Corporation and Corporate Social Responsibility

Definition

CSR is defined as the corporate obligation to contribute to the betterment of society. The obligation encompasses quality improvement for the people and processes. The people are employees of the company, stakeholders, consumers, and the public. The processes are corporate processes and civil and social processes in society. The objective is to generate business wealth by contributing to the cause of society (Wikipedia). The corporate can contribute in many ways to uplift society (Hohnen, 2007; Wikipedia):

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  • By contributing funds for the implementation of processes,
  • By contributing human resources such as technology experts for the cause of society,
  • By implementing quality standards within the corporate to lead society by example,
  • By implementing policies for the benefit of the employees, their family, and regional society such as health care policies, scholarships for education, etc.

Reasons to adopt policies of corporate social responsibility

By participating in economic, social, and environmental development activities of the government or non-government organizations. The reasons why a corporation should adopt policies of corporate social responsibility are:

  1. Corporate Social Responsibility (CSR) infuses ethical behavior and contributes to economic development of the workforce.                                          Novartis a global leader in pharmaceuticals extends the implementation of global standards for business conduct to its manufacturing partners and suppliers. To ensure higher productivity state-of-the-art plant was built by Emcure Pharmaceuticals Ltd. in India. Higher productivity with systematic conduct of business results in higher profits and hence technological, social, and financial advancement of its workforce. The higher standard of living of the workforce results in regional development (Business Role, 2007). The implementation of international business ethic standards such as Information Security Management ISO 27001 and Environmental Management ISO 14001 ensures that business ethic policies are defined, implemented, and followed.
  2. CSR motivates companies to organize and manage business processes.                                                                                                                                                 The quality management process within a business encompasses the implementation of quality standards in all business departments. Quality management is a corporate social responsibility because society demands quality in all aspects of life. Quality management for people yields quality resumes and defines behavior patterns in office and society like professional seminars or private gatherings. Quality management for business processes involves the creation of policies, implementation of policies, and audits (Baker, 2007a).
  3. Corporate citizenship is the role of CSR for the improvement and development of business wealth.                                                                                          Corporate citizenship is analogous to civil citizenship where civil rules must be obeyed for the benefit and development of the native country and philanthropy program. The impact of individual behavior on the business wealth is enhanced brand image, reduced operational cost, and new commercial opportunities and markets exploration (What is CSR, 2007). Example: protection of intellectual rights, authority for sharing information, and discipline. The philanthropy program may be associated with the company business such as lectures/training for college students, or there may be participation in a government program or maybe contribution in kind such as for road infrastructure. The philanthropy program may also be explored for business viability.
  4. CSR is a company’s commitment to stakeholders to operate under controlled economic, social, and environmental policies.                                                 The public value of the company that is of major interest to the stakeholders is evaluated based on the company’s performance, financial stability, and contribution to the development of society and the environment. As an equal opportunity employer, the racial, sexual, and cultural social laws of the society must be honored with an assertive change to uplift the society. While making profit is the main aim it is necessary that moral minimum standards are implemented and hasty acts must not cause unavoidable harm to the society and environment. Corporate governance practices may have social and political influence such as laws regarding the nomination of board members and appointment of directors and CEOs. This may require the approval of stakeholders, the government, and the public.
  5. CSR is for suggesting companies integrate social and environmental concerns in business operations and stakeholder interactions.                                          Business risk management due to social and environmental threats is one of the requirements of CSR. Social threats involve the influence of the company quality management process on the younger generations. Environmental threats could be fire and earthquake hazards that require that the latest technology for safety measures are adopted. According to The Annual CSR report, 80% of British shareholders ask for a company social report (Facts about CSR, 2005). The adoption of the latest technologies by the company enhances the technological know-how in society by inclusion in the curriculum. Integration of social and environmental concerns that are not directly related to the company business requires financial support therefore CSR implementation is the responsibility of both the company and the stakeholders. The financial investment in social and environmental development is a way to conduct CSR, e.g. International Finance Corporation contributes to the development of the private sector in poor countries.
  6.  CSR monitors and controls deception and fraud in the open and free business market.                                                                                                                        A consumer that deals with a business organization seeks the elimination of deception and fraud. Organizations must implement quality policies and measure the variations by Six Sigma methods to determine the discrepancies. External agency audit certification is required to ensure that policies are implemented for stakeholder and consumer trust. The implementation of the Sarbanes-Oxley Act ensures that the financial interests of stakeholders are protected. The product quality audits such as ISO 9001 protect consumer interests.
  7. CSR is the measure of the company business standard and quality for stakeholders and consumer trust.                                                                                            The involvement of the company in social activities and the proof of the validity of social business interactions build company reputation. A commercial advertisement that is broadcast on local, national, and international media is accepted by the public as proof of the product or service’s real-life performance. Example: An advertisement of a cosmetic product that shows the effect of the product. The hygienic high-calorie fast food of Mcdonald’s with a disclosure of its impact on health is not a violation of CSR. The Ethical Consumer reports that 51% British public choose a product for its reputation (Facts about CSR, 2005). The implementation of social and environmental policies under national acts or the UN Global Compact shall attract business partners and consumers.

There are risks involved in the implementation of CSR and hence some corporations may be against the implementation of CSR.

Some of the risks are:

  1. Extra costs                                                                                                                                                                                                                                                             The operational cost of the company may rise due to funds contributed for the CSR, if human resources are delegated to CSR activity there may be a conflict of interest with the company activity, e.g. a critical human resource delegated for CSR technology lectures may result in rescheduling of production activity. When the company is cutting costs by layoffs or by altering product features it is not possible to delegate resources and spend funds on CSR activity (Baker, 2007b).
  2. Stakeholder disinterest                                                                                                                                                                                                                                           A company must create a balance between CSR and production activity, the CSR activities must be informed to the stakeholders as this influences the company goals and finances. There is a risk that stakeholders may not approve the company’s CSR activities. The investment of the corporate funds that is shareholders’ money must not be invested in CSR activities without their permission; it is not only an irresponsible act but deception (Atkins, 2006).
  3. Loss of direction                                                                                                                                                                                                                                                  CSR activities may be considered as extra-curricular activities by the employees, therefore too much focus on CSR activities may result in loss of company goal direction and shall distract the employees. Peter Klein, vice president for Europe at Carbon View suggests that lack of authority with CSR managers is the cause for CSR function coming in the way of business (Murray, 2007).
  4. Complication of processes                                                                                                                                                                                                                            Implementation of service records for audits to comply with laws such as the Sarbanes-Oxley act may require alterations to existing processes or implementation of new processes. Hence conducting an audit may be considered a complicated process.

References

  1. Atkins, Betsy. (2006) Is Corporate Social Responsibility Responsible? Forbes.com.
  2. Baker, Mallen. (2007a) Corporate Social Responsibility- what does it mean? Mallenbaker.net.
  3. Baker, Mallen. (2007b) Arguments against Corporate Social Responsibility. Mallenbaker.net.
  4. Business Ethics.
  5. Corporate Responsibility. (2007) Forbes.com.
  6. Corporate Social Responsibility. Cisco.
  7. Facts about CSR. (2005) The National Forest.
  8. Hohnen, Paul. (2007) Big Governments and corporate responsibility – some reasons to be interested. Ethical Corporation.
  9. Murray, James. (2007) Do we need CSR officers? Business Green. Web.
  10. Six Sigma. Web.
  11. The Corporate Citizenship Company.
  12. What is CSR?
  13. Wikipedia. Corporate Social Responsibility. Wikipedia. Web.
  14. Business Role. World Business Council for Sustainable Development.
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