Introduction
Corporations exist to realize goals set by shareholders in a particular environment. Corporations must protect the environment for their survival. This is because, to realize such goals, corporations must interact with the environment in various ways that ensure their survival since environment provides such things like raw materials, land and human resource tasked with various tasks in an organization. As such, corporations no longer exist to make profits only; they have the responsibility to take care of society and the environment in general.
This understanding is the foundation of corporate social and environmental responsibility. Corporate social responsibility is a relatively new concept, which is yet to acquire a universal definition, but various sources have different definitions for corporate social responsibility. Corporate social responsibility refers to the method of eradicating corrupt or unethical activities capable of harming the community, the people therein and the environment(Mahida, 2013).
Corporate social responsibility denotes a process by which corporations combine their activities and values to take care of the interests of all stakeholders including clients, staff members, shareholders, and the environment (Gebler, 2013). It is the movement from shareholders only to all stakeholders’ interests in a corporation. In other words, a corporation takes into account all the relevant stakeholders in its policies and plans.
Further, corporate social responsibility is a group of management activities put in place to make sure that a corporation reduces the negative effects of its activities on society while optimizing its positive effects (Salls, 2005). In this regard, a company endeavours to minimize negative externalities in the environment by embracing sustainable development, which positively increases its effects.
Lastly, corporate social responsibility is the process by which corporations work with staff members, their families, and society to raise the living standards of the members (Kercher, 2006).
This essay seeks to affirm that corporations have the responsibility of taking social and environmental responsibilities even as they seek to achieve profits.
Social and Environmental Responsibilities
The modern-day concept of corporate social responsibility received great opposition and dismissal from various people. For instance, Milton Friedman maintained that the only social responsibility that corporations had was the maximization of profits. He argued that any business that purported to engage in corporate social responsibility outside the idea of making profits was set to collapse. He dismissed the whole idea of corporate responsibility as hypocritical (Jones, 2013).
Some corporations still stick to Friedman’s idea of social responsibility, but the majority have embraced corporate social responsibility to include taking care of all stakeholders. Currently, over 8,000 corporations around the globe have signed the United Nations Global Compact promising to exhibit good worldwide citizenship in the aspects of human rights, labour principles and the protection of the environment (Business Time, 2012). A socially responsible corporation takes care of different stakeholders and the environment in general, as discussed below.
Responsibility towards Shareholders
Shareholders invest their capital in a corporation with the main aim of making profits. This implies taking a risk and bearing such risks when they occur. Any corporation must, therefore, be responsible to its shareholders through the running of a business efficiently (Hood, 2008). As such, a corporation must use the lowest minimum possible resources to achieve the highest possible output for maximum profits. A corporation must avoid wastage of resources as much as possible.
Secondly, a corporation must utilize shareholders’ capital in the best way possible to ensure favourable returns (Reid, 2010). For instance, a corporation must reinvest capital in the business as agreed upon by the shareholders and diversify programs depending on the agreement of the shareholders. Other than capital, there are other resources like motor vehicles and other assets like computers, printers, scanners, copiers, and so on. A corporation must utilize such resources in the right manner and at the right time.
A corporation must grow and appreciate invested capital (McWilliams & Siegel, 2001). When shareholders invest their capital in a corporation, they expect the capital to grow. Therefore, it is the responsibility of a corporation to use all legal means possible to make sure that capital grows steadily in line with shareholders expectations. This encourages the shareholders to invest more capital in the business, and as this happens, corporations grow steadily.
Shareholders expect a fair return on the capital invested (Truist, 2013). This is the responsibility of a corporation. Returns come in forms of dividends, bonuses and honorary payments to shareholders. It is the responsibility of a corporation to work diligently to afford fair returns of capital to shareholders. Such returns are achievable when leadership in a corporation works tirelessly to bring in more customers to a corporation.
Corporations that fail to grant fair returns to shareholders always lose such shareholders and thus experience decrease in the capital as shareholders withdraw their contributions. Where such a corporation is a member of the stock exchange, the share price decreases drastically too and thus decreases the value of share capital of a corporation.
Responsibility towards the Staff Members
Staff members carry out daily tasks aimed at achieving goals set by a corporation in line with the vision of the shareholders (Kercher, 2006). They carry out their duties diligently by offering skills and knowledge to a corporation. To maintain their morale, a corporation must necessarily attend to their needs at all times. Satisfied staff members mean successful businesses.
A corporation should always ensure that staff members receive their compensation at the right time and in a regular way (Kercher, 2006). Failure to receive compensation at the right time and in a regular way leads to low morale as the staff member looks for ways to fulfil obligations like paying house rent, settling utility bills and supporting dependents. It might also lead the staff member to further financial crisis when such a staff member seeks the services of shylocks.
The working environment must be safe and conducive to work in (Kercher, 2006). For instance, staff members in heavy manufacturing industries should have protective gears and stipulated compensation payable in case of accidents at the workplace. Corporations should take care of the welfare of their employees too. Welfare touches on issues like the ailment of a staff member or bereavement, among other issues.
Corporations should facilitate the upward growth of employees by offering them the chance to fill positions that fall vacant (Kercher, 2006). This becomes possible by giving qualified employees a chance to go for the post before a corporation source elsewhere. Also, corporations should carry out such promotions in a transparent manner to avoid demoralizing staff members.
Corporations should ensure job and social security of their employees is in place at all times (Kercher, 2006). Job security decreases the chances of demoralized employees as they work with certainty and confidence. Corporations should contribute to employees’ provident fund, enrol an employee in group insurance, contribute to their pension scheme and grant retirement benefits to those who attaint the retirement age (Kercher, 2006).
Corporations have a moral obligation in ensuring that the living standards of the employees constantly improve through provision of proper housing or granting of reasonable house allowances, provision of transport while on duty as well as the establishment of recreational facilities within the work environment. Such efforts lead to increased morale among the employees and increased production as well (Business Time, 2012).
Overall, corporations must continuously provide training facilities to employees to update them on new business requirements and prepare them for future promotions in the company (McWilliams & Siegel, 2001). In other words, corporations must invest in training and development of the employees.
Responsibility towards Society
A society comprises of various members who interact with each other and depends on each in most engagements (Kercher, 2006). A corporation is part of the society and as such, has a duty of keeping a healthy relationship with other members through protecting the environment. A corporation protects the environment by minimizing or eradicating different types of pollutions. If a corporation produces excessive noise to the environment, it is ethical for such a corporation to invest in noise-proof materials to cushion the public from such noise.
Corporations that produce affluence should not direct such waste to open grounds or rivers. Instead, corporations should dig sewers to hold such waste and if possible, recycle that waste. Releasing such wastes to natural ecosystems like rivers kills organisms and destabilizes an ecosystem. Other corporations carry out activities that produce toxic gases to the environment. Continued emissions lead to acidic rain, which is harmful to the environment (Reid, 2010). Acidic rains destroy crops and thus deny the herbivores the pasture they need. Consequently, the whole food chain is affected. With this in mind, corporations that release toxic gases must innovate ways of minimizing such emissions.
Corporations must also avoid using non-biodegradable materials like heavy plastics, which harm the environment (Reid, 2010). They should stick to conventional allowances in the use of such materials and encourage recycling to reduce the amount of waste in the environment (Reid, 2010). Also, corporations should involve themselves in environmental conservation campaigns touching on the general environment and wildlife.
Responsibility to Government
Corporations must abide by all rules and regulations set by relevant authorities. This prevents them from constant lawsuits or closure of business due to lack of compliance. Such regulations touch on the number of outlets a corporation should have, the type of physical structure, and level of emissions, including noise, among others.
Significance of Social and Environmental Responsibility
Several benefits accrue when corporations embrace social and environmental responsibility. A corporation improves its image to the public, which enables it to receive goodwill and admiration by the public(Mahida, 2013). Public image influences the earnings of a company through increased sales since customers prefer companies known for their role in the welfare of society. In addition, corporations that engage in social responsibility get qualified and competent staff members to work in them (Jones, 2013). The general feeling is that such a corporation is caring and unselfish towards society and the environment.
Secondly, each corporation exists in a particular society, is part of such a society, and therefore must rely on society for its existence and growth. Corporations use resources such as water, labour, electricity, and land from society and this implies that corporations must invest back in society(Mahida, 2013). For instance, they should participate in environmental campaigns that aim to conserve water catchment areas. Also, most countries use hydropower for electricity generation and therefore, when they conserve water, it adds to constant or more production of electricity, which ensures the continuation of business activities.
Socially responsible corporations achieve employee satisfaction. As earlier seen, society provides corporations with staff members and therefore, satisfying the employee satisfies the society (Mahida, 2013) indirectly. This is because, most probably, such employees will invest in society through supporting their friends and relatives as well as development projects, which become a source of employment to other members of society. Corporations should endeavour to meet the needs of an employee as this boosts production and consequently increases the profitability of a corporation. Such needs include salary, allowances and necessary training.
Corporations should comply with government regulations to survive(Mahida, 2013). Failure to comply with directives concerning aspects like pollution and licensing can lead to expensive lawsuits instituted by the government towards corporations. This would not only hurt the image of a corporation but would also lead to financial losses in the long term. As such, corporations must abide by laid down directives to continue discharging their duties without any interference.
Corporations operate in societies where members know their rights and very conscious of such rights. Corporations that manufacture substandard products face the wrath of consumers through demonstrations and protests(Mahida, 2013). This hurts the image of a corporation and leads to poor sales when consumers avoid purchasing products from the affected corporation. Every business must produce standard goods at a fair price as this portrays the company in a good light.
Views Opposed to Corporate Social Responsibility
The best-known designer of the alliance against corporate social responsibility is Milton Friedman (Jones, 2013). He alleged that business people who propose corporate social responsibility are puppets of intellectual power that have been crippling the foundations of a free society. He believed that the corporation did not have responsibilities. The concept of responsibility applies to people who have social responsibilities to their families since such employees act as principals concerning their money. A corporation is an agent of the shareholders and should not purport to use such money meant for business (Jones, 2013). His followers have advanced several reasons for opposing corporate social responsibility, as seen below.
The first argument states that managers have no right to use shareholderâs money on corporate social responsibility (Jones, 2013). Such money does not belong to managers but shareholders, and the goal of shareholders is to maximize profits. As such, when managers use the money on corporate social responsibility, it amounts to theft of shareholders assets (Salls, 2005). Sternberg believes that it is wrong for stakeholders to dictate to shareholders concerning activities expected through corporate social responsibility (Jones, 2013).
According to her, it is against shareholders rights, and nothing, including the reasons, are given for corporate social responsibility, can convince her. However, she has nothing against civility, integrity and fairness in a corporation (Jones, 2013).
People opposed to corporate social responsibility have a shallow view of the concept. Corporate social responsibility is not dishing out money to the community but a way of building the corporation.
Such a stand against corporate social responsibility is misplaced. The managers have the obligations to steer the business on behalf of the shareholders. As such, they must come up with ways of attracting and retaining customers in the current competitive environment. Corporate social responsibility grants a chance to managers and the corporation, in general, to interact and build lasting relationships with customers. Through corporate social responsibility, corporations net qualified and talented employees, manage risks and build a corporation’s image.
Those opposed to corporate social responsibility make it appear like corporate social responsibility takes place in secret and that shareholders never get to know of it. Corporate social responsibility is a calculated action that has the nod of shareholders because of the returns expected to accrue from activities falling under corporate social responsibility.
Further, concerning management, shareholders receive briefings from management as often as possible. If managers acted against shareholders wish, shareholders would have sacked or directed them to stop any activity related to corporate social responsibility. They act on behalf of the shareholders at all times.
The second argument against corporate social responsibility argues that businesses that engage in corporate social responsibility tend to underperform in their areas and that businesses that do well do not engage in corporate social responsibility (Jones, 2013). Such reason derives from the fact that successful businesses like Microsoft have ruthless leaders in their sectors. Bill Gates has featured in cases relating to bullying in the market, yet his company does well financially (Truist, 2013).
Also, Jack Welche of General Electric engaged in massive environmental degradation yet his business prospered. Bill Gates can use any amount of cash to have his way, and this is unethical and against the principles of corporate social responsibility (Truist, 2013).
Later on, the conduct of Jack Welch fitted into the concept of corporate social responsibility. He said that time was up for companies to make profits and pay taxes alone and instituted structural changes that lead to the current EcoMagination initiative whose main agenda is environmental conservation (Truist, 2013).
On the other hand, there are successful companies that fully engage in corporate social responsibility. Coca Cola is one of the leading corporations in the world, yet the company has raised its profile because of engaging in corporate social responsibility. British Petroleum (BP), under the leadership of Sir John Browne, distinguished itself as a leader in environmental matters (Business Time, 2012).
Therefore, it is untrue that successful companies do not engage in corporate social responsibility. They do because they understand that they are part of the environment and have a duty towards the environment and society.
Conclusion
Corporations must make profits to satisfy shareholders. Above that, corporations are part of the society and must, therefore, be responsible for the society and the environment in general. As such, to realize their goals, corporations must fulfil certain obligations to all stakeholders. Such stakeholders are found in the environment and include customers, suppliers, government, investors, shareholders, general ecosystem, competitors, employees and the society in general.
Corporations that fulfil their social and environmental responsibilities operate smoothly and realize profits contrary to what those of the opposing view believe. Responsible corporations easily attract customers, investors, and suppliers.
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