Corporate social responsibility (CSR) is a concept that has gained massive popularity in the recent past as corporations try to give back to society. According to Hategan et al. (2018), successful business entities have realized that they can achieve sustainable success if they have the support of the immediate community on which they rely for their workforce, customers, suppliers, and general security. Some business practices have contributed to negative influences on local communities, such as pollution and the use of resources.
However, large companies bring vital aspects such as infrastructure, an influx of capital (taxes), and employment, often whereas there is economic decline. The relationship between corporations and communities can be turbulent at times. Recognizing the balance of benefits that both bring to each other, CSR has become a prevalent tool for building strong community ties and identifying the needs of the population while also encouraging sustainable but nevertheless profitable business practices by corporations.
Corporate social responsibility is a deliberate effort by these corporations to support the immediate community through various initiatives which may not bring them direct profits. Besides creating products that people need, providing job opportunities, and paying taxes to support the government, CSR is another major business practice that a firm can use to demonstrate to its customers, employees, suppliers, and the government that it is concerned about the well-being of society. It is an indication that the firm appreciates the fact that its sustainable growth is intertwined with the growth of the immediate community. In this paper, the researcher seeks to conduct a historical analysis of corporate social responsibility, its relevance in modern society, and various approaches that different entities use in its implementation.
Understanding the Concept of Corporate Social Responsibility
The need for companies to be socially responsible to themselves, shareholders, employees, the government, and the community led to the emergence of the concept of corporate social responsibility (CSR). Gouda (2017) defines corporate social responsibility as “a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public through philanthropic initiatives” (p. 66). Other scholars have defined CSR in different ways, but the above definition identifies the critical pillars of this concept. First, it explains that CSR is self-regulated. It means that the government or any other external stakeholder cannot compel a firm to engage in such initiatives. It is upon the management of the firm to realize that it has a responsibility to the immediate community and act accordingly.
When the firm is forced to act by external stakeholders, such initiatives may not be classified as CSR. The definition also identifies the need to be socially accountable to various stakeholders. The primary goal for every firm is to make profits, as Chae and Park (2018) observe. However, in this case, a company is expected to make a shift from economic goals to social goals. It needs to be socially responsible to society by engaging in practices that will be of benefit to people without necessarily getting profits from these initiatives. The need to engage in these non-profit-making initiatives is demonstrated in the last part of the definition, which emphasizes the need for these activities to be philanthropic in nature.
Large multinational corporations have come up with elaborate models for corporate social responsibility because of their growing significance. According to Carroll (2015), when the concept emerged in the 1950s, many large corporations were interested in addressing some of the socio-environmental evils associated with their operations, such as massive environmental pollution (Aguinis & Glavas, 2019).
Although this is still the goal for most of these corporations, CSR has gained massive significance as a way of endearing a firm to its customers. People are so bombarded with massive advertisements on various platforms that they have learned to ignore the message. They consider such promotional campaigns as interruptions to their entertainment. CSR offers a new approach for a firm to develop a bond with its customers and the immediate community. Instead of bombarding them with unsolicited information, this initiative creates a platform where a firm can engage the community in constructive debates and activities. It may be through tree planting to address perennial flooding and landslides, supporting needy students within the community, helping the elderly, supporting the healthcare sector through donations, or supporting correctional facilities.
CSR initiatives make a radical shift from normal operations focused on making profits and expanding a firm’s operations to a new approach to creating a sustainable relationship with the locals (Melovic, Rogic, Cerovic, Dudic, & Gregus, 2019). It is a deliberate reminder to the community that the firm understands that its growth is closely linked to the growth of the community. As Li, Khalili, and Cheng W. (2019) observe, it offers a firm a perfect opportunity to strengthen its brand within that community.
Potential customers will start identifying with the firm. Every time they come across the brand name, they are reminded of the positive initiatives that the firm has undertaken in the past. Herrera and Heras-Rosas (2020) believe that CSR has also gained relevance among large corporations out of the appreciation that the environment will no longer be sustainable if the current rate of pollution is not addressed. Firms like Coca-Cola Company now understand that plastic bottles used to package their beverages are choking the environment. If nothing is done to address the problem, their business model will no longer be sustainable, and as such, they may be forced to stop their operations. As such, the CSR initiative is a deliberate effort to ensure that its activities are sustainable.
History of Corporate Social Responsibility
Corporate social responsibility is a relatively new concept when compared with other business functions such as accounting, finance, and marketing. Since its inception, CSR has evolved over the years because of the changing environmental forces. According to Dyduch and Krasodomska (2017), as new socio-economic, political, and ecological needs emerge, firms are finding it necessary to redefine their approaches to CSR to ensure that they remain relevant by having the right impact on the targeted population. In this section, the focus is to review the historical transformation of the concept from the time of its inception to modern society.
Social Practices and Initiatives before 1950
The concept of corporate social responsibility was non-existent before 1950, but some elements of it can be found as early as the late 1800s, as Carroll (2015) observes. However, large corporations, especially those in the manufacturing and agricultural sectors, were under pressure because of the perceived social evils. Diez-Cañamero et al. (2020) explain that in Europe, many factories were criticized for hiring underage children, hence denying them the opportunity to go to school.
By 1900, many reformers had started various initiatives to fight child labor and low payment of workers that forced parents to bring their children along to work just to make ends meet. These firms were accused of taking a new approach to slavery. Paying workers minimal salaries ensured that they would be forced to work for long hours and every single day of the week just to get their basic needs.
These welfare groups brought to the attention of the political class the social evils of the companies and the need for them to reform their policies. Shin, Hur, and Kang (2016) argue that one of the earliest social responsibilities that most of these large corporations embraced was to avoid hiring children. It became evident to them that these children needed time to go to school and sharpen their skills so that they could become better employees in the future. Another major initiative that these corporations embraced was to improve wages for their employees (Kim, Park, & Lee, 2018).
They realized that it was their responsibility to pay their workers an amount of money that would enable them to meet their basic needs without the need to force their children to help them at work. According to García-Sánchez and Martínez-Ferrero (2018), these initiatives may not meet the criteria of corporate social responsibility because these companies were pressured to do so. However, they marked an important milestone where firms realized that they could not focus on making profits any longer and ignored the well-being of their employees. It marked a new era where large corporations understood the need to be responsible for all their stakeholders.
The Emergence of the Concept of CSR in the 1950s
Studies show that the concept of corporate social responsibility took shape in the 1950s. According to Carroll (2015), during the period from 1953, there was a sudden awareness among large corporations that they had a role to play in empowering local communities through various initiatives. These corporations started by donating to charitable organizations. This was coming soon after the Second World War, when many economies were in recovery (Fernández-Guadaño & Sarria-Pedroza, 2018).
During this period, many of the soldiers and civilians who sustained life-changing injuries were unable to provide for themselves. As such, they would rely on support from charitable organizations within their communities. Many large corporations that survived the war realized that they had a role to play in protecting these veterans. They started making direct donations to charitable organizations to help them support those who were affected by the war.
It is important to note that during this period, companies were not under pressure to give back to society. It was a case where these firms realized that they had a role to play in protecting the vulnerable in society (Zhang, Ma,& Morse, 2018). Their donations went to specific organizations such as the Red Cross, local hospitals and homes for the elderly and veterans, the Red Crescent, and Young Men’s Christian Association (YMCA). These organizations had won the trust of these large corporations because of the role they played during the war in helping those who were affected in various ways.
However, Carroll (2015) admits that during this period, CSR was more of a talk than action. Most of these corporations would publicly make promises that they would not keep just to strengthen their image in the market. It was more of a propaganda tool meant to convince the public that a given firm was concerned about the well-being of people. Despite these criticisms, Nakano and Tsuge (2019) note that this was an important period because firms came to realize that they needed the support of the community for them to survive and that the support would not come unless they demonstrated social responsibility. It was a significant step in the right direction.
The Proliferation of CSR Practices in the 1960s
Scholars have classified the 1960s as the period of CSR proliferation. It became increasingly evident for these companies that they needed to do more for their immediate communities. Andrews (1973) explains that one of the issues that became evident was the fact that the security of these companies could not be guaranteed without the support of the immediate community. A trend was emerging where companies would be targeted during civil unrest (Sial, Zheng, Khuong, Khan, & Usman,2018).
During this period, social unrest caused by the Civil Rights Movement and other political campaigns was common in the United States. People took advantage of the unrest to vent their frustration towards business entities that they viewed as being exploitative. Such attacks would result in massive losses, and sometimes a firm’s operations would be paralyzed for a while. Companies realized that they needed to develop a close relationship with the locals as a way of winning their trust. Engaging actively in various corporate social responsibilities was considered a way of addressing hatred and mistrust. The strategy was meant to create an enabling environment for large corporations to achieve sustainable growth.
It was also during this period that scholars started giving a strong focus on the concept of corporate social responsibility. According to Carroll (2015), it became evident to academicians that CSR was gaining popularity as a business model that needed to be investigated. One of the critical business thinkers of the time, who defined the concept of corporate social responsibility and its significance to companies and society, was Clarence Walton (Agudo-Valiente, Garcés-Ayerbe, & Salvador-Figueras, 2017).
He was specifically interested in understanding why organizations were increasingly concerned about CSR initiatives. In his publications, he explained the fundamentals of social responsibility and what entities needed to understand before embracing them. In their investigation, the concept of voluntarism emerged (Gangi, Salerno, Meles, & Daniele, 2019). Voluntarism was used in defining CSR because firms were expected to undertake these social initiatives without any form of coercion. They had to understand the fact that their expenditure may not result in direct financial benefits in the form of instant profits. However, the initiatives would help promote sustainable growth.
Acceleration of CSR in the 1970s
The 1970s was a period when companies targeted their CSR initiatives to address specific concerns in society. Table 1 below identifies specific issues that most of these companies focused on during this period. One of the fundamental problems was the hiring of minority groups. The United States was going through a tough period during the Civil Rights Movement, and many large corporations considered it necessary to hire minority groups, especially African Americans (Tang, Ma, Wong, & Miao, 2018).
Such an initiative was considered to give back to society. At that time, there was a belief that employing African Americans would help in fighting crime within the country. Studies had indicated that the high level of criminal activities in black neighborhoods was a result of a lack of employment (Carroll, 2015). Hiring African Americans was seen as an initiative that helped in fighting these social vices. Minority training was another initiative common during that period. Once the minority groups were hired, these companies spent a significant amount of resources to train and empower them (Tsai & Mutuc, 2020). The goal was to ensure that they had the capacity to deliver the expected outcome without struggling.
Hard-core hiring and training was another major CSR initiative during this period (Andrews, 1973). Many companies often avoid hiring individuals with criminal records as a way of protecting their workers, managers, and customers. However, some corporations started taking the initiative of taking these hard-core criminals from the streets, training them, then offering them job opportunities. Their goal was to help them overcome their criminal past by creating income opportunities for them.
Environmental concerns had started emerging though the concepts of global warming and climate change were not clearly understood at that time. Companies were interested in ensuring that their facilities do not pollute the environment. As such, they invested in waste treatment plants as a way of curbing pollution. They also invested in tree planting initiatives because of the concern of deforestation during the period.
Urban renewal also emerged as another initiative for these companies (Choongo, 2017). It involved supporting urban authorities in their infrastructural developments, especially those that targeted sewerage management systems, transport networks, communication, and security management. Some of these firms also found it relevant to support civil rights movement initiatives by creating equal opportunity for people irrespective of their color, religion, gender, or any other demographical factor (Carroll, 2015). However, it was an emotive issue at that time, and only a few firms were willing to embrace these initiatives, as shown in the table below. Of all the initiatives discussed above, it was the least common because of its controversial nature.
Table 1: CSR Activities in the 1970s.
The Emergence of Complementary Themes to CSR in the 1980s
The period of the 1980s was classified as the acceleration of corporate social responsibility. According to Hyun, Yang, Jung, and Hong (2016), before this period, many multinational corporations concentrated their CSR activities in their home countries, especially in Europe and North America. They believed that most of the overseas markets, especially in parts of Asia and Africa, did not understand the relevance of CSR, and as such, it was not worth spending on them. Although firms have come to appreciate the significance of these initiatives, they will always try to avoid spending on projects that do not result in direct income (Carroll, 2015).
Given the opportunity, they will avoid social responsibilities that do not bring immediate financial progress. It explains why these firms spent a significant amount of their resources in Europe and North America and ignored some parts of the world. The 1980s also marked a significant milestone as these corporations developed unique mechanisms of engaging in these activities. It became part of their annual budget.
Scholars also made major steps in explaining the concept of corporate social responsibility and its relevance to various stakeholders. According to Becchetti, Ciciretti, and Conzo (2020), it was during this period that scholars started linking CSR with ethics. A firm takes a lot from the community within which it operates. It relies on the community for workers, customers, and suppliers. The city also provides the security that it needs to operate normally (Amor-Esteban, Galindo-Villardón, & David, 2018).
A firm’s operations often lead to environmental degradation, especially if it is in the manufacturing sector. Those in the agricultural sector may encroach into forests as they seek to expand. The immediate community will directly be affected by these negative impacts on the environment. It is an ethical requirement for such a firm to give back to society (Carroll, 2015). Such initiatives are meant to demonstrate to the community that the management of the firm understands how its operations affect the locals and that it is willing to do something about it. Direct benefits extended to the community are an appreciation of the support offered.
CSR as a Base-point for Corporations’ Complementary Themes in the 1990s
The 1990s were characterized by major socio-economic success and political stability in the United States. The early 1990s demonstrated that there was a market for ‘virtue’ in which CSR had become “the tribute that capitalism everywhere pays to virtue” (Vogel, 2006, p. 3). The fear associated with the Cold War was finally over, and many corporations experienced economic growth (Carroll, 2015). The economic prosperity made it more evident that firms had to get involved in CSR activities. Most of these corporations were making impressive profits as they expanded their operations beyond the United States.
As such, there was a genuine attempt for these firms to give back to society. It became evident that supporting initiatives such as universal education would help society (Godos-Díez, Cabeza-García, & Fernández-González, 2018). Children from low-income families will have the opportunity to go to school and gain the skills needed in the workplace. Instead of becoming criminals within the neighborhood, they would become constructive citizens working in these organizations. The corporations would directly benefit from their philanthropic activities by having skilled workers in the community and economically empowered people who can afford to purchase their products. The level of crime would go down significantly within the country.
Many companies started viewing corporate social responsibility as a base point for complementary themes during this period. According to Lu, Zhao, and Dai (2018), CSR has become a necessary initiative expected of every major firm. Although there was no pressure from external stakeholders to engage in such programs, it had become the new normal (Malik, Wang, Naseem, Ikram, & Ali, 2020).
Firms were investing in different initiatives, from environmental protection to supporting the financially challenged in society. It was common to see two or more companies coming together to address a given primary social concern as a unit. During major disasters, large corporations such as the Coca-Cola Company, General Motors, and PepsiCo would make significant donations to charitable organizations to help in addressing the problem. As Carroll (2015) puts it, firms became socially responsible members of society, willing to engage in activities meant to promote the welfare of people.
Corporate Social Responsibility in the Twenty-First Century
In the twenty-first century, corporate social responsibility has evolved to become an integral part of a firm’s normal operations. According to Sarfraz, Qun, Abdullah, and Alvi (2018), CSR has transformed from being activities that firms conduct at will with the extra income they have to be one of the primary aspects of marketing. Brand promotion is taking a new approach in the twenty-first century. Although using traditional methods of promotion is still common, they are growing less effective because of the shifting attention of the audience. The numerous advertisements in both mass and social media platforms have become targeted to specific audiences, especially when they are brought in between entertainment or news broadcasting (Carroll, 2015).
As such, the audience tends to ignore the message. Moreover, they want to identify with specific brands and firs based on what they have done to the environment or the immediate community. These changes have brought about a situation where CSR is considered part of marketing. Firms have to budget for these initiatives, just like they do for other promotional campaign programs (Margolis & Walsh, 2003). The management of large companies is aware that the only way of getting the attention of the targeted audience in modern society is to get involved in initiatives considered socially beneficial.
Studies about corporate social responsibility have increased over the years because of the attention it has received from different scholars. George (2015) explains that currently, there is an emerging concern about the emphasis that firms put on influencing the perception of customers. According to Singh, Sethuraman, and Lam (2017), in marketing, the perception of customers towards a brand and a product defines their purchasing pattern. When faced with two products that offer the same value, it is more likely that a customer will choose the brand that is perceived to be superior. Large corporations are more concerned about the perception of their customers towards their CSR initiatives than the actual benefits that these initiatives have. As they increase their budget for CSR activities, these firms are also investing heavily in related publicity.
The Coca-Cola Company has been running a highly publicized campaign to eliminate plastic bottles from the sea and landfills for recycling as a way of fighting environmental degradation (Vale, Bertuzi, & Monteiro, 2020). Some scholars believe that it would be more beneficial for the firm to find eco-friendly bottles and eliminate the use of plastic bottles than to spend part of its resources on the collection of plastic bottles. The firm has done very little to move towards environmentally sustainable packaging (Žukauskas, Vveinhardt, & Andriukaitienė, 2018). As such, one can question the authenticity of its highly publicized CSR campaigns that focus on environmental conservation. Some of these loopholes in CSR implementation are caused by the self-regulatory and voluntary nature of the programs. These firms have the freedom to engage in these activities in ways they consider appropriate.
Pros and Cons of Corporate Social Responsibility
It is important to note that corporate social responsibility has its pros and cons. When an organization is planning to engage in CSR activities, it must first define the action and determine how it would impact specific individuals and the environment in general. The goal is always to engage in activities that will be beneficial to the firm and society. CSR is a reflection of both strengths and weaknesses of market capitalism in this context (Vogel, 2006). In this section, the researcher discusses the benefits and challenges associated with CSR.
Benefits of Corporate Social Responsibility
Corporate social responsibility can have an active influence and social and environmental innovation by a company, driving firms to encompass new policies, products, and strategies that create social benefits. Many of these initiatives can also be profitable and a strong drive for businesses by reducing bottom-line costs, improving employee or community morale, and even engaging new markets. CSR also enables local citizens to express their values and influence corporate decisions by ‘voting with their wallets.’ It is an inherent politicization of the market forces that also shapes public policy and conversation (Vogel, 2006).
This can be seen in the example of the current Black Lives Matter movement, where many companies are either reconsidering their brands under public pressure or pulling advertising from platforms such as Facebook that are also associated with hosting entities that promote hate speech. It has become a socially driven change as corporations realize that branding, marketing, products, and other decisions are not appropriate for the cultural and political climate. Businesses are trying to align with changing status quo on public policy, including in what is categorized as offensive speech, as well as shifting practices in hiring, diversity, and support for minority populations (Hsu, 2020).
Corporate social responsibility has become a common practice in many companies around the world. According to Reinhardt, Stavins, and Vietor (2008), this concept has gained massive popularity because of its relevance. The practice benefits various stakeholders. It may be necessary to start by discussing how it benefits a firm. Matten and Moon (2008) argue that in modern society, where people and bombarded with all sorts of advertisements, companies can no longer rely on traditional promotional campaign models to strengthen their brands. CSR offers a perfect solution to this problem (Scherer & Palazzo, 2007).
When a firm sponsors a CSR activity, it gets an opportunity to increase its brand presence within the community. The audience will not view it as a campaign even when it is aired on the local radio and television stations. These programs also offer a firm an excellent opportunity to conduct market research because of the physical interaction between a company’s employees and customers. Through such interactions, the firm can understand customers’ perceptions about the firm’s brand, the quality of its products, the approach to product delivery, and any other issue of interest that can enable the company to serve its clients in a better way. Some of the comments that the public may make about the company and its products during the CSR may also help the management to identify issues that need to be addressed.
Conducting regular CSR activities within a given area endears the company to that particular community as long as it is done consistently and with the primary intention of solving a specific problem within the community (Gouda, 2017). It creates the perception that the firm is not just interested in making profits but also in promoting the well-being of members of society. Such people are likely to become loyal customers who cannot be easily swayed to purchase products from other firms.
CSR offers a firm an opportunity to clean up the environment within which it operates to make it more sustainable. It is the responsibility of the local government authorities to protect, preserve, and maintain a clean environment (Antonaras & Dekoulou, 2019). However, sometimes the management may be overwhelmed because of various constraints. Through these programs, an organization will have an opportunity to support the local authority in protecting the environment.
Corporate social responsibility is beneficial to the environment. According to Froholdt (2018), it is evident that global warming and climate change are a reality, and the global society cannot ignore it any longer. Massive plastic pollution and industrial effluent are also choking the earth. Many large corporations are now focusing on environmental protection in their CSR initiatives. Tree planting has become a widespread practice around the world. It has also become a common practice for these firms to support projects that focus on conserving forests and aquatic ecosystems (Malecki, 2018).
Other entities, such as PepsiCo and the Coca-Cola Company, have invested in the collection and recycling of plastic waste all over the world. General Electric, Telsa Motors, and Amazon.com are investing in projects meant to reduce emissions from companies and cars (Emeagwali, 2017). These initiatives are meant to reduce carbon emissions into the atmosphere as a way of fighting global warming and climate change.
Corporate social responsibility programs often help the targeted community in various ways. Microsoft, working closely with charitable organizations such as Plan International, Action Aid, and World Vision, has invested millions of dollars in East Africa to fight malaria (Malecki, 2018). Before these initiatives were introduced in 1999, the child mortality rate was high in the region, and it was mostly attributed to malaria. These partners have worked closely with local authorities to help fight the disease. They helped in stocking the local health care facilities with testing kits and malaria drugs. They have also promoted preventive measures such as clearing the breeding ground of mosquitoes.
In India, the Coca-Cola Company has invested millions of dollars in educating children, especially girls, from poor backgrounds (Malecki, 2018). The organization was concerned about the high rate of teenage pregnancy in some parts of the country and the lack of concern from the local authorities. These initiatives have helped empower women in this country. Most of them even ended up getting jobs at the company after completing their education. The United States Hunger Relief Organization has been receiving massive support from various organizations to help feed homeless Americans (Emeagwali, 2017). Some of these people cannot afford decent meals, and the nutritional support they get helps them stay healthy.
The government often benefits directly from CSR programs that various corporations conduct on a regular basis. According to Froholdt (2018), it is the primary responsibility of every government around the world to ensure that all children have access to quality education. However, that is not always the case in different parts of the world. In Africa and parts of Asia, the government is unable to provide educational infrastructure for learners in public schools. Various multinational corporations have sponsored the construction of classrooms in these countries, taking the burden from the government.
Others are paying school fees to learners in public schools, which should be the responsibility of the government. Initiatives such as construction, expansion, or improving waste management systems, planting trees, cleaning the environment, and fighting crime are responsibilities of the government (Malecki, 2018). When these organizations use their own resources to support the programs, the government can use their income to support other projects.
Challenges and Dangers Associated with Corporate Social Responsibility
Corporate social responsibility has some challenges and dangers that companies need to understand before deciding on the initiative that it needs to embrace. One of the significant challenges associated with CSR is an expense that may not have an equal financial return. As Antonaras and Dekoulou (2019) observe, it involves giving back to society without any expectations. Most of the expenses of companies are often focused on addressing specific problems that would increase their profitability. However, that is not the case with CSR.
For instance, the global society is currently battling the COVID-19 pandemic, and companies have been invited to make donations. As the number of companies making contributions increase, it becomes almost impossible for any individual firm to gain popularity out of such donations. It explains why it is often advisable for a firm to set aside a specific fund for such programs on an annual basis.
Regular engagement in CSR activities creates a sense of entitlement. According to Olkkonen and Quarshie (2019), when an organization commits to paying school fees for learners from financially challenged families, there is always the risk of the beneficiaries developing a sense of entitlement. They start feeling that it is the responsibility of the firm to take care of them. Some of these beneficiaries may even be loyal customers of rival companies to the one that is supporting them.
The most significant risk comes when the firm decides to explore other programs and terminate the current one. When Company Y terminates its food donations to the homeless or pays school fees to some learners, the beneficiaries may vilify it. Instead of appreciating the assistance that has been offered within a given period, they will focus on the fact that the firm stopped its support at a time they expected it to continue. In such cases, Antonaras and Dekoulou (2019) believe that the outcome of the program will be the complete opposite of what was intended. The best cure for poverty is sustainable employment.
One of the dangers that entities have to be careful about when initiating a CSR activity is that it may not be possible to pull out at the pleasure of a firm. One of the major environmental concerns in modern society is plastic menace (Gouda, 2017). Many companies are using plastic materials to wrap and store their products. The problem with this material is that it is non-biodegradable.
When a company commits to eradicating plastic materials, pulling out of the program suddenly may roll back the gains made. Such a firm may be forced to find another company willing to continue supporting the initiative to ensure that there is a smooth transition. It may take some time before finding another organization willing and capable of financing such initiatives. Within the period of finding an alternative donor, the company may be forced to continue spending on the program.
Choosing the right program to support may be another significant challenge that may have a devastating impact on the success of a firm. During the Civil Rights Movement of the 1960s, corporations were under pressure to be on the right side of history (Antonaras & Dekoulou, 2019). For a long time, they had been accused of benefitting from the enslavement of blacks in the country. They were now called upon to support these movements through financial donations. However, there was an issue that these firms could not ignore. A significant majority of Americans at that time, mostly whites, were against these movements (Lumde, 2018).
As such, it was very challenging for these large corporations to be seen to support Civil Rights Movement leaders, who many people viewed as enemies of the state. The dilemma that these organizations faced was that failing to support these groups was construed to mean that they still support racism and discrimination against minority groups. On the other hand, giving out support would make them unpopular among a large portion of society. Firms still face similar challenges where acting or failing to act would both be associated with negative consequences.
There is an inherent limitation to CSR that it is voluntary and market-driven. Firms will only engage in CSR to the extent that it is logical from a business perspective, either monetarily or more long-term abstract strategies such as building a reputation around its brand. Civil regulation over the years has forced some companies to internalize the negative externalities that are a consequence of the firms’ economic activities. However, this is not an absolutely effective method, it often faces legal challenges, and companies will continue to be evasive.
Ultimately, the government cannot force for-profit companies to make unprofitable decisions in exchange for the public good, only in extreme cases of egregious violations (such as environmental contamination or blatant violation laws). According to Vogel (2006), “CSR can reduce only some market failures,” as it cannot target the unethical or free-riding behaviors of some firms, but also reflects badly on those corporations that attempt to self-regulate through competent decision-making. Even in the modern day, CSR considers the business costs of any virtuous behavior and oftentimes remains modest, thus constraining the resources that companies voluntarily direct towards social or environmental projects.
Theoretical Perspective of CSR
The increasing relevance of corporate social responsibility has led some scholars to develop some theoretical models to help explain its application and relevance in modern society. As Weber and Wasieleski (2018) observe, various firms still struggle to find the best ways of implementing CSR projects in ways meaningful both to the firm and the targeted population in the community. It is common to find cases where a firm’s effort is considered a waste of time and resources by the population that it was meant to help. To avoid such cases, it is advisable to ensure that a firm understands the right model that can be used to achieve the desired objectives. The following are some of the theories developed about corporate social responsibility.
Carroll’s Four-Part of CSR Model
One of the theoretical frameworks that have gained acceptance among many scholars is Carroll’s model of corporate social responsibility. According to Lumde (2018), this model identifies four stages that a company should consider when embracing CSR as part of its normal operation. At the bottom of the pyramid is economic responsibility (Antonaras & Dekoulou, 2019). The management must understand the fact that they have a responsibility to the shareholders. As the firm engages in philanthropic activities, the primary goal of maximizing shareholders’ returns should not be ignored.
The sustainability of a firm is defined by its ability to generate enough profits to meet the entire cost of its operations. As such, this model advises that as a firm remains philanthropic in its activities, it should take into consideration the need to generate maximum income. Malecki (2018) argues that a firm can only sustain its CSR initiatives if it makes enough profit. The management of a for-profit organization should remember that their primary source of revenue comes from profits that they make from their business activities.
The model identifies legal responsibilities as the second most important factor that a firm has to consider when engaging in CSR initiatives. Its activities must not contravene existing laws and regulations within a given country. In the United States, there is a large population of those who use hard drugs (Olkkonen & Quarshie, 2019). Studies have shown that some of these people are forced into a life of crime, such as robbery, burglary, prostitution, and many other vices, because of the need to get money to feed their addiction.
Some of them often admit that if only they could have free access to these drugs, they would have no reason to engage in crime. One should also understand that different countries have different policies and regulations that must be adhered to when planning and undertaking the CSR program.
Ethical responsibility is the third requirement when one is using this model to implement a CSR activity. According to Lumde (2018), the fact that something is legal does not make it ethically acceptable. A firm should always remain ethical in its initiatives. Weber and Wasieleski (2018) believe that one of the best ways of remaining ethical is to be just and avoid controversial issues.
In the United States, the issue of police brutality remains a major concern. Studies have suggested that although it is true that law enforcement agencies often use excessive force, they are also victims of gun attacks by criminals and radicalized groups. A firm may want to support the police department by offering protective gear that will protect them at work. However, such actions should be seen to protect both the police and civilians who have complained of being brutalized. Sometimes taking an ethical action may not be popular among the majority of the population.
At the top of the pyramid is philanthropic responsibility. Any initiative that a firm takes should protect its economic interests, be legally acceptable within a specific market, and be ethically acceptable before it can be considered to be a philanthropic move. At the top of this pyramid, the goal of the firm is to be a responsible citizen (Olkkonen & Quarshie, 2019). The assumption at this stage is that all the other three requirements have been met, and the firm is concerned about the well-being of society. As an entity keen on protecting the interest of the community as well as its interest, it will select a matter of significant concern and use part of its profits to address it. Figure 1 below identifies the four main stages in this model.
The Triple Bottom-line Model
Corporate social responsibility has become closely linked to the concept of the triple bottom line. Malecki (2018) explains that in the current competitive business environment, a firm can only succeed if it has a broader understanding of its market. Many firms often have profitability as their primary goal in the market. However, successful firms have learned how to embrace three pillars of sustainability, often identified as the three Ps. The first P is the planet, which is the environment within which a firm operates (Lumde, 2018).
It has become increasingly evident that the environment within which a firm operates must be protected from overexploitation and degradation. Irrespective of the industry where a firm operates, its operations will have some form of impact on the environment. It is often advisable for the management to find ways of mitigating these environmental impacts. Finding ways of reducing the emission of greenhouse gasses and the release of toxic industrial effluents is critical (Du, Varottil, & Veldman, 2018). In most developed economies, such as the United States, there are strict laws that prohibit pollution of the environment. When a firm has a CSR program that focuses on the protection of the environment, it may also help it to adhere to the existing legal regulations. Initiatives such as the planting of trees and the elimination of plastic waste have become critical in modern society.
The second pillar of sustainability is people, as shown in figure 2 below. A firm should also be concerned about its social performance. It starts with taking care of the interest of employees within the firm. As a way of maximizing profits, it is always tempting to pay employees as minimal wages as possible while demanding that they spend a lot of time at work (Weber & Wasieleski, 2018).
Such practices were standard in the past when monopolistic corporations controlled the labor market. Currently, employees are empowered, and the law also protects them. They can quickly move from one company that they feel is embracing oppressive policies to another. The only way that a firm can manage stiff competition in the market is to attract and retain a team of highly talented and dedicated workers (Guliani & Rizwan, 2016). That goal can only be achieved if the organization embraces employee-friendly policies.
Customers should also be protected as part of the people in this sustainability model. A firm that steals from its customers by offering substandard products may experience short-term profits, but after some time, these customers will notice the deception and will opt to purchase products from other firms. A firm can only achieve sustainability if it offers quality products at competitive prices. It should also remain committed to providing accurate information to the customers at all times.
The interest of other stakeholders, such as the immediate community, should also be considered. Some firms have programs meant to empower the less fortunate members of society (Antonaras & Dekoulou, 2019). It may be in the form of supporting the education of children from poor backgrounds. A firm may opt to support local public hospitals to acquire medical equipment and supplies that can facilitate their operations. Whichever approach a firm takes, it should be focused on protecting the interest of specific people.
The third pillar of the sustainability model is profit. As was mentioned above, the economic performance of a firm should not be compromised when engaging in corporate social responsibility. The financial performance of a firm is largely dependent on the strategies that it embraces. Customer-centric programs can help a firm to generate profits in the market. Malecki (2018) observes that technology has become a significant tool that allows firms to cut the cost of their operations as a way of enhancing their profitability. Instead of increasing the price of products, the firm can find ways to improve its efficiency to ensure that the unit cost of each product is as low as possible.
The margin will be increased without hurting customers or creating price wars in the market. It is also crucial for the management to ensure that the revenues generated by the firm fully cover its CSR initiatives. Many organizations have integrated corporate social responsibility as part of their marketing programs. As such, these programs are budgeted to ensure that they do not harm the company’s profitability. Figure 2 below shows the relationship between the three Ps of the sustainability model.
The stakeholder theory is another concept that is relevant when discussing corporate social responsibility. This theory identifies stakeholders a firm is expected to create value for in its operations. According to Emeagwali (2017), understanding the interconnectedness between a business and its stakeholders is critical to its success in the market. Each of these stakeholders is important, and as such, the value should be offered to them effectively. This theory classifies them into two groups, internal and external stakeholders. Internal stakeholders include employees, managers, and business owners. The employee is interested in getting attractive remuneration and a good working environment (Antonaras & Dekoulou, 2019).
Managers are keen on having a team of highly dedicated workers who are skilled enough to implement the policies of the organization. They also expect to have supportive employers willing to invest in a firm’s expansion and developmental programs. Business owners want value for their investments (Olkkonen & Quarshie, 2019). They expect the firm to make attractive profits, grow consistently, and offer them expected returns. In most cases, these expectations may clash. It is the responsibility of the top management unit to ensure that the expectations are harmonized for the best interest of the firm. Employees should not be exploited in any way, but the owners should also enjoy the benefits of their investment.
External stakeholders also have an interest in the company, and the management has the responsibility of protecting them. According to Froholdt (2018), one of the most important external stakeholders is the customers. They will always want the best quality of a product at the lowest cost possible. Suppliers often want consistency, fair pricing, and prompt payment for the products that they deliver to a firm. Creditors expect the company to pay its debt in time and without any unnecessary confrontations.
The government expects a firm to obey laws and regulations that govern its operations. It should engage in legally acceptable businesses, pay its taxes in time, and avoid environmental pollution. Society expects a firm to engage in corporate social responsibilities that support well-being and the environment. Emeagwali (2017) argues that meeting the expectation of each of these external stakeholders may seem to be a burden to a firm. However, it is possible to meet realistic expectations. Sometimes effective communication is what is needed to ensure that any misunderstanding that may lead to dissatisfaction of a stakeholder is addressed. Figure 3 below identifies the stakeholders whose interests a firm should remain committed to for it to be socially responsible.
As evident by the presented information, CSR undoubtedly underwent a significant evolution from a simple public relations type of approach to companies recognizing the need to give back to communities, to modern-day becoming an integral part of business models for many corporations. Each year, most major firms release a CSR report alongside or included in their annual reports, although there is little to no regulation by government agencies that they do so.
In the last decade, both the stakeholders and the public have begun to demand greater accountability from major corporations. Social and political shifts have given much greater influence to consumers and, in the broad sense, the public, in the context of the media culture, that can easily create multimillion losses for businesses that choose to ignore public sentiments or engage in harmful practices. Given the consumer-centered, highly competitive market of the modern-day, it has arguably become better for businesses to engage in CSR rather than not.
However, that does not indicate that unethical business practices have been seized. As sine examples, famous brands such as Nike have been associated with exploiting forced or low-wage labor in other parts of the world, pharmaceutical giants are manipulating drug prices and promoting the use of opioids, and fracking techniques utilized by Chevron and ExxonMobil are still increasingly dangerous to the environment. Despite this being public knowledge and even some government investigation, there is a relatively little backlash, and companies continue to engage in these highly profitable but often highly unethical economic activities. Therefore, it presents a superficial nature of CSR since these companies listed above and others also engage in tremendous community activism or environmental protection initiatives.
According to Dizik (2018), CSR initiatives create an effect of ‘moral self-licensing’ where “positive action is offset by harmful behavior later on.” As discussed earlier, CSR is not the perfect solution to social and environmental problems, even if the businesses themselves cause many of them. It can be a façade that distracts from real systemic change and misleads consumers or stakeholders. This is not to argue that CSR is not necessary; it is critical and should be promoted and expanded as it provides businesses with the power to solve issues rather than seeing them as an obstacle. However, unless CSR principles are implemented across the board in a company, to address all elements of its practices or macro and micro environments, reform the whole company approach, and challenge the economic system, then it continues to be little more than a public relations strategy.
Corporate social responsibility is a voluntary initiative of an organization to give back to society through financial donations or supporting various initiatives. In the United States, many companies currently have an annual budget meant to engage in various CSR programs. The same has been witnessed in Europe, parts of Asia-Pacific, South America, and Africa. Companies have embraced the concept of being socially responsible. They believe that as members of these societies, they have a role to play in protecting the environment, educating children from low-income families, supporting various government initiatives, and maintaining safe neighborhoods.
When it started, CSR activities were purely meant to help society, and firms were willing to make anonymous donations. However, many companies have realized that these initiatives also offer them unique opportunities to promote their brand in the market. The audience tends to be more receptive to charitable information involving a firm’s philanthropic activities than mere promotional messages. It explains why most corporations often emphasize massive media presence when making their donations for charitable activities. The study shows that a firm should choose CSR programs carefully to avoid gaining negative publicity.
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