Introduction
Corporate social responsibility cannot be admitted to carry a totally new notion in the world of business, however, over recent years it has begun to catch on in a dramatically new formation with an application of comprehensive approaches. Currently, a lot of scholars have made attempts to herald an all-encompassing definition of corporate social responsibility. Among the most successful of them are undoubtedly Archie B. Carroll and Lindgreen and Swaen. In particular, Carroll interprets corporate social responsibility as a framework comprising “business ethics”, “stakeholder management”, “sustainability”, and “corporate citizenship” (87-96). Basically, a slightly differing attitude has been offered by Lindgreen and Swaen (1-5).
Having a due regard to the corporate social responsibility definitional complexity, the author will explore the projected costs and advantages of corporate social responsibility being experienced by businesses in many countries. It will be proven that benefits evidently outweigh costs in the eyes of a conscious business owner trying to determine all the risks and prospects of his company.
Projected Costs of Corporate Social Responsibility Reporting
The process of projecting and assessing possible losses and contributions related with certain activities lies within the responsibility of risk and accounting managers. The experts specializing in the industry of corporate social responsibility claim that the amount of such expenditures is sure to depend on the type of corporate social responsibility activity the company intends to engage in (Sino-German Corporate Social Responsibility Project 8-9). Interpreting the above contention by special terms, the managers are first suggested to identify possible expenditures and benefits and then evaluate them by currency equivalents (Sprinkle and Maines 448).
Resting on the long-term monitoring conducted by researchers and business owners, expenses and losses related with corporate social responsibility may be classified by their nature and sphere where they are incurred (cash- and capital-related, associated with equipment, infrastructure, human resources management, or even time contributions). Speaking more specifically, expenses for corporate social responsibility have been traditionally referred to as “opportunity costs”, “sunk costs”, and “recurrent costs” (Sino-German Corporate Social Responsibility Project 8-9).
“Opportunity costs” indicate any business possibility which was estimated to have been lost since the efforts and capitals were drawn to perform the aims of social projects initiated by the company. To exemplify this outcome, the effects of company’s donations and contributions are closely considered. In particular, providing the enterprise has provided a gratuitous aid to some fund, charity, or association. Such a donation will be exempted from the income tax, as well as contributions in the form of final goods and products. However, in both cases the company would incur material (financial) losses – either currency, or product-associated (Sprinkle and Maines 448).
Moreover, whether it is a monetary donation or a product contribution, the company also ought to evaluate its “opportunity costs”. In the first scenario involving a monetary donation, the company could have used this money differently by investing them in a more lucrative initiative with evidently high returns (say, 15% and this percent should be taken into account as a lost income, in other words, as a lost opportunity). Similarly, the lost income may be projected in the situation with a product donation: goods or products donated could have been sold by the company to its clients and by this a decrease in revenues may have been avoided (448-449).
“Sunk” expenditures are caused to a greater extent by engaging in environmentally sustainable practices: purchase of “green” equipment, facilitated, improved, and more productive machines, enhancement of facilities and infrastructure. All these exemplify the capital investments which will certainly prove to be withheld not so easily when needed. Unlike the “sunk costs”, “recurrent expenses” encompass the costs to be incurred by the company’s owner in case of recruiting new personnel, increasing current wages for the extended scope of workers’ duties, rewarding employees for overtime projects, implementing seminars and trainings focused on the enhancement and evolvement of innovative skills of employees (Sino-German Corporate Social Responsibility Project 8-9).
Again, the aforementioned “recurrent” expenditures also precipitate the emergence of “opportunity costs”. Companies’ donations and contributions do not obviously end at financial aid and product gifts, employees working at the enterprise may as well donate their working time to the implementation of social programs and projects. Interestingly, researchers Geoffrey Sprinkle and Laureen Maines emphasize that during one of the recent years, KPMG staff have donated more than 30,000 hours out of the working schedule to social initiatives. In the instance of allocating time of its workers for social projects, the enterprise may suffer productivity and income losses: providing an average hourly rate of each of these workers accounts for $100, then the enterprise must have lost at least $3 million for this period (449).
Additionally, apart from the “opportunity”, “sunk”, and “recurrent” costs, the enterprise may face a necessity to undergo certification or auditing procedures. By the way, the audits and certificates designed for manufacturing companies may account for as much as a few hundreds of dollars per working day and even thousands which makes such businesses especially cost-demanding (Sino-German Corporate Social Responsibility Project 9).
Benefits and Advantages of Corporate Social Responsibility Reporting
The recent practical research conducted by the PwC personnel (Paul and Nieland 3) has demonstrated that sustainability management and reporting, as an integral part of corporate social responsibility, may substantially benefit any enterprise by attracting a serious and long-term investor attention. The survey mentioned above intended to prove that a compliance with the requirements and recommendations of the US Sustainability Accounting Standards Board could facilitate the productivity and effectiveness of the company’s results:
1) performance comparability with potential business rivals and industry trends poses a valuable perspective for all business owners;
2) a prospect of fostering an evolvement and development of a “long-term value creation”;
3) investors have been determined to keep a closer eye on businesses disclosing information on, for instance, risks deriving from relationships with the company’s stakeholders, various litigation risks, or company’s goodwill;
4) apart from the enumeration of advantages stated above, by adhering to corporate social responsibility standards, enterprises are also able of creating a positive atmosphere inside the company itself which could retain talented and dedicated staff;
5) in addition, providing a non-financial insight into the firm would unblock a more perspective way to funds and capitals, and certainly foster innovative practices and inventions within the company (3).
The Forbes contributor James Epstein-Reeves has underlined virtually similar advantages coming from the corporate social responsibility: “innovation”, “cost savings” (the expert cites an effective experiment taken by General Mills where it managed to save more than a half of a million of dollars by introducing a special “energy monitoring” system), “brand differentiation”, “long-term thinking”, “customer engagement”, and “employee engagement”.
Conclusion
In summary, disclosing the non-financial information will require a business owner to identify and evaluate potential losses (costs) and advantages of this process. There are benefits and costs on each side of the issue. Nevertheless, the overall picture discussed above illustrates that a well-thought approach to corporate social responsibility would result in more advantages than disadvantages.
Works Cited
Carroll, Archie. “Corporate Social Responsibility: The Centerpiece of Competing and Complementary Frameworks.” Organizational Dynamics 44 (2015): 87-96. Web. 23 Feb. 2016. < http://dx.doi.org/10.1016/j.orgdyn.2015.02.002>.
Epstein-Reeves, James. “Six Reasons Companies Should Embrace CSR.” Forbes Mag., 2012. Web. 23 Feb. 2016. < http://www.forbes.com/sites/csr/2012/02/21/six-reasons-companies-should-embrace-csr/#e1672774c038>.
Lindgreen, Adam, and Valerie Swaen. “Corporate Social Responsibility.” International Journal of Management Reviews (2010): 1-7. Web. 23 Feb. 2016. <doi: 10.1111/j.1468-2370.2009.00277.x>.
Paul, Beth, and Kathy Nieland. Sustainability Reporting: Is It Time for US Companies to Consider This Growing Trend? PwC, June 2014. Web. 23 Feb. 2016. <https://www.pwc.com/us/en/cfodirect/assets/pdf/point-of-view-sustainability-reporting.pdf>.
Sino-German Corporate Social Responsibility Project. Costs and Benefits of Corporate Social Responsibility (CSR). A Company Level Analysis of Three Sectors: Mining Industry, Chemical Industry and Light Industry. Giz, Feb. 2012. Web. 23 Feb. 2016. <http://www.chinacsrproject.org/Uploads/%7BEA74A6EC-FCD4-4699-B0ED-FE83A70F854D%7D_Costs%20and%20Benefits%20of%20CSR_20120615.pdf>.
Sprinkle, Geoffrey, and Laureen Maines. “The Benefits and Costs of Corporate Social Responsibility.” Business Horizons 2010: 445-53. Academia.edu. Web. 23 Feb. 2016. <http://www.academia.edu/8459306/The_Benefits_and_Costs_of_Corporate_Social_Responsibility_PDF>.
