The theory of corporate social responsibility has been on a steady increase of late as businesses seek to promote their brands by engaging in social responsibilities in the communities. Therefore, corporate social responsibility by a business can be termed as the initiatives taken by the corporates as they take the responsibility of the adverse effects that the corporate may have on the community in terms of impact on social welfare and environment. It is also known as corporate citizenship where the corporate incur costs in the short term that do not necessarily bring economic benefit to the firm but instead seek to promote environmental change and also the social aspect.
A corporate social responsibility brings together all stakeholders on a voluntary basis to positively change the social and environmental aspect of the place. The interactions involve stakeholders such as employees, shareholders, customers, government, local community and investors on a platform of bringing a positive change to the community. According to Milton Friedman argument, that corporation’s only social responsibility is using its resources to increase its bottom line so long as the rules of the game are followed is very wrong. In my opinion, all companies that operate in a certain locality produces negative externalities therefore it is only right that the companies become involved in activities that not only try to reverse these negative externalities but also promote social welfare to the local community.
Some may argue that Friedman was correct that there is hardly any positive contribution by corporate social responsibility to the corporations profitability, it can serve as a crucial strategy in minimizing risks such as adverse media coverage given to the company. Another risk that corporate social responsibility minimizes against is consumer or stockholders backlash against the company and also negative intervention from the government. Depending on the strategies applied or formulated by the company on corporate social responsibility the profits of the company can change in the long run. The debate about the relationship of the corporate and the society in the 1990s led to companies becoming more aware of the need of corporate social responsibilities. Neoliberal critiques argue that corporate social responsibility has adverse effects on the economies or gdp of the nations that the companies are working in be they rich or poor. The further argue that corporate social responsibility undermines the economy and reduces competition within the economy. They argue that corporate social responsibility was, as a result, of companies succumbing to pressures from the non-governmental organizations.
Neoliberals argue that without corporate social responsibility, companies may be subjected to binding regulations by the governments in which they operate in the countries. The querry that is asked time and again by people from different schools of thought is does corporate social responsibility support bottom line of a company?. This question shall support or discredit Friedman theory that a company’s only corporate social responsibility is to increase its bottom line and stay within the rules of the game. The following are positive outcomes that emanates from a company choosing to engage in corporate social responsibility.one of the outcomes is improvement of financial performance, the second positive outcome, as a result, of corporate social responsibility is lower operating costs. Reputation and enhanced brand image, customers loyalty and improved sales, ability to retain and attract customers, greater productivity from the employees and quality are some of the positive outcomes that a company takes when it operates a corporate social responsibility.
Another positive outcome that the company takes when it is involved in corporate social responsibility is decreased liability and product safety. Friedman, therefore, failed to recognize all these positive benefits that company gets after engaging in corporate social responsibility activities. Subsequently, Friedman’s argument that a company should focus all its resources on improving the bottom line is entirely wrong. On the other hand, the public and the community benefit in the following ways courtesy of corporate social responsibility. The general public benefits from charitable causes that may help the needy in the community. Secondly, the community benefits from employee volunteer program that allows the employees of the company to engage in undertakings or activities that are intended to develop and improve the social welfare of the people. Involvement of the corporate to social programs such as educating the needy, building homes for the homeless, employment and guaranteeing the people on the high quality of products are yet some of the ways that the public can benefit on the corporate social responsibility programs.
Then again there is the aspect of environmental impact, as a result, of corporate social responsibility. One of the environmental benefits is greater material recyclability whereby a company prioritizes more on reducing environmental degradation through recycling of waste products. There is greater use of resources that are renewable and also functionality and better product durability. Even though, it is hard to quantify or measure the effect of corporate social responsibility on the bottom line of the company, there are several ways that can be used to show that corporate social responsibility helps the corporates. Respect for people enables the company to retain skilled staff by offering and creating an attractive place. There is the readiness for the future by the company because it identifies and manages issues that have the potential of affecting the bottom line in the future. A store that the general public and the local communities welcome maximizes customers loyalty as well as motivating the staff.
Product innovation is another benefit to the company as the products created are green, and consumers will want to buy these products to help the company. Brand of the company is given more limelight hence more sales may come, as a result, of corporate social responsibility. Cost saving is yet another benefit that a company gets from practicing corporate social responsibility, by reducing waste and effectively retaining staff has a direct positive implication on the company’s bottom line. All these are reasons that encourage a company into practicing corporate social responsibility.
There are several challenges or tests that face a company when it takes on corporate social responsibility. One of the main limitation of corporate social responsibility is that it distracts the economic aim of the company. one of the goals of any company that is commercial is to maximize on the profits. Critiques of corporate social responsibility argue that the projects under these initiatives take up resources that should be fixated on improving the bottom line of the company. However, less the resources channeled to these projects may seem they have an impact on the bottom line of the company. The second challenge or limitations that face corporate social responsibility is that it brings frustrating work environments. From red tape to antiquated technology can be exasperating to the workers and mainly working as a nonprofit.Members of staff of the company are asked to do so much with limited resources on a daily basis to please or satisfy competing interests. Environmental work takes much time to notice the positive changes, and this can be frustrating to the employees.
Another limitation is that the level of burnout is considered to be very high. Nonprofit work often places heavy work on the shoulders of those doing the work. One needs great purpose when going into this kind of work that need self-sacrifice. Stakes are always high, this means that when a project in corporate social responsibility goes wrong, or the results are far from what was expected, the resources channeled towards the project are considered wasted. If this happens, there is likelihood that backlash from the general public or the local community will be witnessed who demand the company to be involved in corporate social programs. There is another challenge that communities require or expect for money to be put in individual projects while the company is not willing.
Constant focus on fundraising is yet another limitation of corporate social responsibility. The company’s executives are always concerned with where the next dollar for their projects shall come from and also the location where they shall put the fundraised money. The rapport between the community and the company is deteriorating because each party is trying to capitalize on the other.
As we have already seen that CSR deals with the corporate social responsibility of the society in which it exists. However, the same kind and facts of the CSR have been commonly been misunderstood for sometimes now, and the cause of these has always been the different paradigms and concerns laid out. Some of these major concerns that touch upon human rights, environmental responsibility of the company, diversifying management, the sustainability and the philanthropic nature of the company. This area is a very complicated area and with regards to CSR, companies are assumed to take up voluntary responsibility to extend legal duties so as to take up economic, social, and the environmental impact of their operation in a certain area or city. Normally, with the description of the CSR, it has been found that, companies and corporation are obliged to take up all responsibility and steps to reduce and minimize adverse environment, economical and social impacts.
Accountability to the stakeholders by the company is a very important responsibility. In this case, the stakeholder definition which is defined as a community or the persons who maybe or is affected by the operations of the company is not limited to the shareholders, employees or the community where the company exists. With the consideration of this social, environment, and economical, we can see how the CSR has been influential in pointing the directions in which the international community or business wants its goals to go. Major concerns that have come up and that are seen include the adverse working conditions of the workers, companies colluding with cartels, and also the unethical practices when it comes to marketing its product. Some of these concerns have brought up the need of them to been watched closely and stopped.
With the introduction of the CSR in the international market, some challenges emerged, and some of them include the economic globalization whereby the states involved faced a challenge in protecting its people’s right. The CSR was designed so as to help the government when it comes to such matters. Therefore, the role of the state is just to provide guidelines and also the promotion of development in the social sector and also to curb the social injustices. With all these factors, CSR was designed so as to become a solution to all these problems and also to ensure that sustainability was attained globally. The CSR has been seen to promote the case for business with claims being put that ethics is good for business. It enables to distinguish between brands and at the same time creating trust. Governments are encouraged to promote CSR in their respective countries through taxations and also by regulation to make sure it is cost effective so as to make companies want to pursue it. For it to become achievable, the governments need to remove competitive pressure.
As part of the government having the sole responsibility of implementing and promoting the CSR, it has been found that managers and other decision making staff members of the company also play an important role in the implementation of the CSR. Therefore, the lack of the education and skill may cause difficulty in coming up with key decision making skills. These are needed to make good judgment calls that enable a firm to uphold the values of the CSR. Managers have particularly been viewed to be a very important element to the implementation of the CSR since their personal values are important in the interactions between organizations and the society. A high level of understanding of issues is necessary so as to make very informed ethical decisions by the managers.
Ethical decisions and ethical issues have to be defined so that the manager can be able to make a real judgmental call. Managers have to be taught on these issues, In the environment case, issues concerning environment were not ethical sometimes back but right now they are. Because of these, managers are required to be aware of the constant changing values of the society and the priorities that they are given. These factors being considered, teaching of the people in business of the appropriate skills and knowledge is very essential so as to guarantee that they act in accordance with the ethical norms.
For all this to happen, the key features of the CSR is by talking and dialogue between the stakeholders involved. Dialogue enables stakeholders to know how to deal with applying and also implementing the particular practices and codes that might be brought up in different countries and the cultural background of different individuals. This overview of the CSR literature review shows the need for standards criteria to be laid down for the judging of the ethical issues in society. The implementation of the CSR is a very difficult task; its nature brings up very difficult questions that must be dealt with quickly. National and the global guidelines work to provide a framework so as to achieve these goals
Every company needs a strategy when undertaking corporate social responsibility. As a company creates value for its shareholders so should it create, value for the community, and this is done by supporting social and environment programs. Some people argue that organizations do carry out social responsibility programs so as to enhance the brand and its marketability. However, corporate social responsibility is here to stay because more and more companies both in private, and public sectors are joining the bandwagon. When formulating a plan on how to carry out corporate social responsibility, the company should formulate the strategies based on the values it holds. However, critiques argue that the strategy adopted by the company should combine supply chain, philanthropic giving, level of system initiatives and marketing all under one umbrella.
There are three strategies that companies adopt when undertaking corporate social responsibility. These are; philanthropic giving, the second strategy used by companies is value chain re-engineering and the third approach is ecosystem transformation. The first strategy which is philanthropic giving focuses on funding directly to community service and organizations that are nonprofit, in-kind donations of products, community service projects by employees and services to underserved populations. Philanthropy giving is motivated by the fact that the company is a central part of the society it is, therefore, obligated to help the needy in that area. A company may support directly by setting up a foundation that deals with matters concerning funding of the needy. Foundations set up by such companies are a separate entity from the company. Examples of companies that are involved heavily in philanthropic giving across the world are Coca-Cola and Microsoft which support directly for humanitarian assistance.
Transforming of the ecosystem is the second strategy in which a company focuses on financial returns in the long run by prioritizing on societal problems. Therefore in this strategy a company engages in critical environmental and social needs when creating value to the community. In this domain, the company creates solutions for the ecosystem with the aim of performing well financially in the future. However, any company that may use this strategy should recognize nonprofit sectors and government policies that are aimed at solving challenges caused by environmental and social factors. The best way to go for a company that wants to adopt this strategy is by partnering with an expert in environmental matters and perfect partners for this are non-governmental organizations. A case in point of a company that uses this strategy is general electric that is a major campaigner against global warming.
The third strategy is known as re-engineering the value chain where the priority is raising the profitability as well as business opportunities while creating environmental and social benefits. In addition to these, the company also aims at improving effectiveness in operational activities in the value chain is it downstream or upstream in the chain of distribution. Value chain re-engineering has become very popular among businesses because they see the importance of adopting new technological and manufacturing solutions to reduce environmental impacts as well as reduce costs. Unlike the first strategy known as philanthropic giving which is evaluated by environmental and social return, this plan is evaluated by the value it brings in terms of social value while also improving the company’s bottom line. A case in point of a company that uses this approach is Nike that recently launched an initiative to reduce environmental impact that is negative by improving its supply chain.
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