The meaning of the term corporate social responsibility (CSR) has evolved over the years since the concept was constructed during the early fifties. In discussing the emerging issues on corporate social responsibility, the definition of the term as used by Kotler and Lee (Kotler and Lee3) will be used in this paper. According to the two authors, corporate social responsibility refers to “a commitment to improving community well-being through discretionary business practices and contributions of corporate resources “. Other people commonly use the terms corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or corporate social performance as alternatives to imply the same meaning as the term CSR.
Of late, the subject of business ethics has been analyzed at three levels. The first level is the individual responsibility of the business person or entity, the second level is corporate responsibility while the last level is the societal responsibility.
At the first level, the ethical concerns revolve around balancing the self-interests of the business with fairness and the welfare of people within and outside the company. Those within the company include the employees, the owners, and the management while those outside the company include people like the suppliers, creditors, the government, customers, stockholders, and the community in which the business firm or company operates.
The need to run businesses successfully and make them sustainable ventures makes it necessary for business firms and companies to engage in CSR initiatives. This is because the environmental impacts related to the activities of a firm or companies have direct impacts on the ability of the firm to run its operations. It has also become equally important for firms to pay attention to the interests of their shareholders and society in general.
In addition to the reasons above, business firms need to engage in CSR activities because there has been a shift of CSR being regarded as mere charity to the view that CSR can be integrated into the business strategy of a company as a means towards corporate success. The paper addresses the major forms of CSR initiatives and the criticism that has been raised against their use, finally, the paper gives a critical analysis and conclusion on the subject.
Issues on corporate social responsibility
According to Kolb 4, debates surrounding the matter of whether companies should engage in corporate social responsibility or not fall under two main categories; the first category comprises of groups that argue that besides satisfying the interests of the stockholders, it is necessary for business firms and companies to take responsibility for how their activities affect the environment, the people who consume or use products and services produced by the company, employees of the firm or company, the community in which the business firm operates and members of the public as well.
The second category includes arguments that firms should not be engaged in CSR initiatives as the main responsibility of a corporation is limited to the stakeholders only. Critics have commonly argued that some CSR initiatives undertaken by some companies are not genuinely meant to contribute to the well being of the community by addressing important social problems but are rather meant to advance the business interests of the company with the main aim being to generate profits and minimize costs for the company. In relation to business ethics, many managers find it hard to decide whether to place greater priority on the interests of the stockholders or those of the community.
Kolb 4, explains that without the primary and the secondary stakeholders, businesses would find it hard to run, and therefore there is a great need for managers to pay keen interest on the primary stakeholders. During the past, the stockholder’s interests were regarded as more important compared to those of the secondary stakeholders. This trend has not changed and continues to persist till today
As mentioned earlier, the concept of corporate social responsibility has evolved over time. Werther and Chandler 11, explain that the activities undertaken by companies as CSR initiatives have also continued to evolve as well. There are different forms of corporate social responsibility initiatives which are commonly undertaken by companies. These initiatives are regarded as adding value to the business but have also received negative criticism as well.
The first CSR initiative is issue promotion, in this activity, the company provides funds, in-kind contributions, and other corporate resources to support a social cause. Wymer and Samu (13) explain that during issue promotions, companies often partner with non-profit making organizations to further a chosen social cause. A common feature of issue promotion involves joint advertising by the corporate and the non-profit making organization. The joint effort is meant to promote awareness about the cause. At times corporate are occasionally involved in the recruitment of volunteers to support the cause.
Besides issue promotion, Adkins (118) explains that companies also engage in cause-related marketing as a form of CSR initiative. In cause-related marketing activities, the company allocates a particular percentage of money that it generates through the sale of a particular product to a specific cause. The offer usually involves a specific product and the money raised through the initiative is channeled to a charity organization that partners with the company. The aim of the initiative is to generate sales for a particular business product while at the same time generating the financial support needed to support a certain social cause.
Daw (24) considers the use of the above strategies as only serving the short-term needs of the parties involved. The author also notes with concern that many cause-promotions are not based on strong relationships. Dew cites as an example that many causes –promotions are either terminated or disrupted when the management that is responsible for putting them in place is changed. As a case in point, Hi-tec Canada had a donation program to support the management of games parks across Canada in 1993. This program ended with the promotion of the Company to head Hi-tec worldwide.
The author, therefore, opines that companies which are engaged in this undertaking this form of the initiative are only deceptive and their intention is only to drive sales up and increase the company’s income. This was the likely case when Kodak Canada introduced a program between 1992 and 1995 in which the company made a donation on every single-use camera and spent canister that was returned to them by users for recycling. The company was heavily criticized for creating what many people considered as a throw-away product (Dew 24).
In the other form of CSR initiative called corporate social marketing, the company gets involved in creating or implementing a media campaign that is targeted at changing a particular behavior the is deemed as promoting the public good such as public health, public safety, environmental protection, and other community-based initiatives. In carrying out a corporate social marketing initiative, a company may do this on its own or can partner with other corporations or agencies that involved in addressing the social issue of interest like pubic agencies and non governmental organisations (Kotler and Lee 23).
According to Kotler and Lee (23), corporate philanthropy is another CSR activity that is perhaps the oldest and most widely used CSR activity. Corporate firms that are involved in philanthropy make donations both in monetary terms and in kind to charitable organizations or towards a chosen social cause. Corporate philanthropy is mostly expressed in the form of grants or services. Many corporations are under pressure to shift from this model towards more strategic approaches in which philanthropy is integrated or aligned together with a corporation’s business goals and broad objectives.
In the recent past, Visser, Matten and Pohl (179) notes that corporations have become increasingly involved in various community volunteering initiatives. Corporations for example have started to encourage their staff and business partners to spend some of their time supporting the activities of community based organizations and support their causes. Such voluntary efforts can involve an individual employee or they can be collective efforts of a group of employees. At times corporations consider it better to partner with non profit organizations in carrying out voluntary activities. Some of the volunteer activities are designed by the corporation itself while others are chosen by the employees themselves, companies frequently grant such employees paid off and by providing finance for the activities.
In addition to the above, some corporations choose to engage in discretionary business practices or investments that are meant to promote the livelihood of the community members and conserve the environment. The actions may be undertaken by the corporation or through partnerships with public agencies or non governmental organizations. A critical concern with the use of discretionary business practices is what some critics have labeled as corporate hypocrisy.
Some big corporations like shell have in the past acted contrary to their CSR policies of promoting community development. According to a report by Baker (para 1-4),the corporation in 2004 gave wrong figures concerning its oil reserves, this information was grossly misleading to the general public and the company ended up paying a fine of 83 million UK pounds.
All the above initiatives have received a lot of criticism because some people strongly believe that many CSR programs are created by big companies as a means to divert the attention of the public regarding the ethical concerns about the operations of the corporations. Similarly some critics like McKibben para 2-, argue that there are some corporations which start CSR programs purely to enjoy the commercial benefits that often come with building a good image of the corporation in the eyes of the public and the state.
As an example, McKibben para 4, cites the CSR policy of the British petroleum company regarding the environment. The company is known through aggressive media campaigns to champion for environmental conservation and protection. Contrary to this, McKibben explains that the company had ignored safety concerns raised by some of its employees in 1992 regarding the corrosion of the company’s pipeline in Alaska. Shortly after this incident, there was a massive oil leak that led to the eventual shut down of BP’s Alaska pipeline.McKibben’s perception is that there are some firms whose mission is to capitalize on maximizing their returns without considering their how they can positive impacts on the society
According to May, Cheney and Roper 269 ,the debates on corporate social responsibility of corporations cut cross a number of important issues. Today, corporations are faced with the task of taking social responsibility as their primary stake holders raise their expectations on the way corporations respond to and address relevant social and community issues. This occurs against a backdrop in which corporate managers are also expected to maximize returns to the shareholders.
The main argument against CSR that corporations should only be responsible to the interest of its shareholders only disregarding the society is a hard approach to adopt in an business environment where consumers are becoming increasingly concerned about how the products they use impact on the environment.
In regard to the environment, Hay, Stavins and Vietor (138) advices that managers should be aware that the natural environment is an integral factor which has the potential to disrupt or sustain the operations of a company. Therefore the need to adopt CSR initiatives geared to towards protecting the environment should be regarded as a natural obligation on the part of the company and not merely as a public relations exercise.
For a company whose activities are likely to negatively affect the environment and be a subject of public scrutiny , a CSR program is indispensable. Managers should strive to understand what environmental causes are important to their internal and external stake holders and make them their first priority. If necessary, they can create a CSR program after a careful cost-benefit analysis of the proposed initiative. Through such programs, a company can derive some considerable benefits. These benefits include for example increased employee engagement. Cook (87) explains that employees are concerned about the ethical position of their employers. The author goes ahead to further notes that through CSR programs, a corporation can increase employee loyalty, retention and increase productivity.
By creating its own CSR programs and dealing with business partners who do the same. A company has a good chance of building itself a reputation as a responsible business. This sets the company apart as it gives the company some competitive advantage over firms doing similar business. Keirnert 89, explains that it is now a common trend for companies to favor or prefer to deal with suppliers who demonstrate responsibility for the environment and people.Implementation of a CSR policy by the company will greatly influence positively; the perception of its major external stakeholders. These comprise parties such as its consumers, academics institutional, media, regulators and investors.
Keirnert (93) continues to explain that the additional benefits that come through engaging in CSR also include reduced misuse of resources and emissions.This is beneficial to both the company and the environment. The company for example gains through reduced operational costs.on the flipside, managers should also be aware that by implementing a CSR project, the company will incur extra expenses to facilitate the implementation of the chosen CSR project.
If the company is to achieve any positive results through a CSR intiative, adequate finances must be availed to minimize negative criticism resulting form the premature termination of CSR projects.Besides this, the management should always be aware that by endorsing a particular CSR policy, it creates for itself a mechanism for regulating its internal activities and by which the business will be monitored to check its compliance with the stipulated laws and ethical practices.
People who argue against CSR do so because they consider it not to be compatible with the interests of corporate organization which is to manufactures goods and services and later sell them for a profit. This argument leads to the conclusion that CSR hinders free trade and interferes with the growth of business enterprises as the mandate of a corporate organization is to maximize profits and be mindful of the interests of the stake holders. These are plausible arguments since the stakeholders are the people who keep the business running through their investments.
This however does not mean that business enterprises should not take responsibility of the environment from which they draw the raw materials that sustain their operations or the workers and the communities that are affected by the business activities of the corporations. As a result of globalization and increased global awareness consumers, employees and business partners are concerned about the ethical stance of the companies they buy products from, work for or trade with.
According to Carroll and Buchholtz 48, there is more scrutiny on how companies respond to and address issues that relate to the legal standards, ethical and the discretionary aspects of their business operations. As result of this, it has become necessary for business enterprises to protect and project a positive image to its stakeholders if they have to sustain their activities and beat the ever increasing competition in the market.
Today businesses are faced with the obligation to manufacture products that are safe for use and not contributing to environmental degradation through pollution of various forms. Similarly governments especially in the developing countries are promulgating strict regulations concerning the activities of multinational companies. All these reasons indicate that in the near future, engaging in CSR will be a necessity imposed by local authorities and government agencies and not the discretion of the company’s management.
Considering the benefits that business enterprises can gain through CSR and comparing them against the arguments that have been raised by critics , it is possible to achieve a win-win situation in which all the advantages gained through CSR initiatives can be spread for the equal benefit of the concerned stake holders and the business as well. There are many types of CSR initiatives that corporations can choose to adopt. This gives corporations a chance to implement CSR programs or integrate them into their business strategy under the normal operational estimates for a particular fiscal year.
It is important for a company which is considering implementing a CSR initiative to make a careful analysis of the cost-effectiveness of the proposed initiative to ensure that there are adequate finances to implement the program in order to avoid the negative publicity that may result from projects that are terminated prematurely. This is an important step to ensuring that the projects initiated will create long lasting positive impacts.
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