The purpose of the current assignment is to outline the definition of corporate social responsibility (CSR) and explain its utmost importance for modern businesses from multiple points of view. The author is going to focus on Carroll’s CSR pyramid and explain the reasons behind following the pyramid. The key benefits of CSR are reviewed and aligned against Carroll’s pyramid. The author also uses Google Inc. as an example of a company that successfully uses CSR to support its operations and build effective relationships with the customers.
Friedman’s conflicting view of CSR is also reviewed and critiqued as the author uses the example of Volkswagen as a company that neglected CSR for the sake of its profit. In the second half, the author dwells on utilitarian and egoistic views of CSR and explains how each of the business philosophies could contribute to the ability of a company to find a balance between self-interest and community-based incentives.
Definition of CSR
Corporate social responsibility (CSR) is a specific business model. It requires any organization functioning in accordance with CSR regulations to remain socially accountable to both the public and the company’s stakeholders (Crane, Matten and Spence, 2019). CSR may be also defined as corporate citizenship as companies are required to review the impact they might have on the community from different standpoints – ranging from social to economic and even environmental. When a company engages into CSR, it means that the business makes an effort to operate in a way that would augment the society and environment instead of damaging them (Wang et al., 2016).
Owing to CSR programs, philanthropy and volunteerism develop, allowing businesses to bring different advantages to the whole community and boost the brand name while benefiting everyone and not just the company. The organizational value of CSR cannot be underestimated as well, owing to the fact that it creates a stronger link between the organization and employees (Lins, Servaes and Tamayo, 2017). Knowing that they work for a responsible company, employees receive a morale boost and feel like they positively contribute to the society.
Carroll’s CSR pyramid promotes the idea that responsibility is an important concept that should not be overlooked by companies that expect to build positive relationships with their customers. Nonetheless, the biggest advantage of CSR is the fact that it can be applied to real-world organizations to cultivate effective interpersonal relations among employees (Ehie, 2016). As employees are going to learn more about volunteerism, they will experience the value of giving.
Such engagement is going to affect employees on an individual level, allowing them to pursue goals that are beneficial both the society and them in particular while also making sure that their skills provide the company with a competitive advantage (Meynhardt and Gomez, 2019).
With philanthropy being at the top of the pyramid, employees could reward themselves by ‘donating’ to the greater ‘good’ without stepping away from the core organizational objectives. As the evidence provided by Hossain, Bashar and Noor (2017) suggests, the volunteering trend is a sign of the working Carroll’s pyramid as volunteers are much more engaged into organizational deeds than their non-volunteering colleagues. Accordingly, CSR contributes to greater job satisfaction, which is a crucial asset for any organization.
On the other hand, Carroll’s pyramid reflects the need for CSR. The latter contributes to the development of a proper business profile that is not affected by any outside factors (Uhlig, Mainardes and Nossa, 2020). When an organization shows awareness of the community issues and displays the readiness to contribute, it allows for the advent of favorable relationships between the customers and the brand. Therefore, CSR can be seen as a well-organized means of reaching out to the company’s employees and outlining the need for volunteering and switching to philanthropic worldviews (Pope et al., 2018). A company that is able to display and maintain commitment to its community-based goals will be able to retain good reputation even on the verge of critical conflicts and adverse scenarios.
While drawing parallels to the modern business environment, one could also create the link between Generation Y and a trend aimed at the popularization of CSR. Gen Y candidates are hard to find and retain, but a thorough focus on CSR initiatives could be one of the stress-free strategies to attract more Gen Y individuals to the common cause (Frynas and Yamahaki, 2016). The voice of younger population is crucial for the majority of modern companies as Gen Y is often willing to dismiss the common outlook that they are lazy and selfish (Sanclemente-Tellez, 2017).
The fact that modern organizations rely on Gen Y and introduce more CSR initiatives on an almost daily basis shows that the trend of giving back has successfully penetrated the business environment. As Pimentel, Branca and Catalao‑Lopes (2016) suggested, the passion for giving back is going to remain an eye-catching prospect for the younger population as Gen Y sees volunteering as one of the most community- and business-friendly ingenuities.
Google CSR. Google is an exemplary company in terms of how it applies CSR as its numerous projects are paying off majorly and contribute to a better community. Google Green, for instance, is one of the many corporate efforts that support renewable power (Deng, Ji and Wang, 2017). The company tries to use existing resources in the most efficient manner and recycle them where possible. Lower costs is not the primary goal for Google as the search engine mogul strives for affecting the bottom line and reducing power requirements for its data centers (Deng, Ji and Wang, 2017). Ultimately, Google often redirects the resources it saves to other areas of business to allocate resources efficiently.
Friedman’s View of CSR
According to Friedman’s theory, CSR is a mere form of capitalism that should not be approved. It negatively affects economic freedom and goes out against any corporate activity that could be beneficial to employees and shareholders (Carson, 2018). The reason behind Friedman’s claims is the idea that shareholders basically do not have access to decision-making when CSR is on, which ultimately leads to a situation where the company’s resources are spend inadequately, with no rational explanation backing up the expenditures (Saleem, Kumar and Shahid, 2016). This argument was also based on the claim that company profit should not be linked to charitable activities as the latter do not generate any revenue and, therefore, should be ignored.
There is another principle shared by Friedman. It is the need to sidestep different frauds and deception in an attempt to obey the general business rules (Jahn and Bruhl 2018). This also implied that company’s profit could not be maximized because of the necessity to follow all the existing ethical customs. As Friedman suggested, the best company is the one that operates not ethically but rather in ways that make it economically viable (Elrick and Thies, 2018).
The biggest reason why Friedman disregarded the value of CSR was his belief that ethical spending was inexistent and, therefore, could not benefit business in any way. This led him to citing social Darwinism and concluding that all the positive market outcomes could only be achieved under the condition where companies would focus on their profit and not the ethical side of the question.
Volkswagen CSR. Volkswagen is a perfect example of a company that failed to support CSR and benefit from it. The company ignored emission control requirements and went on to releasing automotive vehicles that made it the world’s top carmaker at the cost of social trust and environmental benefits (Siano et al., 2017). Volkswagen acknowledged that they were poisoning the planet but they went on to manufacturing even more vehicles as their sales increased since they ignored the required emission protocols. Ultimately, the inability to follow ethical standards has led to the resignation of multiple shareholders.
Even without addressing any literature on the subject, it may be evident that Friedman’s philosophy became outdated in the face of all the changes that occur in the world nowadays. With immense expenditures that exceed $15 billion annually, CSR initiatives are one of the biggest sources of monetary value for businesses that respect the concepts of volunteerism and philanthropy (Wang, Dou and Jia, 2016).
Even though Friedman believed that CSR policies were a mere waste of corporate resources, modern business experience proves that environment- and community-friendly decisions are much more important than increased organizational income (Voegtlin and Greenwood, 2016). There are multiple sources of regulatory pressure that require companies to care about their inherent values, meaning that the adoption of CSR currently becomes a principle rather than an optional decision.
Trade-offs in public relations cannot be evaded. However, there is no evidence in the literature proving that social benefits and organizational profits are mutually exclusive (Ashrafi et al., 2018). Quite contrarily, many modern organizations are pushing forward toward a business model that inherently requires employees to volunteer and elicit philanthropy-like behavior in others. Shareholder interests could become the primary concern at times, but only under the condition where there are formal rules that support such transition and do not damage the established business framework (Tiba, van Rijnsoever and Hekkert, 2019).
The importance of social norms and formal rules should never be underestimated, as customers are the invisible guiding hand that takes companies away from pursuing self-interest. There should be socially beneficial ways to run a business, and Friedman’s theory seems to be outdated to allow for a balance between self-interest and complex social relationships between corporations and their customers.
The Link between CSR and Ethical Theory
The Theory of Utilitarianism and CSR
This theory does not allow companies to commit illicit actions, as the latter, per philosophical utilitarianism, are not maximizing well-being in any way. Therefore, utilitarianism and CSR are interconnected through the willingness to protect and respect human rights (Valentinov, 2017). The evident issue with the classic utilitarian outlook on business consists in the fact that companies tend to pay more attention to their shareholders.
In contrast, a definitive utilitarian business would reach for the interests of all the customers and even strangers who comprised the local community. There is also the concept of agent-neutral utilitarianism that suggests that well-being can be maximized with the help of CSR resources that companies might direct at the local demand or even send those resources to the poor who are living far away from the company’s original location (Mudrack and Mason, 2019). This implies that stakeholders that are located closer in geographical terms are ignored for the sake of the greater well-being of other stakeholders.
The question of whether it would be ethical to save someone far away instead of investing resources into local shareholders is seen by utilitarianism as inconsistent. Mainly, it is because the promotion of well-being is much more important than the location where it is stimulated (Curras‐Perez et al., 2018).
From the business perspective, a utilitarian approach relates to justifying specific rules related to how the interests of strangers could be taken into consideration together with the aspirations of local stakeholders. Nonetheless, it would be impossible to achieve the greater ‘good’ via a disproportional willingness to help others while pursuing business objectives only (Magno, Cassia and Ugolini, 2017). According to Garry and Harwood (2017), many of the current practices applied by companies respecting both CSR and utilitarianism may be seen as ethical due to the fact that the principle of promoting well-being is also respected.
In order to become even more utilitarian by nature, companies would have to focus on the needs of ‘strangers’ even more. This is a concept that may be rather hard to apply to real-life scenarios as there are dilemmas broader than the mere choice of either helping the poor or the rich (Boso, Afrane and Inkoom, 2017). The greatest difficulties arise when it gets to the discussion of the future impact of utilitarianism on business. For instance, when it comes to the reduction of CO2 emissions, numerous companies might end up failing merely because of their limited efforts to understand the need to reduce emissions in the first place (Wang and Sarkis, 2017).
As Perez, del Mar Garcia de los Salmones and Liu (2019) suggest, with no immediate outcomes, many companies might suffer from indecisiveness because of the inability to make a choice that is going to be right for the community, not for the company.
Foxconn’s utilitarian CSR. The best example of utilitarian principles being inoculated into the modern business environment is Foxconn. As a series of Chinese factories, Foxconn presupposes that the lack of sleep, reduced wages, child labor, and many other limitations serve for the greater good of people around the world who are using smartphones manufactured at Foxconn factories (Kim, Kim and Tam, 2016).
As one of the biggest manufacturers for Apple Inc., Foxconn is practically responsible for the production of the majority of iPads, iPhones, and iPods that the majority of the world uses without knowing the conditions at Foxconn facilities (Ma, Shang and Wang, 2017). As an electronics mogul, Apple Inc. might get the most backlash from the Foxconn scandal, but many other companies collaborated with the infamous Chinese manufacturer in the past, such as Nokia, Dell, and HP.
The Theory of Egoism and CSR
Many researches analyze egoism and its association with CSR. In interrelated literature, it is stated that the majority of moral issues prevail at times when the interests of society interfere with those of the business (Palihawadana, Oghazi and Liu, 2016). Therefore, any given company should strive to achieve a balance between being egoistic and altruistic, while also realizing what societal needs should or should not be satisfied. As in the case with Friedman’s argument, trade-offs cannot be overlooked when discussing the possibility of making ethical decisions (Marin, Cuestas and Roman, 2016).
Nonetheless, the theory of egoism suggests that if the organization pursues its own interest, it will not be considered entirely unethical. This is also based on the idea that society should not be superior to organizational objectives at all times, leaving room for corporate improvement and employee well-being (Donia, Tetrault Sirsly and Ronen, 2017). The general understanding of ethical business theories, though, suggests that instead of maximizing profits, companies should do everything to advance community interests.
There are different ways to explain the rationale behind making the best use of the theory of egoism. One of them may be the fact that stakeholders are focused on company profits (Cheng et al., 2019). By placing their interests at the forefront, they are also making sure that the company is not going to become bankrupt, also leaving more room for potential philanthropy and volunteerism. As Choi et al. (2016) wrote, the stakeholder theory is entirely in line with the egoism theory as the interests of relevant stakeholders should not be ignored when it comes to decision-making. This allows businesses to increase the value of business operations for all shareholders without putting a strain on the company’s budget (Shim and Kim, 2019).
The majority of negative backlash received from the society is going to be ignored by the company as the latter would pursue their own interests and employee well-being instead of fully supporting the cause established by community members.
On the other hand, the inability to maintain positive relations with the society would result in the company not achieving its long-term objectives, destroying its financial sustainability, and disregarding shareholders at the same time (Chen and Chiu, 2018). A company is presumably going out of business if it does not respect its customers and fails to provide its stakeholders with the reasons to develop an effective partnership further.
When it comes to ethics, egoism is a tough topic to discuss because the interests of the society are, most often, not in line with the organizational incentives (Chung and Lee, 2019). In order to remain unbeaten in the long run while also being egoistic, a company should find a healthy balance between their needs and community responses so as not to go over the top.
Nike’s egoistic CSR. Poor working conditions is one of the reasons why Nike is considered unethical and disrespectful to its employees while being solely interested in maximizing profits. Nike’s factories across the not-so-developed countries are synonymous with inhumane working conditions where employees have to work overtime with no chance to receive higher wages (Yang and Hsu, 2017).
On the other hand, Nike employees are enduring the proposed conditions as they do not have any alternative options for making money. As Newman and Brucks (2018) claim, Nike also exploits child labor in an egoistic manner, creating opportunities for the community to slam the company for disrespecting ethical norms. At the moment, Nike has been able to step away from unethical practices successfully and get back on the track with community needs.
Based on the information presented in this paper, it may be concluded that corporate social responsibility is one of the vital concepts that might get customer-company relations to a whole new level based on how the business treats its ethical accountability. As Friedman’s outlook on CSR is somewhat outdated, it may be safe to say that modern companies should engage in volunteering acts and philanthropy in order to maintain positive relationships with the customers.
As the real-life examples presented throughout this paper show, mere self-interest is insufficient if a company is willing to increase its profits while also making sure that customers are satisfied. In order to succeed, companies have to find a perfect balance between pursuing value and retaining customers as otherwise, they might file for bankruptcy in the long run. There should be no excuse for overlooking specific ethical standards as the majority of customers nowadays pay just as much attention to corporate volunteerism and philanthropy as to the quality of products manufactured by the company.
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