Corporate Social Responsibility in Multinational Corporations

Introduction

Various types of business refer to the corporate social responsibility (CSR) because they believe it to be one of the most significant elements that allow the organization to achieve success. It is highly valued by the multinational corporations (MNCs), as it provides strategies that can be utilized to operate in the ethical way. As a rule, the representatives of the general public believe that all businesses, including MNCs, are focused on the profit. People tend to think that they do not care not only about the needs of the society and environment but also employees.

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Of course, such negative perception of business does not appeal to its owners and affects companies’ success. That is why some entrepreneurs tried to utilize best practices and prove the citizens that organizations can bring benefit to the society. To meet this goal, they refer to the CSR and start taking part in socially responsible activities. Regardless of their size, companies emphasize the necessity to develop and follow those strategies that successfully combine and balance profit and social responsibility.

This report will investigate the MNCs’ need to use the CRS to guide business operations. Its aim will be to prove that the utilization of the CRS is critical and advantageous for the organizations. To reach this purpose, the principles of the CSR will be pointed out. The paper will also identify the most common challenges that the businesses can face when introducing their CSR. Finally, on the basis of the obtained information, recommendations will be made. They will be useful for the MNCs that are willing to implement the CSR effectively. The report will also conclude and summarize the importance of the CSR.

Corporate Social Responsibility in Multinational Corporations

The concept of CSR altered with the course of time greatly. Different professionals discussed it from various points of view but generally it refers to the “responsibilities to society beyond that of making profits for the shareholders” (Quak, Heilbron & van der Veen, 2012, p.3). The significance of the CSR was first emphasized in the 1970s. It was claimed that it should be utilized when the company faces some problems that are beyond the economic, technical, and legal considerations (Sharma & Mehta, 2012).

At that time already, scientists and experts in the field stated that businesses should pay attention to the effects their operations make on the society. They claimed that it is critical to bring a contribution and not just obtain more income for the company. It is considered that the main corporate responsibilities are “economic, legal, ethical, and discretionary” (CSR-The shape of a history, 2014, p.12). Businesses are free to define how they want to execute these four stages of the CSR. They may work on them simultaneously or one by one.

In this way, the CSR is today commonly perceived as “a voluntary way for a company to enhance its public image and reputation by incorporating responsible activities that satisfies a need of society beyond its legal requirements” (Abels & Martelli, 2012, p. 86). Thus, company’s stakeholders focus not only on the increased income but also on such things as human rights, environment or ethics. It is believed that the success of the organization in the long term depends on the mentioned aspects enormously.

Eccles, Ioannou, and Serafeim (2012) mentioned that MNCs’ sustainability can improve as well as its performance if the business is engaged in those programs that are environmentally friendly and society responsible. A lot of MNCs introduce the CSR program or scheme to ensure that their operations are maintained ethically, are able to streamline the growth of the company, attract attention to particular issues that are on the front burner for the general public, or extend job markets.

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Principles of Corporate Social Responsibility

In some cases, stakeholders and professionals who deal with business operations question the value of the CSR because they consider it to bring no significant benefits. Rather often such view occurs because professional fail to recognize long-term effects. Some people believe that the CSR of any MNC focuses on the profit making only. They consider that businesses are not obliged to do anything for the society and even those CSR programs that it uses should deal with the company itself. Still, an enormous number of research studies showed that effectively implemented CSR is sure to bring expected benefits.

The first advantage of the CSR utilization deals with the alterations in the perception. Both current and potential clients start recognizing the MNS among its competitors even if they offer the same products for the same price. Brand awareness can increase in this way, which plays a vital role in the life of the organization. The reputation of the MNS can also improve, which attracts more clients. As a result, the profit also increases because the customers are willing to work with those firms that are concerned about the issues critical to the society, and sales increase (Kotler & Lee, 2005).

The second advantage deals with the financial benefits. With the help of the CSR, the operating costs can be reduced. When being focused on environmental issues, many MNCs start reducing energy disposal and refer to recycling. In this way, they save resources and decrease spending. Moreover, with the help of the CRS MNCs can become more recognizable, which allows them to reduce advertising costs. Finally, they receive an opportunity to recruit more talent and improve employee loyalty (Kotler & Lee, 2005).

The information obtained from the literature proves that MNCs that have CSR have more chances to remain competitive for a long time and enhance the reputation than other organizations. Contributing to the community and environment, MNCs receive a lot of benefits.

Components of Corporate Social Responsibility

The majority of stakeholders and representatives of the general public consider whether the MNC is trustworthy and reliable on the basis of its reputation, which can be improved greatly with the help of the CSR. Stakeholders believe that successful MNCs are those that efficiently utilize social responsibility. Still, they underline the extreme value of citizenship, governance, and workplace.

MNCs are expected to be good corporate citizens that support their society and the environment. In this framework, MNCs need to deal with those problems that have an adverse influence on the future of the planet. They should pay attention to such diverse aspects as diseases, shortage of water, education, and corruption, etc. (Schwab, 2008). Thus, many organizations started to get involved in corporate philanthropy, which deals with aid provided to such spheres. MNCs even followed a campaign established to make companies engaged in philanthropy and ruin the stereotype about their focus on profit (Craig, 2013).

This dimension also presupposes the establishment of environmental practices and policies (Lajoux & Soltis, 2013). It is possible to participate in environmental and recycling projects and utilize alternative resources, etc. (Creel, 2010). When paying attention to the governance, MNCs should act ethically and transparent in the business framework.

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They are expected to build positive relationships with the society. Thus, it is significant to consider how internal unethical behaviors will be reported and ethical one’s rewarded. The existence of the decent workplace presupposes a place where the employees are treated in a good way and have positive relations with others. Employees’ satisfaction and morale can also improve in this way. It is significant to pay attention to external CRS, which deals with such things as the environment and philanthropy and to the internal CSR, which covers employee satisfaction, diversity, and other dimensions.

Challenges in Introducing a Corporate Social Responsibility Scheme

A CSR scheme outlines company’s attitudes towards CSR and the way it is going to be utilized. This scheme generally consists of several parts. The first one is a preamble, which provides a short insight into the concept. Then planning of the CSR is discussed, including related strategies and projects. The way CSR project activities are selected should also be defined.

Professionals pay attention to funding, provide clarifications regarding the policy and expected benefits. The way documentation is prepared should be mentioned as well as monitoring peculiarities. After identifying the areas of CSR activities, the date of application is to be pointed out. Unfortunately, sometimes organizations turn out to be unable to develop a decent CSR scheme and face a range of problems. The challenges they deal with relate to various organizational peculiarities, including internal and external ones.

Sometimes MNCs attempts to implement CSR fails because of the lack of community involvement in such activities. They may be just not aware of it. As a result, the communication with MNCs is not enough. Thus, the organization will need to spread the knowledge. The CSR scheme is to identify the activities, in which the MNC is going to take part. That is why it should ensure that local capacities are built. Their lack limits the scope of CSR activities greatly and prevents the MNC from obtaining expected benefits.

Transparency can become one more challenge for the MNC that is willing to introduce its CSR scheme (Berad, 2011). Its lack presupposes organization’s unwillingness to disclose the information that relates to the programs and activities it is going to be involved in. Transparency means that the MNC is willing to implement changes. This goal will not be met if the company hides the information about its operations and financial condition, including those funds that are going to be spent on the accomplishment of CSR activities and the introduction of the scheme.

Lack of transparency also affects relations with MNC’s employees, shareholders, and stakeholders, preventing it from building trust relationships with the society. As a consequence, the main source of CRS cusses is annihilated. The MNC should also consider visibility and branding. Other organizations and the community are likely to support CSR initiatives only if the MNC is known to them and they consider it to be rather successful and competitive. Non-governmental and governmental agencies that are involved in the CSR projects undertaken by the MNC may consider them to be just an opportunity to attract attention and gain more money, providing no substantial aid to the community. In this way, it can also be difficult to introduce an appropriate CSR scheme.

The absence of a clear CSR guidelines and policy can lead to the selection of those projects that are not beneficial for the MNC. It is critical to correlate the size of the organization with the activities it is going to be involved in for them not to be too limited and superficial. Finally, it is critical to discuss human factor. Various professionals may have different views regarding the way CSR issues should be solved. Moreover, the employees may be not willing to support new initiatives and reach new goals (Berad, 2011).

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Recommendations for Ensuring its Effective Introduction

On the basis of the information received with the help of the qualitative research (literature review), a range of recommendations for MNCs can be made. Following the best practices and implementing ideas provided by professionals in the sphere of business, MNCs can avoid the majority of the challenges that are usually faced by the organizations.

In order to successfully implement CSR and introduce its schedule, MNC should plan their actions and prepare both external and internal environment for the change. First of all, a CSR assessment should be maintained to gather all available information about the MNC, its products, their weaknesses, and strengths. This step allows the MNC to get ready for the development of the CSR strategy that serves as a guideline for the organization when it needs to deal with some issues related to the CSR.

Then MNC is expected to define what policies and instruments it will use to deal with the social and environmental influence it provides. The CSR commitment should also be clearly outlined, including decisions and activities the MNC will maintain. It is significant to consider reporting and verification procedures that allow to see how the organization operates with the focus on CSR. Finally, the ways of evaluation the success of CSR approach should be defined as well as improvement opportunities (Hohnen & Potts, 2007).

It is recommended to make sure that the representatives of the general public are aware of the CSR peculiarities when trying to prevent and resolve other challenges. In this framework, it is possible to refer to the media and identify what positive alterations were implemented due to the involvement of the MNC. The attitude of the public towards both initiatives and the organization are likely to improve in this way. It is also a great chance to motivate other businesses to undertake CSR and promote it.

As the relationship with the stakeholders may become a problem for the successful implementation of the CSR, the MNC should build bridges amongst them. It would be advantageous for the MNC to cooperate with non-governmental organizations and to pool their resources. In this way, they have a chance to implement best CSR practices and enhance outcomes. The impact of their initiatives will also increase and the lives of the representatives of the general public will improve.

Thus, it is critical to safeguard CSR projects to make all initiatives stable. It is also vital to make sure that the initiatives the MNC is going to implement are appropriate for the selected location. For example, educational alterations are often more required in rural locations. When maintaining a formal partnership with a local administration, MNCs receive an opportunity to make it recognize CSR and consider rewarding and recognition. The employees who are working in the MNC should be educated regarding the CSR peculiarities.

In this way, they tend to become more likely to support CSR initiatives and participate in civic issues. They are even expected to propose some initiatives themselves, improving the internal environment and enhancing organizational performance. To ensure competitive advantage, the MNC should ensure that the actions it proposes were not already implemented in the same region (Berad, 2011).

When following recommended steps of CSR implementation and effective introduction, the MNC is likely to cope with those challenges that organizations usually face. They will even receive an opportunity to influence both external and internal factors that affect mentioned processes.

Conclusion

Today, the majority of shareholders try to cooperate with those organizations that do not only make money but are focused on social aspects. Clients also are not focused on the price. They tend to be more interested in the quality of products and services and company’s brand image. In this way, MNCs can benefit greatly when they have the CSR. Its introduction and implementation can turn into a source of competitive advantage. As a result, MNCs’ sustainable development can be ensured.

The integration of the CSR is likely to improve workforce relationships, make employees more involved, and enhance customer satisfaction and loyalty. It is also expected to improve relation with stakeholders and shareholders and to increase profit in this way. Unfortunately, the MNC may face some challenges when introducing its CSR scheme, which are caused by both internal and external factors. Nevertheless, the organization can cope with them if following the recommendations developed on the basis of the literature review.

In this way, the MNC should accomplish all tasks needed for the efficient implementation of the CSR, starting with the assessment of the company and its products and ending with the evaluation and improvement. Moreover, it is critical to pay attention to the way CSR is perceived by other governmental and non-governmental agencies as well as by the representatives of the general public to make sure that they are aware of it and value MNC’s contribution.

It is significant to ensure that decent local capacities are built, the MNC values transparency and does not hide information that is likely to interest its shareholders. Except for that, the activities that are going to be implemented should be appropriate for the selected community. Visibility and branding should also be carefully discussed as they determine the way organization is perceived by others and prove that the implementation of the CSR will not be wasted.

References

Abels, P. B., & Martelli, J. T. (2012). What is CSR all about? Global Conference on Business & Finance Proceedings, 7(2), 86-90.

Berad, N. (2011). Corporate social responsibility – issues and challenges in India.

Craig, S. (2013). Building better business with generosity. American Salesman, 58(3), 24-28.

Creel, T. S. (2010). Environmental reporting practices of the largest U.S. companies. Management Accounting Quarterly, 12(1), 13-19.

CSR-The shape of a history. (2014).

Eccles, R., Ioannou, I. & Serafeim, G. (2012). The impact of a corporate culture of sustainability on corporate behavior and performance. Cambridge, UK: National Bureau of Economic Research.

Hohnen, P., & Potts, J. (2007). Corporate social responsibility: An implementation guide for business. Winnipeg, Canada: IISD.

Kotler, P., & Lee, N. (2005). Corporate social responsibility: doing the most good for your company and your cause. Hoboken, N.J.: Wiley.

Lajoux, A. R., & Soltis, C. (2013). Sustainability rising. NACD Directorship, 39(2), 24- 35.

Quak, S., Heilbron, J., & van der Veen, R. (2012). Has globalization eroded firms’ responsibility for their employees? A sociological analysis of transnational firms’ corporate social responsibility policies concerning their employees in the Netherlands, 1980- 2010. Business & Politics, 14(3), 1-21.

Schwab, K. (2008). Global corporate citizenship. Foreign Affairs, 87(1), 107-118.

Sharma, S., & Mehta, S. (2012). Where do we go from here? Viewing corporate social responsibility through a sustainability lens. Journal of Contemporary Management Research, 6(2), 69-76.

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