Corporate Social Responsibility: Advantages and Disadvantages of Standards

Overview

Corporate social responsibility is an opportunity for business companies to improve their work, motivate people, and attract the attention of potential customers. It consists of certain rules and regulations that are also known as CSR standards that can be developed by reliable international organisations like the International Organisation for Standardisation or United Nations. In this paper, the definitions of CSR and its standards will be given along with a discussion of their main advantages and disadvantages. The application of ISO 2600 or UNGC may cause a variety of positive and negative reactions among employees of small and large companies worldwide.

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Introduction

Today, organisations have to follow a number of standards, regulations, and laws and develop strategies to offer services or products, stay competitive, and use available opportunities. The concept of corporate social responsibility (CSR) is an integral part of any business that causes debates and discussions at different levels. Despite the existing uncertainties, CSR remains a solid issue for investment in many companies from a global perspective.

According to Chernev and Blair (2015), CSR is a tool that enhances an organisation reputation and motivates consumers to cooperate. On the one hand, it is a policy for integration in the already developed business model. On the other hand, CSR is a form of self-regulation that can be promoted voluntary or mandatory. Despite the attitudes towards CSR in business, companies continue following rules and using guidelines.

CSR consists of various standards that must be established or have already been created by specialised organisations. A CSR standard is a tool that is prearranged within the sustainable development framework and characterised by such principles as “accountability, transparency, ethical behaviour, and respect for stakeholder interest/the rule of law / international norms of behaviour / human rights (Idowu, Dragu, Tiron-Tudor, & Farcas, 2016, p. 138).

It aims to define the rules and procedures according to which organisations have to develop their behaviours and recognise all environmental and social issues. Still, it is necessary to distinguish ordinary codes of conduct that can be developed by the same company, which should use it, and the standards introduced by the third parties and imposed on organisations regarding the existing international laws.

There is no single system according to which the classification of CSR standards can be developed. For example, Painter-Morland and Bos (as cited in McDonald, 2015) differentiate standards into three main categories: principle-based (principles like human rights or environment are used as guidelines), reporting-based (indication of performance according to global issues), and certification-based (audits to check company’s performance on the basis of third-party certifications). This list of types is not full, and it can include process-based or outcome-based standards, depending on the purposes companies want to complete (Camilleri, 2015).

In this essay, special attention will be paid to two types of CSR standards, process-based (ISO 26000) and principle-based (the United Nations Global Compact), the evaluation of their advantages and disadvantages, and the discussion of their practice-based implications to various business organisations.

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CSR and Sustainable Development

The field of business should not matter if a company makes a decision to create a CSR strategy and use available opportunities. In one of the Forbes articles, Dave Stangis, a chief sustainability officer, admits that to be beneficial, CSR initiatives must connect core business purposes and the strategy so that it can make intuitive sense (Ludema & Johnson, 2018). Another important strategy of sustainable development includes the necessity to stay connected to communities and investigate their experiences (Ludema & Johnson, 2018).

The essence of CSR is to create an environment where companies can demonstrate their respect and recognition of the role of society in their development and the possibility to make profits from the resources offered by communities. The benefits of using CSR in business include strategic management of stakeholders, the identification of ethical and moral components, and the establishment of obligations that can help to control individuals’ behaviours and organisational steps (Bhinekawati, 2017). In the modern business world, companies can choose CRS standards and guidelines on a voluntary basis that prevents the opportunity to compare the achievements of different companies within the same framework.

There is no specific definition of what CSR is and why companies have to follow its standards. Many leaders find it necessary to manage their work in accordance with CSR strategies and contribute to a positive impact imposed on society. The idea of CSR becomes competitive by making companies able to develop culturally competent conversations with regular and potential clients (Moodie, 2015). CSR standards may considerably increase in numbers, proving the growth of social concerns, human rights, and environmental problems that have to be recognised by modern organisations.

Advantages of CSR Standards

Many modern business organisations agree with the fact that CSR standards have a positive impact on their performance and development. One of the most popular examples of how CSR standards can help companies is the possibility to attract and retain talent (Murray, 2018). The experience shows that among 1,000 people, about 75% chooses to work at companies with strong CSR practices, and about 83% stay loyal to the chosen business with their intentions to solve social and environmental problems (Murray, 2018). The rights of people, as well as environmental and social concerns, are properly defined within the frames of principle-based standards.

Being a type of CSR standards, principle-based standards focus on the guidelines that include a number of the already defined principles and concepts to reflect on current corporate responsibility issues. The United Nations Global Compact (UNGC) is one of the best examples of principle-based standards of CSR. It consists of ten main principles that may be easily incorporated into strategies and policies for companies around the whole world (UN Global Compact, 2018). There are divided into four main groups:

  • Human rights (according to which business companies have to respect the protection of human rights and never abuse clients);
  • Labour principles (according to which business companies should promote freedoms and rights to bargaining, eliminate all forms of forced or child labour, as well as employment discrimination);
  • Environment (according to which business companies are obliged to discuss environmental challenges, promote environmental responsibility, and implement environmental friend technologies);
  • Anti-corruption (according to which business companies should avoid any form of corruption, including bribery and blackmailing).

Process-based principles identify the steps companies should be ready to take as soon as they decide to work in a certain environment. The establishment of working relationships in society is one of the crucial tasks for any organisation, and one mistake can lead to unpredictable and uncontrollable outcomes. The guidance for businesses to operate in a socially responsible way is developed by the International Organisation for Standardisation, also known as ISO, in 2010.

The same way the UNGC principles support human and labour rights, ISO 2600 introduce the standards for modern companies to understand the worth of accountability, transparency, consumer issues, international norms, and stakeholder interests (International Organisation for Standardisation, 2010). Ethical norms and respect to all business parties defined by these CSR standards cannot be broken or neglected if companies want to gain a good reputation and cooperate with many people.

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Performance in accordance with CSR standards is also characterised by a number of internal and external benefits. Organisations get a free chance to identify non-financial risks and take precautionary methods, understand the link between financial and management concerns, increase returns, and reduce costs by comparing competitors’ performance (Saeidi, Sofian, Saeidi, Saeidi, & Saaeidi, 2015). In addition, the external advantages include the provision of stakeholders with information that can play an important role in final decisions and the promotion of new marketing strategies to strengthen performance (“The value of corporate social responsibility,” 2014).

People who choose ISO 2600 certification enjoy a strategic advantage and a possibility to increase competitiveness and introduce a positive image with all the necessary rights and concepts being identified (Ajeti, 2016). Planning and overcoming risks in organisational management is a serious benefit for modern companies, and CSR promotes these achievements.

There are also many personal advantages from using CRS standards, both process-based and principle-based. Employees turn out to be satisfied with the conditions under which they have to work, and customers can trust companies and be confident in the quality of services offered. The investigation of Vazeos (2018) proves that more than 55% of customers choose products from socially responsible companies.

Employees increase their brand awareness, thus promoting their motivation and pride in the work done and increasing business profitability by 20% (Vazeos, 2018). Increased workers’ morale is another important improvement that leads to a well-developed company’s image and the promotion of healthier communities (Arora, 2016). It is hard for business companies to control changing the environment or stop recruitment and target allocations, and CSR is a chance to rely on some guarantees and make people loyal to one organisation (Arora, 2016). In brief, CSR promotes commitment, guarantees, and stability among employees and customers and makes modern companies competitive and financially stable.

Disadvantages of CSR Standards

Despite the existing number of positive aspects of CSR standards, companies should understand that being socially responsible is not always beneficial. Organisations must work hard to achieve the desired results and focus on making profits. Sometimes, people are not able to recognise the strengths of being socially responsible and forget about their direct obligations as employees but become engaged in CSR programs. A famous economist Milton Friedman is one of the strongest opponents of CSR standards who believe that social issues should never be the main concern of business organisations but a part of market system workings (Carroll & Brown, 2018).

Therefore, the disadvantage of CSR standards is the idea of being imposed on companies at the expense of working on their direct responsibilities and obligations. Friedman allows the possibility to solve social and environmental problems until they can be defined as community investments in financial operations (Calton, 2018). Still, it should not be a priority for people in the business world, but just one of the supplementary goals to be achieved. Companies have to think about society, but the needs of their shareholders and expected profits cannot be neglected.

Another drawback of CSR standards is their incompatibility with all businesses and industries. For example, the automobile industry requires the production of vehicles that pollute the air. The case of the Volkswagen Company with the inability to promote emission control or focus on environmentally friendly cars only proves that CSR standards do not play a crucial role in becoming the world’s leading car maker (Dans, 2015).

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Despite the fact that cars poison the world and worsen the quality of air, many people continue using different vehicles to save their time, enjoy comfort, and follow the progress. CSR standards are either followed by the companies of the tobacco industry. Being aware of the harm made by cigarettes to human health and the environment, people smoke, use different tobacco products, and even believe that they can stay socially responsible if they do it at specially developed places.

Finally, the necessity to meet CSR standards leads to additional monetary expenses and increased costs on services and products. Both principle-based and process-based standards imply unexpected expenditures and checkups. Companies have to cover their activities or even hire new experts to deal with standards and monitor organisational behaviours and managers’ interests (Lin, Chang, & Dang, 2015). The number of spent costs may not be covered by all the benefits obtained, and people can easily lose their interest in doing their job well. Companies should think about additional ways to cover their losses, reduce wages, or increase prices that may end in employee dissatisfaction or customers’ intentions to search for new cheaper options.

Critical Analysis

The need to implement CSR standards is associated with positive and negative aspects for companies and society at the same time. For example, there are many companies that find it necessary to use ISO 26000 or UNGC standards. Compared to ISO 2600, where the authors pay special attention to such concepts as human rights, labour, environment, economics, consumers, and community development, UNGC authors do not provide enough information about community and consumer issues (Gradert & Engel, 2015).

However, the absence of this description does not lead to a dramatic decrease in users. Some companies find it normal to focus on human rights, employment, and the environment only and save time for discussions of their own financial or organisational concerns. Balcerowicz (as cited in Księżak, 2016) admits that regardless of the standards chosen, enterprises prove that they are socially responsible and have the required social licence to continue their operations and offering their services. In this case, the advantage of ISO 26000 and UNGC standards for companies is approval from local communities to introduce different brand images and have clear backgrounds for service/product development.

Society can also benefit from CSR standards and the improvement of the quality of products and services. Mullerat (as cited in Księżak, 2016) explains that the decision to obey ISO 2600 or UNGC results in the possibility to eliminate defects and diminish the number of complaints. If there is a chance to achieve specific improvements and positive after-effects, it has to be used by any company, either small or large.

Society, in its turn, gets a possibility to observe an example of a good organisation of services and ideas and may decide to follow it in their everyday activities. A company’s success is the success of a community regarding hiring more people, changing prices, and creating favourable conditions (Księżak, 2016). Free training and presentations, master classes for the population, and direct communication between a company and a customer inspire people to buy products or services of a particular company and be confident in its quality and appropriateness.

In addition to Friedman, who usually criticises CSR and its implementation in modern companies, several more researchers demonstrate their negative or, at least, prudent attitude towards CSR standards developed by ISO or United Nations. Księżak (2016) underlines the possibility of hypocrisy among organisations. Today, it is easy to create an illusion of following CSR standards and use a number of strong statements about the importance of environment protection, human rights, and employment equality. Still, even the most attentive customers may be misled and confused by the offered public relations campaigns and special sale events.

Practice-Based Implications

There are many ways of how CSR standards can be applied to practice. The main goal is to make sure leaders and manager identify the basic concepts about human rights, environmental protection, and employment conditions and follow the regulations developed by famous international organisations. It is possible to find information about the Organisation for Economic Co-operation and Development, ISO, and United Nations and their guidelines for various enterprises and business activities (Gradert & Engel, 2015).

Then, it is expected to compare the desired outcomes of the chosen standards and, finally, decide on one source for a company to rely on while becoming socially responsible. As a rule, the guidelines are free of charge, and their electronic versions are available online. Still, the majority of potential users should make a payment in case they want to use a complete version of such standards like ISO 2600. Managers should read them carefully, underline the main aspects to be followed, and inform the staff about their responsibilities and duties in regards to the CSR standards.

Several arguments in support of CSR standards can be given to modern companies. First, any business organisation must understand its social and ethical obligations, and CSR standards include the basics that cannot be ignored. In addition to competitive advantage and customer satisfaction, companies enjoy their positive reputation and strong potential in promoting performance (Saeidi et al., 2015).

Employees learn the rules of how to behave within a company and in society, how to talk to customers, and how to take actions with minimal harm to nature. Some leaders want the staff to sign special agreements about the awareness of CSR standards, and some organisations prefer to discuss these issues in an oral form.

Another important argument for CSR is its worth in defining organisational goals and missions. Individuals may be ready to open a new business and hire employees, understanding the required skills and knowledge. However, unfamiliar to each other, people can be lost in a new environment, poorly motivated, and misinformed. CSR standards should help to unite them, create one solid background for professional and personal development, and introduce a goal that has to be achieved after mutual attempts are taken. In other words, CSR unintentionally becomes a practical source of motivation and inspiration for a team with a leader.

However, certain arguments against the obligation to use CSR standards determine the decision of companies to rely on these rules. One of the biggest challenges for employees is the existing overregulation. In addition to organisational duties, management, and culture, the staff has to consider international environmental and social regulations to be properly recognised and accepted by society. In developing countries, many companies cannot meet all the concepts because of poorly implemented technologies, the lack of natural resources, or the absence of well-trained people. Despite evident shortages in human resources or information technology, leaders must meet a number of standards and compete with other organisations at the same level. Such responsibility and high expectations may de-motivate and frustrate.

Conclusion

In general, corporate social responsibility is a modern self-regulation tool for many modern companies. CSE standards are introduced by several well-known international organisations to create common rules and norms for people who want to compete and develop services in the world of business. The consideration of human rights, environment, employment, and community issues is a good chance to establish a reputation, motivate employees, and raise customer satisfaction.

Along with a number of positive aspects, such drawbacks as increased control, the inequality of countries, and the participation of stakeholders may influence prices and conditions under which people have to work. Therefore, it is hard to create one common attitude to CSR, and the idea to obey the same business standards continues causing mixed reactions.

References

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