With the increased consumer awareness, organizational success is now more dependent on their actual and/or perceived commitment to socio-economic, environmental, and other aspects of sustainability. It is no longer acceptable as proper for organizations to thrive in isolation from the communities that are affected by such a firm’s actions. Corporate social responsibility (CSR) is an important way for firms to strike a balance between economic, environmental and social responsibilities in operations, which in turn ensures that they cater for the interests of all their stakeholder’s interests and expectations. CSR has different meanings and has varying definitions depending on every organization’s specific context. The most important aspects of its meaning and definition, include an organization’s responsibilities beyond its core business (production of services and goods), contribution towards solving critical social problems (including those that a firm played a role in creating), and catering to the firm’s broader constituency, other than its shareholders. Other definitions include internalizing negative impacts that an organization has, outside the market transactions, and catering to the wider human values that are, however, outside the singular focus of economic values. However, the tendency for all organizations to appear to be ethical has tended to blur the line between
While some organizations engage in CSR for strictly charitable purposes, it is naïve to assume that organizations’ engagement in CSR is solely driven by their singular desire to further society’s ends. As perhaps best evidenced in the manner in which CSR emerged and has developed, firms are driven both by the need to give back to society, as well as the positive publicity that such engagement in society brings. This is a legitimate motivation, and it alone does not render CSR necessarily manipulative and cynical. Organizations are expected to, and should operate in a manner that meets all stakeholders’ needs. CSR allows them to fulfill a basic responsibility but also get on society’s good side, which in turn makes for success. CSR improves the company’s standing in the estimation of the society, which makes for better brand recognition, equity, and the bottom line. The ultimate responsibility for any organization’s management is to the shareholders, and any decisions taken must create shareholder value. In this respect, the benefits that an organization gets from CRS (including brand recognition, loyalty, equity and parity) must be justified by the benefit gained from the practice (Boulstridge & Carrigan, 2000). CSR enhances corporate reputation, which is in the interest of the shareholders that organization maintains. According Boulstridge & Carrigan (2000), an organization’s reputation stems from the customers’ experience of its products, advertising, and even gossip, and it is desirable because it leads to gaining important competitive advantages. Effectively, firms are not into CSR for the sake of helping only better communities, but because they have a genuine interest in the success of the CSR programs, enough to preclude the deliberate intention to do it for the marketing ends.
The balance of power between consumers and marketers has shifted considerably in favor of consumers, with increasing competition, the desperation by firms to differentiate themselves as well as the rise of consumer activism. The internet has opened up new frontiers to ensure consumer information and awareness, which in turn serve to mitigate against the possibility of organization’s using CSR to solely advance their marketing goals. Even though consumers are relatively uninformed about the value created by CSR and other marketing activities undertaken by firms, it possible for firms to make them on conscious decision-makers, thereby facilitating the creation of an environmental where ethical companies are rewarded. According to Carrigan & Attaila (2001), consumers lack information, they seem to require more in order to make decisions that promote ethical organizations. Through the continued involvement in CSR, coupled with the provision of relevant information to consumers, it is possible to ensure that they ultimately make informed decisions, which in turn would mean that CSR serves a genuine function.
With CSR, Devinney (2009) shows cause to believe that society actually derives value from it, and thus the reason why it should be encouraged. To begin with, consumers tend to vote with their wallets and feet, and thus corporations with more acceptable practices in their respective markets are likely to have better customer satisfaction and a greater likelihood to thrive. While the sustainability of such customer satisfaction remains in question, it is known that niche companies that build their brands in a way that resonates with specific segments of the population, ultimately monetize that support through the prices charged.
Boulstridge & Carrigan (2000) finds that consumers lack information to make ethical decisions but desire such information in order to be effective decision makers. Effectively, even though it is possible as Cho, Guidry, Hageman, & Patten (2012) established that firms may be pursuing CSR solely for the publicity that if affords them, as many firms are using it to create value for society. Given the information asymmetry between consumers and organizations, organizations are best placed to use such information to the benefit of the consumers, and thus CSR is an important way to encourage them to do this. While some organizations in the market may cheat the system using their information advantage, CSR allows consumers to give corporations signals and a great majority of them would use their information advantage to address the signals received from the market. A case in point is Toyota’s and Tesla Motor’s development of hybrid and electric cars respectively, in response to increasing demand in the market for green vehicles. The technologies pioneered by these companies and millions of other organizations in similar positions would help create real value for the consumers, even though its original motivation was merely CSR.
Even most importantly, corporations have a better technical understanding of the technologies, trade-offs and societal trends, more realistically and rationally than governments can. It does not matter whether Toyota intended to exploit customers that wanted energy efficient cars, but the fact that used its production resources to create technologies that ultimately create value for the consumers means that corporate social responsibility has, and can have value. Additionally, since regulatory frameworks that require involvement in CSR still lack in many parts of the word, organizations do, and can exploit the opportunities presented by the lack of transparency and accountability frameworks to experiment, and thus create value for consumers. CSR foster social entrepreneurship, which are effective means to gauge and meet society's needs.
It is impossible to stop some organizations at least, from engaging in manipulative corporate social responsibility programs with the purpose of currying favor with the markets. However, in its most basic form, and CSR involves voluntary in engagement in programs outside an organization’s core business in order to create a better society. Effectively, if organizations are not pressurized by regulatory, competitive and other interests to engage in CSR, they are likely to engage in it for the benefit of the community. Cho, Guidry, Hageman, & Patten (2012) found that environmental performance, as determined by Trucost environmental performance scores, had a negative relationship to the organization’s membership to the Dow Jones Sustainability Index and the actual corporate reputation scores. The researchers in this study ventured that the reason behind the negative relationship was due to voluntary disclosures by the companies, involved, and the fact that many companies tended to over-disclose just to cover their poor performance. Effectively, self-disclosure was likely to yield the expected CSR benefits as against forced performance reports that drive many firms today. Similarly, Abbott & Monson (1979) found that while it had its own flaws, the self-reported social disclosure approach of estimating corporate social responsibility management, was likely to have considerable advantages in encouraging and estimating the benefit of CSR. This means that the apparent failures in CSR and the tendency by some firms to use it for self-serving and manipulative marketing ends, stems from the appropriation of CSR, both by organizations and society into a mandatory and expected practice, as against a voluntary way for organizations to give back to society.
Cynical & Exploitative Marketing
Organizations use CSR as a marketing tool as against a tool to meaningfully contribute to a better society, which defeats the very purpose of CSR. According to Cho, Guidry, Hageman, & Patten (2012), corporations simply exploit CSR for its publicity value, without taking any concrete measures to actually ensure sustainability in social development. Cho, Guidry, Hageman, & Patten (2012) studied whether variability in environmental performance and disclosure appeared to be linked with membership selection to the Dow Jones Sustainability Index (DJSI), which was thought to be associated with perceived environmental reputation. The results indicate the publicity for environmental reputation had a statistically insignificant relationship, and thus there is no reason to believe that membership to the DJSI, environmental disclosure, and environmental performance was influenced by the associated publicity. It is further clear that environmental disclosure and performance are significantly related to the firm’s reputation, but the path from performance to reputation was negative, meaning that firms that had poor environmental performance were perceived to have high environmental reputation. However, the path from disclosure to environmental reputation is both statistically significant and positive, meaning companies on the DJSI inspire perceptions of being environmentally favorable reputations, but this perception as well as the membership to the DJSI are negatively related to actual disclosure or performance. Companies with the worst environmental record tend to make more extensive disclosures.
Social responsibility covers a huge range of factors, including regulation, consumerism, social and political marketing, and environmental conservation. Given the intricate processes of transforming resources into products, it is expected that there are disagreements on the best way to achieve the goals, and most importantly, there is no single way to place a gauge any single firm’s CSR program. There are no objective metrics to gauge CSR programs, and even if there were, organizations neither have the training and understanding of social issues, nor do they have social skills to undertake social programs that best meet society’s interests. Effectively, there is a considerable incentive for organizations to cheat, engaging in artificial CSR programs in order to curry favor with the public, without any meaningful contribution to society. In fact, Boulstridge & Carrigan (2000) shows up the fallacy of attempting to cater to society’s needs because society does not necessarily understand what is good for itself. For instance, while marketers can create happy customers by selling products such as tobacco and alcohol, those same consumers and society as a whole would in the long-term face immense costs. Effectively. The very assumption that CSR ultimately leads to greater consumer satisfaction does not necessarily justify the practice as valuable to society but creates a bandwagon for corporations to use to achieve their own goals.
Devinney (2009) argues that while it is legitimate that organizations expect and/or receive positive reputation and other benefits that translate to a better bottom line, their attitudes towards CSR is wrong and manipulative. Organizations exist for the purposes of accomplishing their core business, for the sake of their primary stakeholders (shareholders). Effectively, their sole social responsibility lies in organizing productive resources in a way that yields profit, as long as they do is ways that are within the law, including free and open competition. Anything that falls out of this core role has little to do with the organizations, and CSR will not be meaningful if it did not yield such value. Effectively, any assertions that organizations are doing good society is inherently false because organizations are only interested in the value that derives from such engagement. This view is backed by both Cho, Guidry, Hageman, & Patten (2012), Abbott & Monson (1979) and Freeman (1984), which show that all organization’s primary responsibility is to their stakeholders, and thus all other responsibilities fall secondary to it.
Other the tendency of organizations to pay lip services to CSR for the publicity value, Devinney (2009) points to the pretend corporate interest in creating a better society betrayed by the fact that the same organizations do, and have in the past tended to skew societal interests to defeat public interests. Firstly, these firms use indirect political influence through political lobby groups and outright corruption to obtain political influence, which use to not only further their own interests but perhaps most importantly, to defeat the good of society. For instance, Devinney (2009) offers the example of the Multi-Fiber Arrangement that effectively protected the organizations that it had been intended regulate because they used their political influence to subvert it. Effectively, it is inherently false for corporations to pretend to support societal interests. Instead, as Milton Friedman argues, they are solely driven by the interests of the shareholders, with all other interests being secondary to this goal. In the wider scheme of things, corporate social responsibility, is only a means to attain these organization's primary objectives. Effectively, given the information asymmetry between organizations and the society, the tendency to manipulate the latter use actual or perceived CSR is considerably high.
Devinney (2009) also negates the arguments by Boulstridge & Carrigan (2000) and Fan (2005) that regardless of their true purpose, CSR programs lead to organizations adding value to society. This is not least because corporations are socially conservative and thus hardly experiment, but also because these organizations have the slightest regard for the need to represent society’s best interests. For instance, large organizations such as Nike and Hershey’s are know to have contractors and other parties in their supply chains that are know to use unethical (and even illegal) labour practices to achieve lower costs, yer their CSR programs commit to ethical and sustainable labour practices. Nike’s contractors in countries such as Bangladesh, India and Vietnam, as well as Hershey’s suppliers in countries such as Liberia use child labour, and force workers to work under deplorable conditions for abysmal pay, just to ensure that these corporations’ products arrive on the shelves at the lowest possible costs. The practices by these corporations (as many others like them) and the fact that such practices are contrary to the underlying philosophy of their CSR programs reveals a dark side of these organizations, as well as the fact that they merely CSR to achieve their goals as against benefitting society.
CSR remain’s value to society and the individual organizations remains in question. However, it is evident that organizations derive considerable value (marketing value) from such programs, and it is highly likely that they usually intend to. Oftentimes, societies benefit, but there is no reason to believe that corporations ever intend to contribute to the betterment of the societies that support them (Devinney, 2009; Freeman & Reed, 1983). This is perhaps best illustrated by the corporate world’s active hostility to policies and regulations that tend to promote society’s interests to the detriment of their own interests. Effectively, however, well-intended, CSR programs are manipulative ways that serve the needs of the respective organizations.
References
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