Introduction
Corporate social responsibility (CSR) is a common practice among contemporary business organizations. It is a self-regulatory mechanism that is part of business models. Different scholars have not only defined the term variously, but they have also referred to it using differing terms. For instance, Hancock (14) and Kern (7) refer to it as a form of corporate conscience. On their part, Wals (21) regards it as an aspect of corporate citizenship. Other people associate the term with social performance and sustainable responsible business operations. However, despite these varying conceptualizations, most analysts agree that CSR is a form of an inbuilt self-regulatory component of business entities. In this regard, all operations and business models are geared towards the achievement of international sets of standards (Hancock 15). In this case, organizations have to adhere to legal regulations and ethical principles.
In addition to compliance with law and ethics, CSR encompasses addressing the social welfare of people working within and without the industry. The concept has gone beyond legal and ethical norms to include sustainable operations. It addresses the issue of responsibilities concerning the actions of the company. Business organizations have to maximize the positive effects of their conduct and mitigate the negative impacts. Different companies operate in varying environments characterized by unique sets of customers, communities, employees, and other stakeholders. Multiple contentions are touching on how a firm can create private value for its name, as well as public worth for the community (Hancock 19).
In this paper, the author analyses CSR in the context of General Electric (GE) Company. Critics have pointed out the various weaknesses of adopting this concept among business organizations. They argue that it distracts the firm from its core business of creating value for shareholders. In light of this, the author provides a critical review of the impacts of CSR on GE. The relationship between the multinational status of this company and its engagement in social welfare activities is assessed.
General Electric: Company’s Profile
The company is a multinational conglomerate based in New York. The corporation operates in the energy, technology infrastructure, capital and finance, and consumer industries. In 2011, the company was ranked as the 26th largest business organization in the US. Besides, it was placed as the 14th most profitable company in the country. In 2000, it was named the 4th largest firm in the world by Forbes. It has also been ranked in other listings, including the 15th most admired company and 19th most innovative company in the world (Carlson 34).
GE has a foothold in different parts of the world. It involves the number of products which include among others, appliances, gas, aviation, and electricity. Besides, it is also involved in electric consumers and electric motors. According to the 2013 annual report, GE has a total revenue of $146.045 billion and a total income of $14.055 billion. In 2013 it had employed over 305, 000 workers (General Electric Works 27).
Types of Corporate Social Responsibility Programs
CSR Geared towards Conservation of the Environment
There are different types of CSR strategies adopted by corporations. Companies have adopted different areas of this concept and made them part of their business models. In light of this, GE has adopted specific forms of CSR programs. One of them is environmental sustainability. The strategy encompasses recycling and waste management. It is commonly used by multinationals to enhance their presence in the world. General Electric has played a role in elevating the suffering of communities in areas with scarce water resources. It has achieved this through the adoption of sustainable water management practices.
There is an increasing demand for green energy among contemporary organizations like GE. Such companies are engaging in activities to ensure that they carry out their business operations using this form of energy. Also, where possible, they supply the community with this energy (Wals 16).
Community Development and CSR
Community development is another type of CSR programs. It includes the donation of monetary funds to support activities beneficial to the community. Such areas include funding education programs, engaging in charitable work, sponsoring local events, and including the community in business operations. Also, CSR strategies with regards to community development include volunteering and recruitment of people from the locality (Wals 16).
Ethical Marketing Practices and CSR
Ethical marketing practices are other forms of CSR programs. Companies are expected to advertise their services ethically. They do so by taking into consideration their place in society and the value they hold in general. CSR does not allow false and manipulative advertisements (Wals 17).
General Electric’s Approach to CSR
According to Hancock (23), CSR is heterogeneous. The presence of GE in different parts of the world, as well as its engagement in different types of social undertakings, is a result of this heterogeneity (General Electric Works 20). For instance, in China, CSR is regarded as a socially driven engagement. As such, a company that adheres to these values is regarded highly in this society. General Electric uses this approach to conduct business in China. In German, CSR is viewed as a form of job security. The case is different in other parts of the world, such as in Africa. For example, in South Africa, such engagements are treated as necessary contributions to social needs in society, including health and education.
Corporate philanthropy is another common approach that has been employed by GE. In this case, the company is involved in several compassionate activities through monetary donations to local and non-profit organizations. The donations are used to fund different activities like education, art, health, and environmental conservation (General Electric Works 23).
Interest in corporate responsibility is another avenue through which GE implements its CSR programs. Pederson (21) refers to this approach as Creating Shared Valued (CSV). In the company’s annual report, the CEO opines that the success of the company and the community’s social wellbeing are interdependent. In efforts to enhance its competitive edge in the market, GE ensures that the employees are healthy and educated. Also, it endeavors to make sure that the resources are exploited in a sustainable manner (General Electric Works 31).
CSV attracted global attention after GE was recognized for implementing its CSR programs and achieving a competitive advantage in the market. The approach was acknowledged in the Harvard Business Review articles. Scholars have addressed the issue of the relationship between competitive advantage and CSR as a result of the success evidenced in GE (General Electric Works 33).
The organization adopts the benchmarking policy to review its operations. The approach enhances the competitiveness of the organization with regards to CSR policies. It has achieved this through the effective implementation of strategies that reviews competitors’ CSR initiatives. Through benchmarking, the company can measure its progress. Besides, it can evaluate the impacts of CSR programs initiated by other companies on society and the environment. The move was meant to help the company gauge the perceptions that customers had towards its role in corporate responsibility. General Electric’s global research division plays an important role in the organization’s CSR undertakings. The division makes a comparative analysis between GE’s internal policies and those of other companies. Such activities promote healthy competition about CSR initiatives (Pederson 38).
Cost-Benefit Analysis of CSR Programs from a Resource-Based Perspective
Cost-benefit analysis is the preferred management approach among companies that aspire to achieve competitive advantage. According to Wals (39), financial performance can be enhanced through the effective implementation of CSR strategies. With the help of the Resource Based View (RBV), GE has acquired a significant edge in the market. The company started operating in the early 1900s. Many years down the line, the organization is still strong and highly competitive (General Electric Works 52).
General Electric initiated an RBV program that was competitively advantageous. It attained this by ensuring that the resources utilized fall within the four parameters stipulated in the program. The four include valuable, rare, inimitable, and non-sustainable (VRIS) domains. In this regard, GE conducts cost-benefit analyses of its CSR programs using RBV as a determinant. As a result, the company has achieved an optimal and appropriate model of CSR (General Electric Works 57).
The disadvantage of long term CSR initiatives about RBV is that they result in advantages that are later copied by competitors. As a result, GE conducts annual reviews of its operations as far as CSR is concerned. The various CSR strategies are examined using a heterogeneous approach. From an RBV’s perspective, it is apparent that GE makes several assumptions in its operations. For example, the management regards businesses as collections of resources and skills of varying nature. The heterogeneity is uniformly distributed across the continuum occupied by different organizations. GE takes advantage of this imperfect mobility of resources to acquire superior capabilities over competitors. However, scholars have questioned the relationship between RBV and CSR. The link is especially scrutinized concerning the maintenance of competitive advantage. The company ensures that competitors do not imitate its CSR strategies (General Electric Works 59).
In its annual report, GE informs that it has shifted from company individual thinking to a supply chain approach to consolidate its social responsibility undertakings. The organization’s success in supply chain management can be attributed to its CSR strategies. GE conducts supplier and product audits. Review of suppliers has suppressed direct relationship with first-tier distributors. Such an approach has played an important role in improving GE’s visibility in the distributors’ chain. The annual report emphasizes collaborations between the company and trade partners within the industry. Such joint undertakings aim to “consolidate social responsibility” as far as the distribution chain is concerned (General Electric Works 61).
General Electric’s Social Accounting, Assessment, and Reporting
The three elements are very important. General Electric maintains credibility by ensuring that it is fully accountable to the community and the shareholders. Such accounting encompasses the review of the firm’s effects on social and economic environments (Kern 31). To this end, CSR is one of the elements that determine the nature of the company’s economic actions. Hancock (54) defines social accounting as a mechanism used in reporting the actions of the company. It emphasizes the need to take into consideration the social reality in the community. GE has adopted accountability measures that support its social performance and presentation mechanism.
There are various social accounting, auditing, and reporting strategies. Due to its presence in different parts of the world, GE has adopted several accounting mechanisms. Some of them include the accountability AA1000 standard. The approach is a global initiative that is synonymous with sustainable reporting and social accountability. Also, GE ensures that it adheres to the provisions made in the United Nations Standards and the ISO 14000 Environment Certification (General Electric Works 44).
The organization uses the services of external auditors to prepare its annual reports. Such reports address issues to do with sustainable development and CSR. The statements are made in line with the requirements stipulated in Triple Bottom Line Reports. The reports vary from one industry to the other. The variation ranges from style, format, and evaluation techniques. However, critics have disregarded some of the reports submitted by GE. They equate them to those made by failed companies like Enron. The critics argue that social accounting reports are used as a smokescreen to hide the negative aspects of the company. GE maintains that it adheres to the ethical and regulatory standards when submitting the returns. The integrated report highlights the company’s environment, social, economic performance. It is submitted in line with the laid down rules and procedures (General Electric Works 49).
General Electric’s CSR Programs and Legal Issues
GE has received its fair share of negative publicity. The company has been involved in legal issues revolving around social accounting about CSR. For instance, in 2009, the Security and Exchange Commission (SEC) fined the company $50 million for misleading investors. According to Carlson (63), GE made people believe that it would suppress its earnings expectations.
In another instance, GE was charged with the offense of defrauding the United States Department of Defence. Also, it has been accused of owning an abandoned building in Bridgeport, where it engages in different forms of criminal activities. All these accusations affect GE’s social environment and accountability in general (Carlson 64).
General Electric, CSR, and Social License
According to Kern (77), a social license is the approval of the firm’s presence in the community. The license is a prerequisite for development as far as GE is concerned. In most cases, the approval takes place outside the legal framework. It calls for sustained investment by actors in the social sphere to realise an effective and trust-oriented relationship.
GE admits that social certification in different parts of the world is often opaque (General Electric Works 71). However, its impact on the communities has helped in the accumulation of social capital. To obtain social licenses, GE puts in motion a responsive and flexible mechanism that entails understanding the regional and cultural needs of a given area in advance. By familiarising itself with these aspects, GE can develop and implement CSR initiatives.
The company’s management asserts that it is not easy to establish a social license without the help of local governments. Since GE operates in different parts of the world, it is always a challenge to gain this acceptance. Governments provide the required mapping of stakeholders involved in the operations of GE. It also provides a regulatory framework that gives the company the capacity to engage with the community. Different social media techniques have been used to provide information on the credibility of GE operations. The managers argue that the activities of the company are monitored around the world about technology and project implementations. By acquainting itself with these issues, GE has secured social licenses in many parts of the world (General Electric Works 79).
Human Resource Management and CSR in General Electric
According to Hancock (69), CSR is an important tool in the recruitment and retention of personnel. GE has used this strategy to acquire its human resource. Perceptions of customers play an important role in fundraising and community outreach programs. Customer care is a fundamental aspect of all companies. GE ensures that frontline employees are well-grounded in CSR, which helps them to improve consumer satisfaction.
Risk Management
Risk management is used to safeguard the reputation of a company. It has taken decades to create GE. On the environmental front, GE has been criticized for neglecting various conservation policies. In 2000, the Political Economy and Research Institute faulted GE for its increased pollution in the US. It was listed as the fourth largest air polluter in the country. The company is accused of releasing a lot of toxic chemicals into the environment. The company is regarded as the largest producer of toxic waste in the US (Pederson 102).
In 1999, the corporation paid a penalty of $250 million for 100,000 tons of piled waste in Waterford, New York. In the past, the company has engaged in media and political campaigns to fight off accusations over environmental pollution. The organization emits a lot of toxic wastes into River Hudson. The company was also ordered to address the health problems brought about by PCB contamination in different parts of the world. The pollution was especially toxic in Rome and George state (Pederson 102).
General Electric has also been involved in the construction of nuclear plants in Fukushima, Japan, and other parts of the world. The 2011 tsunami crisis in Japan made many people question the disaster preparedness of this company. It is important to note that natural disasters like tsunamis were not addressed during the company’s safety analysis in 1972 (Pederson 104).
Other scenarios have affected the company’s reputation negatively. To address these issues, the company’s board of governors has ensured that all operations are within the CSR parameters. The management board endeavors to maintain a genuine culture by avoiding unwarranted attention from legal offices, the government, and the media. To achieve this, the CSR strategies put in place involves environmental initiatives in several ways. One of the ways is the exploration of sustainable sources of energy in different areas. The use of solar energy has increased in the recent past, especially in the US. The organization has invested significantly in the research and development programs with regards to renewable energy. The aim is to address the increased demand for clean energy (General Electric Works 81).
Brand Differentiation
GE operations involve working in crowded markets and penetrating new frontiers. To attain a unique selling position, the company adopted CSR strategies in its ethical operations. Customer loyalty is based on genuine ethical values that are distinctive. An engagement plan ensures that GE reaches out to the desired market (General Electric Works 64).
Globalization and Market Forces
GE pursues dominance through globalization. The GE management acknowledges that the achievement of this status has encountered a myriad of challenges. The challenges include stiff government regulations, unfriendly tariffs, as well as strict environmental policies. With the help of CSR tactics, GE remains one of the most influential corporations in the world. Global competition exerts pressure on multinational companies. The organizations are prompted to review their human resource and the entire distribution chain (General Electric Works 65).
Corporate Social Responsibility and Regulations
Regulation of operations among corporations is characterized by several challenges. The concept is hard to comprehend given the fact that different corporations operate variously in terms of behavior and nature. As such, it is not possible to regulate all areas of corporate operations. The cumbersome nature of this undertaking has negatively affected the legal process, especially about the interpretation of the law (Pederson 115).
An example of such development involves the accusations leveled against GE. The corporation has failed to clean the contaminated Hudson River since 1972. Even today, the organization is engaged in arguments with various stakeholders about its liability. The issue has not been fully resolved due to ambiguities as far as legal interpretations are concerned (Pederson 115).
In light of these developments, different governments across the world have formulated laws that are identical to CSR policies. The process of implementing the strategies is agreed upon between the governments and GE. It was resolved that corporations should put in motion the newly formulated CRS standards and expectations (Pederson 116).
Stakeholder Priorities: General Electric’s Commentary
Shareholders and other stakeholders have been made to understand social and community responsibility is important to the operations of GE. Identification of the social aspects of operations is regarded as the beginning of a productive performance streak. The perceptions of stakeholders with regards to CSR inform the involvement of the people in the corporation. The normative model adopted by GE indicates that the implementation of CSR strategies promotes the positive impacts the company has on the stakeholders, including members of the community (General Electric Works 82).
Conclusion
In this paper, the author analyzed how CSR strategies have been used in GE operations. The company has adopted these strategies, making them part of its business model. A critical analysis of the situation reveals that the major issue is not the formulation or implementation of CSR initiatives. On the contrary, the major factor in the process of making these plans part of the business operations. Poor implementation of CSR policies would lead to constant conflicts with the environment. It will also lead to a decline in business performance.
Social welfare is an important aspect of business dynamics. Corporate social responsibility helps companies survive in the global market. It helps them understand their community and markets. Most firms aim to promote economic development and protect the environment in the process. General Electric is engaged in several activities, which may lead to environmental pollution. CSR is used to mitigate the effects of these undertakings.
Works Cited
Carlson, Bernard. Innovation as a Social Process: Elihu Thomson and the Rise of General Electric, 1870-1900, Cambridge: Cambridge University Press, 2013. Print.
General Electric Works. n.d. 2012 Annual Report. n.d. PDF file. Web.
Hancock, John. Investing in Corporate Social Responsibility: A Guide to Best Practice, Business Planning & the UK’s Leading Companies, London: Kogan Page, 2004. Print.
Kern, Jutta. Corporate Social Responsibility meets Human Resource Management, Sternenfels: Velr. Wissenschaft & Praxis, 2013. Print.
Pederson, Jay. International Directory of Company Histories, Detroit, Mich.: St. James Press, 2011. Print.
Wals, Arjen. Social Learning Towards a Sustainable World: Principles, Perspectives, and Praxis, Wageningen: Wageningen Academic Publishers, 2007. Print.