This paper focuses on corporate social responsibility (CSR) and its implications for society and businesses across the globe. The literature review examines journal articles on the given topic to evaluate the importance and the effects of CSR strategies. The history of CSR presents a valuable insight into the development of socially conscious approaches to business operations. Additionally, to illustrate the methods and actions that companies take to carry out CSR plans, a multinational corporation, Siemens, is examined. The adherence of Siemens to the six core values of CSR indicates that the establishment successfully plans and implements the strategy.
The company chosen for this analysis is Siemens because it is large, has divisions in many countries across the world, and employs a large number of people. Examining CSR practices within Siemens’s environment would provide an understanding of values and mission that the organization has. Siemens claims to practice sustainability within its operations (“Sustainability,” n.d.). The practice is presented through the Siemens Strategy Program Vision 2020+. The company states that being “responsible, excellent, innovative” is the primary objective for its strategic development (“Sustainability,” n.d., para. 2). Thus, Siemens should comply with the six sustainability characteristics, which is the aspect that will be further examined in this paper.
Siemens is a multinational company that operates in the industry of electronic devices and power generation. According to the organization’s website, it is a global enterprise, which focuses on developing products in the industries of electrification, automation and digitalization (“About Siemens,” n.d.). In addition, it operates in the healthcare industry by developing medical devices. Siemens claims to create products that are efficient and resource saving, which indicates that the establishment is concerned with environmental issues that currently exist in the world.
The headquarters are located in Berlin and Munich, Germany while manufacturing facilities and offices are situated on all continents. It employees over 300,000 people across the globe in 190 countries and generates revenue of more than £73 billion (“About Siemens,” n.d.). The scope of operations and the number of facilities that Siemens has indicate that the company’s global development strategy should include CSR because the aspect is crucial for large organizations.
Evaluation of the CSR
Businesses should recognize that the environment in which they operate matters for their development. CSR reflects the idea by offering companies to implement activities that would help combat issues that exist in a society. CSR is difficult to standardize, which is displayed in the ISO 26000 guide. In it, it is stated that CSR serves as a guide to social responsibility for businesses and can be used to “translate principles into effective actions and shares best practices relating to social responsibility, globally” (“ISO 26000 – Social responsibility,” n.d.). Siemens in its corporate statements indicates the organization’s focus on addressing the environmental and societal problems.
Currently, different authors present various definitions of CSR in their work, with an emphasis on multiple components of the practice. In their article, Hamidu, Haron, and Amran (2015) analyzed previous literature to identify common characteristics attributed to CSR. The lack of a standardized approach to the matter indicates that companies are free to decide which aspects should be the focus of their CSR strategy.
However, the common characteristics of CSR are “obligation to the society, stakeholders involvement, improving corporate image and reputation, economic development, ethical business practice, law-abiding, voluntariness, human rights, environmental protection, transparency and accountability” (Hamidu et al., 2015, p. 83). Those can be used to evaluate the effectiveness of a particular CSR strategy.
The understanding of CSR changed over time with companies including more aspects into their strategies. Schrempf-Stirling and Palazzo (2016) state that most manufacturers shifted their focus from improving work conditions for their employees to ensuring that human rights adherence across their facilities. Additionally, most corporation develops a set of values that their partners have to comply with as well. The trend implies that companies build their practices to include a broader spectrum of responsibilities for themselves. Furthermore, it can be argued that the methods of CSR management will continue to evolve in the future.
To correctly understand the implications of CSR one must examine the history of its development and identify key components that affected the practice. Husted (2015) states that the US enterprises of the twentieth century were the primary contributors to the evolution of CRS. The author argues that history can provide valuable insight into understanding what aspects of CSR work best for business. In 1919 Gant stated that businesses have to recognize their responsibility for the society, otherwise the communities will take over their enterprises (as cited in Husted, 2015). Although Gant is not considered to be a crucial contributor to the CSR philosophy, his world remains viable to this day.
Major historical events that transformed the global economy affected CSR. A unique aspect is highlighted by Husted (2015) as he states that the first attempts to create CSR guidelines occurred in the 1772 BC. The Code of Hammurabi implied that builders who cause damages to third parties have to be responsible for their actions. However, the industrial revolution provided the necessary incentives for adaptation of social responsibility practices by many. It is because the popularization of factories and other manufacturing facilities caused a lot of damage to the environment, resulting in many individuals raising the question of CSR.
Approaches to CSR
Understanding the relationship between the economic state of a country and business practices within it is crucial for CSR. Cuervo-Cazurra (2018) states that “the level and diversity of CSR investments of business groups evolve with the development of the country, as a result of the interaction of two drivers” (p. 1). Additionally, corporations invest in underdeveloped countries infrastructure to compensate for lack of proper foundation. The research presents an outlook on the relationship between CRS practices in particular countries by analyzing methods for negative externalities mitigation in various settings.
Considering the research results mentioned above, it can be concluded that global and local approaches to CSR differ. Filatotchev and Stahl (2015) state that leaders of multinational corporations are concerned with the question of balancing the global consistency and ethical standards within their CRS plans. Furthermore, the interests and expectation of diverse groups of stakeholder have to be considered as well.
Impact of CSR on corporations
The primary aspect of CSR that the executives should consider is a financial benefit. Ioannou and Serafeim (2014) state that “when analysts perceive CSR as an agency cost, due to the prevalence of an agency logic, they produce pessimistic recommendations for firms with high CSR ratings” (p. 1053). Thus, the perception of CSR values does not always result in higher financial performance for the company. However, Sontaite-Petkeviciene (2015) states that CSR has a positive impact on corporate reputation. It is because the aspect is connected to the stakeholder’s perception of the business, which can be improved through social initiatives.
Sontaite-Petkeviciene (2015) argues that earning the potential of an organization can increase with the improvement of reputation. Therefore, it can be argued that CSR does not result in direct financial benefits, but it can affect the revenue positively. The increased awareness regarding a particular brand and its engagement in the local and global improvement initiatives can establish a connection with potential customers.
Although CSR is becoming increasingly important, the law does not regulate most of the practices; thus, companies choose approaches to reporting activates, which can be subjective. Lock and Seele (2016) examine the credibility of these reports, published in eleven countries across Europe. Due to the fact that trust establishment between a business enterprise and its stakeholders is crucial, the study present important outlook on the matter. Lock and Seele (2016) concluded that most of the reports lack credibility, primarily due to the content. The study presents a new approach to communication CSR with readers by applying a specific framework that is understandable and easy to read.
The relationship between a company’s social actions and its scope of operations is vital for proper CSR practice. Hafenbraedl and Waeger (2018) state that businesses achieve remarkable things by enhancing the quality of life through their developments and services. However, this is not always true as some manufacturers’ activities result in pollution or other environmental damages. Considering this, the question of incentives for adopting CSR practices arises. In their article, Hafenbraedl and Waeger (2018) state that “it is crucial to provide business executives with evidence that such investments benefit their company’s bottom line” (para. 5).
Although the majority of CSR believe that this is the primary incentive for corporation’s management, the authors of this research argue that other factors obstruct multinational companies form developing social responsibility strategies.
As was previously mentioned, CSR practice has existed for decades and became widely accepted in the twentieth century. Hafenbraedl and Waeger (2018) argue that most individuals are aware of the CSR importance and its positive effects on establishments. However, they do not think that such practices have a positive accrual effect on the environment or society, which is the primary factor obstructing the implementation of such strategies. Therefore, more research on the societal impact and benefits created by multinational corporation’s CSR is required. The literature review indicates that businesses have a long history of contributing to social development. However, the initial impact on the establishment of CSR as a core practice for strategic development occurred in the time of industrial revolution in the US.
For Siemens, the primary objective of CSR is to provide easy access to technology across the world. The organization refers to its CSR practices as “corporate citizenship” and states that the component has been a crucial part of the company since its establishment (“Corporate citizenship,” n.d.). The primary aim of the approach is to invest in the development of local regions, where Siemens has offices or manufacturing facilities.
It is evident that some industries have to be regulated by governments, for instance, to ensure that air pollution is minimized. The first aspect defined by Crane, Matten, and Spence (2014) is voluntarily actions that a firm takes to improve the external environment that is not required by the law. Due to the fact that such activities are obligational because a company would be unable to operate without adhering to the legislation, they are not considered part of CSR.
Siemens adheres to this standard by ensuring that people across the world receive easy access to technological advancements. For instance, the company “donates some 21.2 million Euros annually” for the identified purposes (“Corporate citizenship,” n.d.). This financial objective includes investment in educational programs and community development. Additionally, the establishment delivers humanitarian aid to people who suffered from natural disasters (“Corporate citizenship,” n.d.). Due to the fact that donations and help are provided on a voluntary basis, it can be concluded that Siemens adheres to the first component of CSR.
The second component of CSR is essential because enterprises often create conditions that adversely affect the society or environment. Siemens manages externalities by ensuring that its branches and partners adhere to human rights standards (“Sustainability,” n.d.). Additionally, for large manufacturers such as Siemens, it is crucial to adopt methods that would help reduce environmental impact. The company does so by encouraging energy efficiency within its facilities and for other establishments (“Energy efficiency,” n.d.).
Promoting the approach with the company’s products and branches ensures that Siemens is consciously affecting the world around them. Additionally, recently the organization adopted zero emissions approach and indicated that all their manufacturing facilities would become carbon neutral (“Siemens is going carbon neutral,” n.d.). Thus, Siemens effectively manages negative externalities as part of its CSR plan.
Some business enterprises consider the interest of their shareholders when making strategic decisions. Crane et al. (2014) state that it is essential to examine the impact of the company’s actions on its stakeholders. This is important because such establishments rely on employers from local communities, consumers in a particular region, and suppliers or partners in the area. The primary aspect that reflects Siemen’s adherence to this standard is their objective of providing decent wok to their employees. The specific guidelines are applied to the supply chain management to ensure that Siemens’s partners adhere to the human rights laws (“Human rights,” n.d.).
It is an essential indicator of stakeholder orientation because essentially Siemens cannot control the operation of their partner organizations. However, they can clarify the conditions for such cooperation and choose manufacturers that comply with the standard. In this way, Siemens ensures that fair work conditions are promoted globally, affecting their employees, customers, and inhabitants of local communities.
The company rebuilt the village of Amle by providing its citizens with water and renewable energy solutions. In addition, Dombek (2018) states that in India Siemens created “a project that aims to increase community development and enhance the living conditions in rural areas” (para. 5).
Furthermore, Siemens provided training for the locals to ensure they can run the facility adequately. The example presents the adherence to stakeholder standard of CSR because Siemens would not receive any financial benefit from the project. However, the company has branches in India, and thus by investing in the community, Siemens can improve the living conditions of their prospective employees.
It is evident that the company invests into improving living conditions of the people across the world, which showcases its multiple stakeholder orientation. In India, Siemens states that the focus is on being “an employer, customer, investor, vendor, and corporate citizen” (“Corporate social responsibility,” n.d., para. 5). The example of Amle village and company’s claim to improve the living conditions of people across the world indicates that Siemens considers different groups of people in its strategy.
Economic and social responsibilities alignment
This aspect means that companies should create projects that would provide revenue while incorporating social responsibility in them. Crane et al. (2014) state that this component of CSR is debated over because some believe that social initiatives should not obstruct profitability. Siemens adheres to this standard through its programs oriented at enhancing the local communities. The first example is the company’s investment aimed at transforming part of Berlin into a technology hub (Reuters, 2018).
It is estimated that Siemens would provide up to £500 million for the project. This will create multiple jobs for the citizens as well as provide learning and development opportunities for people in the city. Additionally, Siemens’s healthcare division provides grants for individuals or establishment that conduct valuable research for medicine (“Healthcare giving,” n.d.). Through the program, Siemens can affect important discoveries while manufacturing the devices in the future.
Practices and values
It can be argued that the fifth component of CSR is connected to communication and implementation of CSR. Crane et al. (2014) state that “CSR is clearly about a particular set of business practices and strategies that deal with social issues” (p.6). It is essential for companies to foster an environment in which particular approaches to operations are accepted. It is typically reflected in the mission, vision, and values statements. However, it is more difficult to identify whether the internal environment of an establishment, such as executives and employees adhere to the recognized standards. It is because the CRS reports are created and presented by the companies, without an identified structure or a mechanism of control.
To identify whether Siemens’s CSR plan complies with the fifth component of such strategies one should examine recent activities of the establishment. Arguably, the practices and values part is reflected in the Siemens’s corporate strategy because the organization clearly states the importance of integrating into a local community and helping the society improve (“Corporate social responsibility,” n.d.).
Additionally, the donations mentioned above and village constriction in Amle indicate that the values are carried out into practice by the company. Palmer (2017) states that Siemens donated modern communication devises to the American University of Sharaj. This action will benefit the students and demonstrate that the company carries out its claim to support education through their efforts. Thus, Siemens aligns its strategic vision for CSR with the actual actions the company’s executives take towards carrying out their initiatives.
The establishments should review their operations to identify which aspects of them affect the society. Crane et al. (2014) state that contemporary CSR approaches imply that businesses should not solely focus on donations and project development for the less fortunate. Siemens dedicates many of its efforts to philanthropy and helping people across the world. On the company’s website, Siemens presents a comprehensive overview of its corporate citizenship program, which includes donations, refugee help, fighting poverty and others (“Sustainability,” n.d.). However, for this component, it is essential to identify whether Siemens has a strategy to mitigate the adverse impact their operation shave on a society.
Siemens’s values and strategic development plan indicates that the company understands the societal importance of CSR. Furthermore, one of its goals is to improve the energy industry by promoting clean energy and renewable sources (“Corporate social responsibility,” n.d.). To do so, the executives created a plan to reorganize the offices across the world to save energy. Siemen’s development plan indicated the adherence to the sixth component of CSR because the organization states that primary focus is on changing “the way we electrify, automate and digitalize the world around us” (“Corporate responsibility,” n.d.). Therefore, Siemens understands its impact on society in regards to technology and electricity and strives to alter its operations to create a more sustainable environment for the community.
Overall, the findings of the paper indicate that CSR has an extensive history, which can be traced back to the 1772 BC. The policy became popularized among business enterprises in the twentieth century. However, no clear standard that would guide organisations and offer a strategy for CSR development and communication is currently present. From the analysis, it can be concluded that Siemens adheres to the six core values of CSR. The company voluntarily identifies societal issues and takes actions to resolve them through donations. Additionally, Siemens has a clear stakeholder orientation and strives to mitigate negative externalities. All in all, the company aligns its efforts with the strategy and goes beyond philanthropy in its actions.
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