer. Corporate social responsibility on the other hand could not be related to marketing and branding because the initiatives involved in CSR are integrated into the business core, making it inseparable with the other functions of the business.
Corporate social responsibility refers to the compliance to the standards and provisions of certain economic, social, ethical and political systems. In addition, a company also needs to go an extra mile to earn clear distinction from other companies for excellent CSR practice.
Citing a theoretical situation could help provide a more elaborate distinction of charity and corporate social responsibility. Suppose a company grants financial assistance that will be used for the construction of a hospice. This act cannot be considered as a part of the company’s social responsibility. This is because if one tries to carry this analogy a bit further and assume that the financial assistance extended by the business was earned from illegal activities like gambling, then the donation will not have a socially responsible beginning.
The provision of financial assistance is more of a charitable act since a hospice is generally constructed to house a population of elderlies. Some may argue that the act is still a manifestation of social responsibility considering that the end provided assistance and the company did it on its own volition. Assuming that it was done willingly on the part of the organization, the intention may however be questioned. It may have been initiated to clear their conscience of guilt from participating in illegal activities or to divert the community’s attention into something positive.
A business’ socially responsible behavior would include any form of business activity that would increase its profits without harming the society either in short or in the long run. We should again refer to Milton Friedman (1970) who said that the most important reason why businesses exist is to serve the society and as a return, they are rewarded with profit for doing this responsibility. Similarly, when the business fails to serve the society well, they would usually not be tolerated which would lead to their eventual downfall. Therefore, corporate social responsibility should include paying the right taxes, not participating in any unfair trade practices like the black market, not misleading the customers with false information, and securing to protect the environment through mindless exploitation of natural resources. This may also extend to the securement of the welfare of its employees, investors and suppliers.
Charity is dispensable. A company is under no obligation to take part, more so to initiate any activity that requires them to donate an amount or render mandatory service for any charitable program or organization. It will not affect the company’s total image nor will it increase the company’s revenue. Neither will a charitable act save the management from spending or losing anything because this is not what Friedman was referring to in his statements.
On the other hand, unlike charity, corporate social responsibility could not be ignored. If the company does so, it may lead to eventual profit losses and negative perceptions on their social image which is detrimental to its existence.
Moses Oktech presents the most cohesive and unbiased evaluation of the entire concept of Corporate Social Responsibility . He never denies that the primary motive of a business is to earn profit as a business with low or in some cases, without profit, would cease to exist and thus would not be able discharge any form of responsibility, be it a Corporate or Social responsibility. However, if a company has to survive and prosper, it has to earn the faith and trust of citizens of the society within which it operates . Such faith and trust can be generated only if a company transgresses the narrow confines of shareholders and looks at the larger perspective of stakeholders. This is possible if the company implements socially cohesive measures where it views the entire society in a holistic manner rather than focusing only on its corporate shareholders .
One of the most important stakeholders in a business organization is its human resources. If a company can implement a genuinely equitable corporate governance norm that is free from any apparent bias, it would almost immediately be able to win over its employees who would be self-motivated to walk that extra mile for the company. This would be one great example of fulfilling corporate social responsibility wherein the company would be able to overcome its competitions because of the mere presence of a well-motivated workforce. If a company wishes to win over the society’s favor, it might consider implementing a policy that would prohibit any form of immoral or corrupt practices. Such attitude would surely project the company in a favorable light in the eyes of the entire society and it would be able to earn invaluable volumes of goodwill which would provide it with a good head start over its rivals. Common people would start trusting the company more than its rivals would.
Other examples of socially responsible acts that can be initiated by any organization may also include getting involved with governmental and non-governmental organizations in undertaking campaigns or programs that might not be directly connected to their areas of operations but are nonetheless burning issues of the day such as drug addiction or AIDS. Thus, it can be surmised that if a company wishes to survive and prosper in the long run, it has to have a socially cohesive approach and carry out all those activities that could be termed as socially responsible not because it has suddenly turned over a new leaf and has become genuinely altruistic, but because there is simply no other way to ensure a steady increase in the rate of profit earned which is essential for long run survival.
Corporate Social Responsibility of Tata Group of Companies
Right from the day the group was founded by Jamshetji Tata they have been involved in all those acts that truly convey their total commitment to fulfill their Corporate Social Responsibility. Tata had already had in place a well-equipped and efficiently functional Welfare Department way back in 1917, a full thirty one years before having a business department dedicated to welfare issues became mandatory in 1948.
Tata went ahead and implemented a scheme of maternity benefit in 1928 while it took country’s government another eighteen years to make it legally compulsory in 1946. These two examples should be sufficient enough to prove the commitment and sincerity of this organization.
The group was intelligent enough to realize early enough that public support is absolutely necessary for any business to survive and prosper in the long run. Thus, it took enormous efforts to ensure that the public has a very favorable opinion about the entire group and spent substantial amount of resources for various activities connected to improvement in education, health care, art and culture and rural development. In the year 2004, the group had spent Rs. 450 million for similar activities .
The group also features the Tata Relief Committee whose sole purpose is to provide succor and relief in areas ravaged by natural disaster. The high point of the group’s policy is to provide livelihood-related programs to the needy instead of giving them money in the form of alms or charity. Perhaps the company’s success can also be attributed to this unique policy which sports a two tiered approach in the event of a natural disaster by initially providing immediate relief followed by extended and effective rehabilitation.
The group firmly believes in the importance of earning the trust of all stakeholders through consistently adhering to the policy of giving back to the society what they could earn and have earned. This has created a unique position for themselves that no other Indian company would perhaps be able to achieve. It has remained steadfast in its objective of improving the quality of life of people who are not only their employees but of all members of the communities it serves. The group never violated any socially-related laws. They also value the importance of paying utmost respect for human dignity. The group has a multi-pronged strategy for fulfilling its Corporate Social Responsibility agenda and it consists of:
- Empowering communities by endowing them with several capacities and skills imparted through vocational training
- Creation of sustainable livelihoods
- Absorption of vocationally trained youth at various stages of supply chain
- Deployment of latest technology for the benefit of local people
- Work in tandem with government’s development plans for local areas
Conclusion
In conclusion, it can be rectified that an act of charity should not be confused with corporate social responsibility. It must be established that although both acts would warrant social involvement, depending on the motives and intention as well as the precipitating provisions incorporated in the act of social involvement, these two can never be the same.
A company can save money, generate profit, and build its image without having to incur additional cost if compliance to socially responsible advocacies are implemented and followed. Whereas, investing in charitable activities and projects the company will need to also put in considerable amount of money to finance it. However, that will not rectify nor does anything good about the company.
It must be noted that although a good act has been conceived, people will always see the negative side of the good act. Being involved with tax evasion, fraud, environmental degradation or employment and other violations of the law would always be perceived as a morally and socially irresponsible act.
Paying the right taxes, for example, is an act of corporate social responsibility. However, compliance to this act does not involve any additional cost; rather it gives various positive feedbacks to the company which can later on brings profit to the company.
Overall, corporate social responsibility can be a good form of investment for an organization. However, by investment it does not refer to financially allocating funds to secure success. Companies must invest in maintaining an image that complies with the social, economic, ethical and political standards and policies imposed by the society and most importantly, the national government. Lastly, it should be noted that regardless of the amount of resources that companies spend on charitable programs, it will not be sufficient to compensate for the principles that embodies corporate social responsibility. But on the other hand, the community must also be sensitive enough to distinguish the purpose of an action because there can be instances wherein an act is covered with silver linings but is actually filled with rotten eggs.
References
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