The Role of Corporate Social Responsibility in Business

Introduction

Modern businesses are having trouble when ensuring that their interests coincide with those of other entities including citizens, future generations, and the environment among others. Consequently, companies are expected to take direct responsibility for the impact that their operations have on the environment and society at large. The main principle behind the concept of corporate social responsibility (CSR) is sustainability. Consequently, most of the activities that are covered by CSR are necessary for the survival of the businesses that undertake them. Nowadays, there is an ‘unwritten’ rule that businesses have to pass on their success to the world through CSR. Since the advent of CSR, businesses are forthwith judged in terms of their ability to be good corporate citizens. Businesses that find it hard to fulfill their social responsibilities as corporate citizens have trouble marketing themselves to the world. Furthermore, CSR is an essential agenda for both upcoming and existing businesses. Like other modern-day entities, businesses have to consider their position within their complex environments. The complex issues that surround the execution of CSR by various businesses make it necessary for organizations to develop “a variety of strategies for dealing with the intersection of societal needs, the natural environment, and corresponding business imperatives” (Sen & Bhattacharya, 2001, p. 226). This paper explores the issues surrounding the role of social responsibility in business decisions.

Stakeholders in CSR and their Responsibilities

There are various stakeholders in respect to CSR and all of these groups have a varying degree of interest in respect to this business concept. A business that is implementing CSR is also expected to play a significant role when this concept is actualized. Consequently, the first major stakeholder in matters of CSR is the customer. The goal of most companies is to serve their esteemed customers. Therefore, CSR has significant elements of the customers and this makes them major stakeholders during social responsibility (Militaru & Serbanica, 2005). Customers are considered differently according to the underlying environments. For instance, customers who operate in areas that feature high levels of capitalism have low expectations regarding CSR. On the other hand, customers like to identify with organizations that acknowledge and practice significant levels of CSR. Overall, the customer is the ultimate driving force when it comes to CSR. One study observes that “the purpose of a company is to serve customers and to satisfy their needs and desires….(whereas) profit is a by-product, a reward for serving customers well” (Sen & Bhattacharya, 2001, p. 228). Henceforth, there is a need for companies to use CSR as a tool for connecting with customers and sharing the success of the customer-client union.

Employees also have a significant stake in matters to do with CSR. For instance, all successful businesses aim to “provide fair wages, a healthy and safe work environment, and a climate of respect” (Clarkson, 2005, p. 95). A business that has adequate levels of social responsibility will also seek to contribute to the overall welfare of its employees. In regards to CSR, employees serve as both actors and reactors. For instance, businesses execute their CSR through their employees. Furthermore, employees are also beneficiaries of CSR. Some organizations find it difficult to execute CSR within society without first taking care of their employee’s welfare. Employees are pivot points in the layout and execution of CSR. Instilling the idea of CSR among employees is the responsibility of any company that seeks to implement its policies with ease.

Business partners are also significant factors when it comes to the implementation of CSR. Business partners act as points of influence when it comes to CSR. For instance, most organizations are reluctant to form partnerships with businesses that do not have a good track record when it comes to CSR. For instance, partnerships between influential companies are often regarded as capitalistic unions that are determined to exploit both people and resources. Therefore, business partnerships that shun the elements of CSR have a hard time appealing to their benefactors and other partners. In a competitive business environment, the CSR aspect might be the winning factor for most businesses.

Communities are an important aspect of the implementation of CSR. For instance, communities are the wider targets of most companies’ marketing strategies because they are synonymous with mass markets. All businesses want to maintain an image that coincides with their respective community. In addition, all businesses aim to become the most visible and exemplary aspects in their respective communities. Consequently, involvement in CSR is not an option for a company that has long-term goals.

Compatibility of CSR and Economic Responsibility

All the stakeholders of CSR are independent elements that come together in a company’s economic environment. However, all capitalistic organizations are formulated to make a profit. Consequently, it is unlikely that any company can give up its pursuit of financial goals in favor of CSR. Economic prosperity always comes before CSR. The main issue in regards to the relationship between CSR and economic responsibility is how a balance between the two elements can be achieved. The other issue is that it is the responsibility of all businesses to ensure that their economic interests do not lead to unsustainable practices. One management expert “discusses the challenge to develop a sustainable global economy and the responsibility of corporations to make it their business to develop and sell profitable solutions to the world’s environmental problems” (Clarkson, 2005, p. 97). In a scenario such as this one, there would be compatibility between CSR and economic responsibility. For example, a business can only guarantee its future survival by ensuring that the integrity of its operational environment is not compromised. CSR provides an environment of stewardship where companies are expected to safeguard the interests of all the operators within a certain realm. In the past, some companies have had to restructure their entire business models just to make them compatible with economically friendly CSR.

Corporate Social Responsibility as a Strategy

Companies have found it difficult to operate and survive in some business environments. Consequently, companies have discovered that on some occasions, CSR is not just a simple mode of operation but it is also a market strategy. On other occasions, CSR is driven by external factors. For instance, CSR as a strategy can be motivated by “changes in consumer behavior, pressure from shareholders and employees, or by enlightened leadership” (Galbreath, 2009, p. 109). On all occasions, CSR can be successfully used to institute a turnaround in a business. Most CSR corporate strategies are implemented using the top-to-bottom approach. Furthermore, most of these strategies involve practices such as organizational alignments, improved budget allocation, and taking roles that are more central in environmental matters. CSR as a strategy might involve an acknowledgment of the firm’s role in respect to external issues. The chosen strategy must also be considerate of the standards of the actions that are expected from a company that seeks to implement CSR. Management is a key factor in any strategy that depends on CSR.

The link between CSR and Competitive Advantages

Most of the companies that adopt CSR often report increased levels of financial performance (McWilliams & Siegel, 2001). Distribution of company resources through CSR has tangible benefits to a firm through increased revenue. For instance, some of the activities that might be carried out through CSR can create more avenues for revenue for any company. In addition, CSR can lower a company’s operating costs because it solves future problems. CSR also deals with problems before they become major issues for a company (Cheney, 2006). For example, if a company embarks on a quest to foster security in a certain neighborhood, its future security budget will be lower, assuming its CSR efforts are successful. Customers like to identify with companies that embrace CSR. Consequently, after engaging in CSR most companies report increased sales and enhanced customer/product loyalty (Porter & Kramer, 2006). Companies that are considered to be part of the community often pose higher levels of competition than the ones that are only viewed as business entities.

Personal Observations

CSR and its related institutions have been a welcome idea in a world where capitalism ‘has threatened to ‘take over the world’. Lack of CSR has in the past led to various global problems including climate change. Companies have in the past engaged in ‘passive’ CSR but the citizenry has become more informed when it comes to these issues. Consequently, ‘dutiful’ CSR will not suffice in the future. The concept of ‘corporate charity has changed a lot over the past few decades and CSR is also expected to mimic these developments.

References

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Clarkson, M. E. (2005). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of management review, 20(1), 92-117.

Galbreath, J. (2009). Building corporate social responsibility into strategy. European business review, 21(2), 109-127.

McWilliams, A., & Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of management review, 26(1), 117-127.

Militaru, G., & Serbanica, D. (2005). Ethical behavior and social responsibility in business. Bucharest: Niculescu Publishing House.

Porter, M. E., & Kramer, M. R. (2006). The link between competitive advantage and corporate social responsibility. Harvard business review, 84(12), 78-92.

Sen, S., & Bhattacharya, C. B. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of marketing Research, 38(2), 225-243.