All businesses have an ethical obligation of being socially responsible as a way of appreciating their customers, employees, and shareholders. Corporate social responsibility initiatives by organizations play a crucial role in promoting sustainable development and achieving the common good across various communities. Socially responsible businesses hold a competitive advantage in their respective markets because investors, customers, and potential employees tend to have a strong desire of being associated with such corporations. The success of CSR initiatives depends a lot on an organization’s corporate values and the ability to incorporate them in the projects a business chooses to support.
Sustainable development is one of the priority areas for any business or organization that aims to achieve prolonged success. It entails the ability of the current generation to embrace the need for a high sense of responsibility in meeting its needs without compromising the ability of the subsequent ones to meet theirs (MacGregor, 2014). Business organizations have been at the forefront of achieving this feat by engaging in numerous Corporate Social Responsibility (CSR) activities. There are four major CSR categories for businesses, namely environmental sustainability, philanthropic giving, economic responsibility, and ethical business practices (Aluchna & Idowu, 2016). Often, business organizations engage in promoting local communities, volunteering, funding going green programs, and investing in the development of employees among others. Since the turn of the century, there has been a growing trend where many employees, customers, and investors are choosing to work for and associate with businesses that prioritize CSR (Rasche, Morsing & Moon, 2017). In particular, those that demonstrate a strong desire to promote environmental protection, economic responsibility, and ethical practices are very attractive. As an evolving business practice, CSR helps to incorporate the concept of sustainable development into an organization’s business model by adhering to several social, economic, and environmental standards.
One of the biggest values of CSR for any business organization is the positive impacts it brings about boosting an entity’s image, growing the existing brands, as well as motivating the employer and the employees towards achieving the corporate goals (Tsiganovski, 2019). Social consciousness should be a priority for every company because the perception that the public has about its products and services plays a pivotal role in determining its success. Businesses have an ethical responsibility of effecting social change in communities through their corporate values, practices, and profits. With the increasing uptake of CSR by businesses around the world, one of the growing trends is the increasing consumer power where they are holding organizations accountable for supporting issues of concern in their communities (MacGregor, 2014).
Building a socially responsible business is a demanding feat that requires a lot of investment in terms of time, financial resources, as well as a high degree of commitment from all the relevant stakeholders. To have the full commitment of all employees, whenever a business decides to initiate a CSR initiative, it is important to involve them in the decision-making process. This helps in ensuring that the employees have a sense of ownership to the different causes they will be dedicating their time and energy to overtime. In addition, asking the employees to choose a CSR initiative for engagement plays a pivotal role in increasing their level of commitment, as well as the success rate of the chosen program (Sivaranjini, Rekha & Nisha, 2016).
An important thing that businesses seeking to be socially responsible ought to avoid is volunteering in or funding charitable activities that do not relate to their corporate values and promote ethical practices (Rasche, Morsing & Moon, 2017). This consideration is very important because it prevents an organization from wasting its resources, lowering the value of its portfolio, as well as maintaining a good image and reputation among the consumers. It is also important for socially responsible businesses to avoid initiating CSR activities and programs with the sole intention of marketing their goods and services. Business development experts argue that the best way an organization can exploit the marketing element of CSR initiatives is by engaging in socially responsible business practices repeatedly in various target areas. Consumers, employees, and investors have a greater preference for business organizations that have a clear long-term CSR initiative compared to those that focus on short-term activities with little or no impact in the community (Rasche, Morsing & Moon, 2017).
One of the main guiding principles of CSR initiatives by business organizations is accountability. Every business should be responsible for the welfare of its employees, the impact of its goods and services, as well as the environmental impact of its activities. In addition, accountability by business organizations should embody a strong desire to support community activities and programs that address social challenges such as discrimination and accessibility to healthcare services. According to business development experts, any business is bound to prosper as long as it addresses the needs and challenges of the community that forms its customer base (Doda, 2015). The contemporary business environment is highly competitive, therefore a business organization should use every available opportunity to improve its image to grow its customer base. Identifying various gaps within a community and committing to bridge them over time always endears a business to more consumers because the general feeling is that the money spent on the organization’s goods and services will end up bringing the necessary changes.
The success of any CSR initiative is highly dependent on the standards that a business chooses to apply about the business code of ethics adopted. The importance of a business code of ethics is the fact that it forms the basis for the standardization of CSR activities an entity elects to support. It outlines how its employees ought to behave to promote ethics, diversity, and inclusivity in the workplace, as well as the need to prioritize good customer service (Tsiganovski, 2019). A business that intends to become socially responsible shows its intent when designing its governance document where its commitment towards social development and environmental protection.
The globally accepted and recognized standards that govern CSR aim to help organizations seeking to be socially responsible develop a sense of transparency in their activities. Business organizations that initiate CSR programs should embody ethical behavior that promotes sustainable development in terms of the welfare of the society and achieving the common good (Rasche, Morsing & Moon, 2017). The ethical code of conduct should take into account the expectations and interests of all stakeholders associated with the organization. One of the principal objectives of the CSR standards is ensuring that organizations comply with applicable laws under the jurisdiction they operate and are consistent with international models (Bustos, 2015). There are numerous internationally recognized CSR standards, but this essay will focus on the most dominant ones that almost every business has to use regardless of their size. One of the common standards used is the Global Reporting Initiative (GRI). GRI is an autonomous institution formed in 1999 to create a steadfast and plausible structure that socially responsible businesses would use in preparing sustainability reports. The strongest element of this standard is the fact any organization can apply it regardless of its location or industry of operation.
ISO 26000 is also a predominant standard used by many organizations. Developed by the international standards organization (ISO) and published in 2010, it seeks to offer businesses guidelines on the implementation of CSR initiatives (Sales, 2019). This non-certifiable standard aims to influence and advance the need for organizations to implement internationally recognized social responsibility practices. It does this by providing sensible guidelines relating to the implementation of social responsibility such as identification and involvement of stakeholders, as well as ensuring the credibility of sustainability reports (Cohen, 2017).
ISO 26000 standard lays its emphasis on the argument that the ability of an organization to achieve sustainable development is highly dependent on its commitment to being socially responsible. This norm aims to help business organizations deal effectively with the demands of being socially responsible and come up with the most effective strategies for initiating CSR (Bustos, 2015). Other notable objectives of this standard include growing the satisfaction and confidence of the consumer, promoting key terminologies used in social responsibility, as well as ensuring that an entity conforms to existing treaties, documents, and other relevant ISO standards.
Business organizations also use the SA 8000, a management standard created by Social Accountability International (SAI) in 1997. It lays a lot of emphasis on the need to provide employees with good working conditions, as well as discouraging child and forced labor. In addition, it focuses on the need for business organizations to offer ethical goods and services (Rasche, Morsing & Moon, 2017). This standard developed from conventions involving the international labor organization (ILO) and the Convention on the Rights of the Child. Business organizations seeking to be socially responsible should avoid gaining a competitive advantage in their respective markets by providing poor working conditions as a way of cutting down on the cost of production (Cohen, 2017). In particular, this standard applies to organizations operating in communities that do not have a demanding environment in terms of social and cultural expectations. This explains why it is the most common CSR standard in developing countries where the development aspect in terms of safety and welfare of employees within the workplace is low (Bustos, 2015). Business organizations seeking to be socially responsible should have initiatives with an orientation towards addressing workplace challenges such as discrimination, freedom of association, right to collective bargaining, working hours, remuneration, and management systems.
AA 1000 is a CSR standards series developed by AccountAbility to incorporate communication, auditing, and management elements of CSR. This norm aims to help the socially responsible organization develop a higher sense of accountability and sustainability in a bid to support fair trade (Sales, 2019). The strongest element of this standard, which makes many organizations choose it, is its emphasis on the creation of a methodology that establishes the interests of stakeholders and redefining corporate values (Cohen, 2017). This standard is very effective for government and private organizations with challenges relating to managerial strategy, sustainability assurance, business models, governance, as well as stakeholder involvement.
Advantages of using CSR Standards in Establishing Responsible Business Organizations
Without a doubt, the concept of CSR has become persistent because business organizations have realized the value and importance of upholding ethical values, respecting the interests of stakeholders, employees, and consumers, as well as protecting the environment. Socially responsible organizations report on compliance with their stated CSR policies regularly. When an organization initiates a CSR program, it is important to identify the right standards to apply to get as much value as possible from the activities they support. One of the major advantages of using CSR standards is the fact that it increases the profitability of a business and the value of its brand (Zhao, 2014).
A company’s reputation grows when it chooses to embrace the need for greater accountability and transparency to the stakeholders, consumers, and the local community. This leads the value of the company’s stock to increase, thus generating more income. In addition, organizations with a good reputation find it easier to access investment capital because various investors and sponsors elect to associate with their brand. Through CSR, an organization gets a chance to build a responsible business reputation that helps to boost its competitive advantage in the market. A company’s profitability also increases because of cost savings relating to lowering the amount of waste and emissions because it requires lesser resources for mitigation measures (Bustos, 2015).
Using CSR standards also helps organizations to improve their customer relations. Research has shown that one of the biggest expectations that customers expect of any business is social responsibility by using part of its profits to addressing various challenges within the community (Ahmadian & Khosrowpour, 2017). Socially responsible businesses need to incorporate CSR standards that bring them closer to the consumers by understanding their interests, expectations, and efforts needed to win their loyalty. Studies have also shown that many customers would not have an issue paying more for goods or services by a certain company as long as it was socially responsible and shown its commitment to supporting the community in the long term (Ahmadian & Khosrowpour, 2017).
CSR standards also help business organizations in attracting and retaining talented employees within the workforce. Research has shown that organizations that adhere strictly to the SA 8000 standard of CSR find it easy when it comes to recruiting new employees, as well as keeping the ones they already have. Employers have an ethical responsibility of ensuring that they provide a safe and inclusive work environment that allows everyone to enjoy the freedom of expression. Employees have a greater preference for organizations that support their personal development and involve them in the decision-making process (Zhao, 2014). This also helps organizations in reducing their operational costs and increasing their profitability because the disruptions of recruiting and training new employees tend to be minimal.
Socially responsible organizations also attract positive media attention, especially when they elect to sponsor or participate in activities within the community. Media is a powerful tool that can propel a brand to unimaginable heights as long as an organization keeps engaging in activities that identify and fill various gaps within the society. Organizations need to understand that the main objective of initiating CSR is to show their customers that they care and are responsible enough to earn their loyalty (Geethamani, 2017).
Using CSR standards also helps organizations to identify and create new business opportunities. For example, when an organization identifies a social challenge they would like to solve within a community, it allows them to develop new products or use their existing products. This explains the argument that organizations that use a strategic CSR policy tend to benefit a lot in terms of marketing their products and services (Doda, 2015). Arguably, many organizations elect to initiate CSR programs with the sole intention of introducing their goods and services to new markets.
Disadvantages of Using CSR Standards to Establish a Responsible Business Organization
One of the biggest disadvantages of using CSR standards is the cost implications relating to the implementation process. This challenge is heaviest on small businesses seeking to build a reputation for themselves in a bid to grow their brands. Although business development experts encourage businesses to start their CSR programs with manageable budgets, essential elements such as reporting and marketing require a lot of financing (Ahmadian & Khosrowpour, 2017). Although some organizations in the contemporary world have elected to use social networking sites as a cheaper avenue for reporting on their CSR initiatives, the amount of time required in monitoring exchanges can lead to additional expenditure necessitated by the hiring of additional personnel to that job. The cost factor also applies to an organization if the CSR initiatives chosen do not align with its corporate values and practices (Geethamani, 2017). The reason for this is the fact that the employees will require fresh training on the new practices.
Another major disadvantage of using CSR standards is conflicts of business objectives and the profit motive. Studies have shown that although CSR brings numerous benefits to an organization, the costs involved often act as an obstacle to the attainment of business objectives and the need to make some profit. Because the management team of every organization has a fiduciary duty to shareholders, CSR can easily end as an exercise in futility if the ability to maximize profits reduces. Arguably, a manager of a business organization can easily lose his or her job if providing benefits to the community precedes the need to make as much profit as possible (Zhao, 2014). In a situation where shareholders do not agree with the same priority areas for their business, then initiating CSR can easily prove to be costly in the end.
Initiating CSR can also lead an organization to suffer a competitive disadvantage. According to business development experts, initiating CSR can be disadvantageous to an organization operating in a highly competitive and dynamic environment where some competitors have enough resources for marketing and diversification of their portfolio. A socially responsible organization feels the negative value of CSR when competing against entities that disregard the ethical code of doing business because they can offer their products at lower prices (Geethamani, 2017). This challenge leads to both short-term and long-term losses to organizations using CSR standards because their market value will decline along with its customer base and market influence. Although consumers prefer to buy from businesses that show concern for their needs, harsh economic times can easily drive them to go for cheaper options regardless of the reputation of the provider.
Another disadvantage is the fact that consumers are more aware of their rights and interests when it comes to subscribing to a brand. Research has established that some business organizations initiate CSR to dupe consumers into believing that they have a desire to be socially responsible yet their actions give a contrasting impression (Geethamani, 2017). For example, some manufactures tend to label their products as environmentally conscious and safe for human handling just to increase their sales. Such strategies can hurt an organization’s reputation badly, especially in countries where socially responsible organizations are supposed to share information relating to the shortcomings of their products during the presentation of sustainability reports. This often leaves an organization in a vulnerable position that can easily lead to their products and services facing a backlash in the market. If not carefully designed, a CSR initiative can easily kill an organization’s reputation because of careless mistakes and the prioritization of profits over the welfare of consumers (Geethamani, 2017).
Corporate social responsibility is a top priority for businesses in the contemporary world. Businesses have an ethical responsibility of ensuring that they promote the welfare of their employees, shareholders, customers, and the community. Initiating CSR has both advantages and disadvantages to an organization depending on the things they intend to achieve from achieving the status of being socially responsible. CSR helps to build an organization’s reputation, attract highly qualified employees, grow the brand value, and increase customer loyalty among other benefits. Embedding CSR is one of the difficult decisions that most businesses in the contemporary world have to make. Conflicting business objectives, the high cost of amalgamation, and the competitive nature of the business environment necessitate this challenge.
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