Abstract
The global business environment has been evolving over the years, and the current wave of change is demanding a more ethical and moral approach from the different businesses enterprises. These changes have been happening over the past three decades as expectations and demands of customers and the ever-increasing interest groups keep on changing. Companies and other business organizations have, therefore, been forced into developing a social responsibility; in addition, to their primary economic missions in order to remain competitive in the market share. The turbulent period, with accelerating changes, on which businesses are operating; makes it necessary for managers to strategic relationships with all the stakeholders including customers, suppliers, communities, government, and employees. This will go a long way in ensuring the company’s competitiveness and more crucial; its survival. The above principle is the basis of corporate social responsibility which over the past decade has seen increased implementation by most corporate executives, and managers irrespective of the firm size. The effect of applying the corporate social responsibility concept is the flourishing of business enterprises; both domestically and internationally.
Keywords: corporate social responsibility, stakeholders, executives.
Introduction
Corporate social responsibility has gradually become a significant factor in the global business community. This based on the reflections of various credible surveys which the Economist Intelligence Unit surveys. Its development into mainstream activity has affected the type of relationship between business enterprises and the entire scope of stakeholders. The companies’ resolutions to include the various social players to the main financial objectives make them socially responsible . However, despite its extreme importance, the phrase ‘corporate social responsibility’ has not been sufficiently defined. This has led to the sprouting of several different names for these practices. Examples include Corporate Responsibility, Corporate Citizenship, Corporate Accountability, and Global Citizenship.
Thus, corporate social responsibility is not a neutral topic. This wave of encouraging companies to be socially responsible has been faced by criticisms; ever since its inception. The protagonists believe that a company should endeavor to reach a balance between addressing the diverse needs of its various stakeholders (social responsibility) and those of its shareholders (financial interests). On the other hand, the critics of corporate social responsibility still operate under the notion that a company should only strive to satisfy its economic goals; in the name of profits. They argue that these social responsibilities can distract companies from their sole role of being successful since the projects involved introduce other costs; which diminish the benefits the shareholders accrue. For example, a big multinational company would have to use around 2% of its total revenue, or tens simply tens of millions, to set up a well-tailored corporate social responsibility program.
The presence of these hardliners against CSR has not deterred its embracing by the bigger portion of the global business community. Companies now take corporate social responsibility as a central factor necessitating special consideration during decision-making. There are several factors that have driven this wave of CSR, and they include: the society’s diminishing trust in large corporations, globalization, need to increase a company’s competitiveness, more strict carbon emission guidelines, corporate-governance movement and the increased requirement of providing funds for used in social projects. The recent global financial crisis is a good example of some of these factors that have driven the corporate social responsibility trend since it considerably damaged the consumers’ trust levels in business. The crisis also made the public to be keen on the social and ethical practices of enterprises making more companies to pay attention to corporate responsibility.
Taking the dynamics discussed above, it is evident that determining the value of corporate social responsibility to a business is of an essential nature. In this perspective, this paper aims at discussing the various points of interest that make the embracing of CSR concept a necessity for any business aiming to survive in this competitive global market. Basically, corporate social responsibility has six main dimensions that are dictated by the various stakeholders; that are part of any business. When a business takes seriously the task of integrating the interests and needs of the stakeholders over a long term, the effort is bound to generate more profits and consequently, growth. The six dimensions (investors, customers, communities, business partners, environment and employees) form the basis of corporate responsibility, and they can be simply summarized by this diagram.
Through analysis of each of the six facets of corporate social responsibility in depth, the benefits of this concept will become more pronounced to a business owner, an executive manager or a prospective investor.
- Customers
Competitive pressure and globalization are two factors that have rearranged the dynamics of business through shifting the power of the market to consumers who buy and use the products from the producers. Companies have been forced to put the customers first when it comes to any decision-making process. The management team has been tasked with designing the organizations in a way that echo’s needs of the customers. Globalization has given the customers the power to demand goods and services that are of superior and reliable quality. Survey’s done over the years have shown that spending money in a bid to comprehend the needs of the customers, does actually pay since the companies are more profitable. A company that produces goods of superior quality gains a bigger market share because the few and rare defects mean minimal waste management time, higher customer retention, and lower costs of operation. In this case, well-tailored production practices are cheaper while the poor practices are often expensive.
In addition, the customers’ view is the company’s ethical conduct and environmental consciousness when selecting its suppliers. Customers are currently more interested in knowing the conditions under which the products are manufactured. Companies have had to be transparent when handling their production systems since customers have different degrees of sensitivity to various degrees. For example, in England, customers are more sensitive to companies that use animals during medical tests . Consumers will prefer and identify with companies that they believe uphold socially acceptable ethics and environmental considerations. These practices help companies build quality relationships with the customers since the management ensures that the information released is accurate and honest, when describing specifications and on advertisements. Under this concept, the increased profits, a company accrues are usually the rewards for satisfying the customer’s needs.
- Business partners
A company’s business partners include competitors, suppliers, and joint ventures. These groups of stakeholders have an effect on a company’s competitive success. Suppliers are important to companies because they ensure that companies can access all required raw materials. Corporate social responsibility in the dimension of suppliers aimed at building a great relationship between the two parties involved. Companies are shifting from selecting suppliers that offer lowest prices to suppliers on whom they can rely. By offering the suppliers terms that include fair prices, enough for suppliers to make profits, companies are able to demand quality and reliable delivery. This ensures that the raw materials used will produce the quality of goods customers demand, and the production turnover interval is not affected. The suppliers will end up being loyal to any particular company that operates under the belief of fair remuneration and the companies will get a supplier who can in some setting be considered a true partner. Another benefit of loyal suppliers is that they can be an additional source of innovation which helps the company increase its competitiveness in the global market.
Another issue, which applies to suppliers, is their respect for human rights. Companies are stringent on the type of labor used or the conditions under which the supplier’s workers are operating under. This is a response to the ever increasing pressure from customers and human rights groups for companies to monitor and ensure that their suppliers respect all the fundamental human rights. Child labor in some developing countries and intolerable working conditions in some producing companies are the main concerns for these interest groups. As companies monitor the suppliers to ensure that they operate under socially accepted conditions, they are at the same time building trust and increasing their credibility among the consumer community.
- The Environment
The biggest companies in the world have for some time being facing constant pressure from environmentalists and other interest groups to preserve the environment. Despite the society’s demand for businesses to be responsible and accountable, the environmental preservation topic is a mixed one. Some business managers do not believe sustainable management of either the renewable or non-renewable resources to be good business. However, research has shown that the other groups of managers have proved sustainability is profitable. The responsible business managers operate under the basis of creating the required foods of superior quality by using fewer inputs (energy, land, etc.). The General Motors is a great example of a company that realized eco-efficiency and profitability are exclusively compatible. The company in conjunction with other suppliers all over the world worked on projects that aimed to achieve meaningful saving costs by reducing pollution and increasing energy efficiency.
Corporate social responsibility is also a good idea when targeting the availability of resources and long-term investors. Insurance companies and pension funds are taking the relationship between shareholder value and environmental performance more seriously. This ensures safe sailing for companies that are environmentally responsible and accountable. Studies have also shown that the financial performance of low environmental polluters is better than the high polluters since customers favor goods produced by manufacturers with a stringent reputation on environmental stewardship.
- Employees
A socially responsible business ensures that the workplace environment is conducive, safe and healthy environment for the each worker. The company also offers the workers fair wages and job security which are essential in helping the employees realize their potential and dreams. Improved management practices like designing ways for ensuring a workable balance between work and family is met. In addition, profit sharing or share ownership have improved the motivation and productivity levels of the company. These practices also decrease employee turnover since they increase the commitment levels of the people involved. A survey carried out in England concluded that, on some instances, customer loyalty is influenced by employee loyalty.
The fact that women are an integral part of employee group makes it necessary for companies to make the workplace more family-friendly by setting up daycares and kindergartens. The companies are also revising their parental leave policies, making them more generous. These policies and practices are mostly aimed at ensuring the work-family integration is improved. The effects of these changes is increased productivity, low turnover, employee commitment, better quality and innovation which are significant benefits for any company.
- Community
Recent development in the global setting has rendered the “important contribution” of a business to local communities in the form of jobs, fair wages and tax revenues insufficient. This is a view shared by almost 90 percent of business leaders who took part in a survey; in the United States. With a company’s success being dependent on the health, level of education, and stability of the society it operates, it is important for business leaders to accept part of the responsibility of improving the surrounding communities. It can be through charitable contributions; which might involve the company’s employees. Employee involvement in community building activities has a positive effect since it increases loyalty while consequently helping employee personal development. Giving the employees a chance to make a change in their communities gives them an irreplaceable sense of pride that aids a lot in staff retention. The executive managers are able to identify valuable leadership qualities among the employees during these charity events. These are just a small portion of the benefits gained by business organizations that have embraced external corporate social responsibility.
- Investors
The classical group of investors and economists believe that a business’s main purpose is the maximization of shareholder wealth. However, there has been a gradual increase in number of investors who appreciate broader issues like social responsibility. For instance, the global market has witnessed the emergence of a new group of investors called ethical investors. Research has shown that even though these investors insist on ethical and moral side of business this does not comprise the returns on the investments. Therefore, the financial performance of the enterprises the ethical investors invest in positively correlates with the social responsibility. Banks in more developed countries have developed loan screening guidelines that discriminate potential borrowers who abuse human rights, deal with currency speculation or sell weapons to unstable or tyrant regimes. These loan screens make it easier for socially responsible companies to access funds for expansion or innovation than their socially irresponsible business peers.
Over the past decade, the number companies and other business organizations that embrace corporate socially responsibility has remarkably increased with the biggest world companies being on the fore front. The Body Shop is considered as the pioneer companies that introduced corporate social responsibility to the modern global market setting. The company was among the first companies to publish a full report of its efforts and initiatives. Anita Roddick, the company’s founder and then manager, used the company as a vessel to fight for its ethical beliefs such as environmental protection, human rights and animal protection. She went to an extra mile by supporting a petition against animal testing in 1985 presented by Greenpeace. The campaign finally collected 4,000,000 signatures that were presented to the European Union. This is a company set a path for other companies to follow.
The second-largest convenience store in Japan, Lawson, is another great example of a company that has embraced corporate social responsibility in its entirety. The company has developed a sustainability report that contains six of its main social responsibility objectives. These objectives address mainly the customer, community and environmental dimensions of corporate social responsibility. For example, the management teams of the convenience store aim to donate 30 sewing machines to disadvantaged community in Sri Lanka, Myanmar and Vietnam, and plant over 20,000 trees all over Japan. The company also released a report on its ability to meet some of the goals it had set in terms of saving energy, recycling and environmental protection.
Chiquita is a company that really exemplifies the importance of social responsibility to the success of a corporation. This American fruit industry has set up CSR standards that all its suppliers have to adhere in order to do business with the firm. Although this affects some small scale fruit growers mainly in Latin America, the standards ensures that the company maintains exemplary quality of its products and credible image among the various stakeholders. Chiquita has also set up a 100-hectare monkey reserve on a land it initially used to plant bananas in Costa Rica. The reserve, called Migros, was set up to preserve the rich diversity of the remaining rainforests in the region. In addition to the howler monkey, the reserve also houses the two-toed sloths, and a diverse variety of flora and fauna.
Conclusion
Corporate social responsibility is a diverse topic that business managers and economists are struggling to properly define, but the evidence available from the numerous studies and company reports show that it has become a central subject to consider when making decisions. The benefits accrued by responsible companies both socially and environmentally are enough to entice the critics of CSR to change their outdated stands. To quote Chiquita’s chief executive, “.Sure, there are companies that go backward—but that is a path to disaster”
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