Corporate social responsibility is basically an internal regulatory policy in any organisation. These policies are for the purpose of monitoring the organisation’s compliance to the written laws of the land. Every organisation has a social responsibility to maintain its operations within the law and protect the societal ethical standards. CSR objectives therefore should embrace responsibility on organisations actions with regards to the impacts on the environment, the work force, the industry and the public in general. In many organisations, CSR defines what the organisation believes and stands for.
CSR policies in the recent past have taken different approaches depending on the organisations capability and interests. The most common approach has been that of philanthropic engagements. Organisations are more involved in donating financial aid to the less fortunate communities. While this approach has its advantages and successful positive impacts, it has also come under great criticism for a long time. Offering financial aid has been accused that it does not address the less fortunate long term financial needs. Many business leaders feel that community development projects approach are of more value and long-term benefit to the society. This research discusses the CSR theory, its justification and viability in the business arena.
An organisation operating in the current global market is faced with many challenges, differing objectives and goals, and it is because of these conflicting aims that the topic of corporate social responsibility (CSR) and what it involves becomes unclear. CSR is commonly referred to as an organisation’s actions that intend to impact society in a positive manner, but that go beyond the interests of the firm and legal requirements (McWilliams & Siegel 2001). According to Porter and Kramer (2006), the CSR field is saturated with moral imperative, however most CSR activities are not just community centred, and are actually a balancing act of stakeholder interests, competing values and costs. Given the growing need to balance social pressures, expectations, and company strategy and profit-making, Dennis, Neck and Goldsby (1998) argue that CSR promotes ‘incompetence by leading managers’, and that managers are involving themselves in areas ‘beyond their expertise’ to ‘repair society’s ills’.
Studies by Friedman in the 1970s follow neo-classic economic theory, which state that a company’s only social responsibility is to increase its profits (as cited in Enquist, Johnson & Skalen 2006). However, according to Freeman (1984), it is impossible to disconnect business from ethics, and that all stakeholders must be taken into account in relation to business practices (as cited in Enquist et al. 2006). Carroll (1999) argues that the term ‘social’ in CSR is viewed by some as unclear and does not identify anything specific in relation to the corporation’s responsibility. While there is debate over what exactly involves being ‘socially responsible’ and what is expected from an organisation, one thing is clear – the accessibility and speed of media revolving around CSR has seen major changes in what is expected from organisations (Dawkins & Lewis 2003). Organisations do not act out of social responsibility, but good business (Dalton and Cosier 1982).
CSR is not a new idea, however according to Smith (2003); it has never been more prominent on the corporate agenda than it is today. Dawkins and Lewis (2003) state that conventionally, the values that consumers regarded highly were product quality, value for money, and a company’s financial performance; but recently have discovered there has been a world-wide shift in values leaning more towards CSR in areas of treatment of employees, community involvement and environmental issues. Implementing CSR strategies cannot entirely balance the needs of some stakeholders, such as managers of the company, because doing so may involve acting outside of their areas of expertise and contractual obligations, in order to meet the needs and demands of the community and other social pressures. Basically, some action is better than no action, and throughout the course of history, inaction has never advanced mankind (Dalton and Cosier 1982).
According to Reece (2000), society is made up of three elements, (1) the political entity, (2) the business community, and (3) the social community, and that harmony only exists when there is a general balance between the expectations and performance of each element, in the eyes of the other two. Companies can experience pressures from the stakeholders and the community to meet expectations placed on them. Reece (2000) suggests that the debate continues as to whether CSR is about meeting community expectations rather than pursuing a competitive advantage. Some may perceive CSR to offer positive contributions towards the company, and that it overweighs any negative consequences. Dennis and Goldsby (1998) disagree, believing that CSR is not as ethical as it appears and that companies may be using a false image of themselves in order to be positioned and represented in the best possible light by deceiving their consumers and other stakeholders. There seems that there is no clear answer as to whether any business is fully socially responsible.
CSR refers to the obligations of the firm to society and the firm’s stakeholders, which are those affected by corporate policies and practices (Smith 2003). The essential idea rooted in CSR is that business corporations have a duty to work for social betterment (Smith 2003). When considering the theoretical contributions to CSR, the Stakeholder concept (SC), popularized by Freeman personalises social responsibilities by defining the specific groups or persons that business’ should consider in its CSR direction and future actions (as cited in Carroll 1999). Freeman (1984) defines the SC as the natural fit between the idea of CSR and an organization’s stakeholders. SC is an intelligence gathering mechanism that attempts to accurately predict environmental opportunities, threats, and provides information to strategists at a broad level. Freeman (as cited in Dalton & Cosier 1982) states that managers do not ‘own’ the company; they are employees, nothing more and nothing less, and that their responsibility is to the ‘owner’, the stakeholder.
Freeman (1984) defines the ‘stakeholder’ is any individual or group that can be affected directly or indirectly by the achievement of an organisation’s aim, and that an organisation would cease to exist without the stakeholders that support it. The word ‘stakeholder’ first appeared in 1963 in an internal memorandum on management literature at the Stanford Research Institute (Carroll 1999). The term ‘stakeholder’ was originally used to simplify the concept of ‘stockholder’ as the only group to whom management need be responsive, but the concept can also be used to develop the current state of strategic management (Freeman 1984). Stakeholders can be identified at a broad level as customers, suppliers, owners, public, and society. Freeman (1984) believes that unless executives understand the needs and concerns of these stakeholder groups, organisations could not devise company objectives which would receive the necessary support for the continued survival of the organisation.
Another important theoretical contribution to consider is the model presented by Dalton and Cosier (1982) called ‘The four faces of social responsibility’. The model has four cells in a table which depict a 2×2 matrix with ‘illegal’ and ‘legal’ on one axis and ‘irresponsible’ and ‘responsible’ on the other axis. Each cell represents a strategy that an organisation can adopt. If an organisation chooses to act illegally and irresponsibly, their conduct would be condemned by society and industry, for example The News of the World invading personal mobile phone records (illegal) and using that personal information for stories in their paper (irresponsible). If an organisation employs local members of the community as workers in a factory (responsible) but pays them less than minimum wage (irresponsible), they would fall into the illegal and responsible cell. If a tobacco company who sells cigarettes (legal) without any warning labels on the packaging (irresponsible), then they would fall into the legal and irresponsible cell. And finally, if an organisation falls into the legal and responsible cell, their conduct would be law abiding (legal), socially orientated (responsible), and recommended when implementing a CSR strategy. Dalton and Cosier (1982) conclude that every cell is open to criticism and may be determined by external factors such as federal agencies or consumer groups.
Main Considerations for Business Practice
The idea that business’ have CSR obligations to society was evident at least as early as the nineteenth century, but has only been widely discussed in the last forty years of the twentieth century (Smith 2003). Smith (2003) believes that the demands for improved CSR are not only being lead by protesters at global meetings, but as well as conventional quarters of society. According to Smith (2003), since the major U.S. corporations like Enron and WorldCom emerged in 2002, the accounting and governance scandals associated with them have further damaged the public standing of business practice. This leads to important considerations for business practice in the twenty first century. With regards to the scope of CSR, reporting of actual performance achieved by companies, their goals and commitments, reducing CO2 emissions, minimizing carbon footprint, reducing energy consumption, waste reduction and recycling, reducing water and soil pollution, and providing opportunities for learning and development (Bouten 2011). Reporting of actual performance is supposed to be presented on the companies’ websites with sufficient information related to CSR goals, but some companies do not adhere to this.
Analysis of the depth and type of CSR reporting in Australia’s largest 100 companies with regards to human rights, labor standards, environment and anti-corruption found that reporting of actual performance hasn’t been performed as expected (McGraw 2010). This lead to the establishment of the ‘Global reporting initiative’, with the hope it becomes as routine as financial reporting (McGraw 2010). In Australia, CSR activities and reporting practice are not widely restricted by regulation, and that company stakeholders still lack the motivation to report actual performance (McGraw 2010). This direction taken by companies could help authorities to tackle the needed areas and provide guidance to companies, as well as to analyse the progress that has been achieved so far. This could also help by making comparison between companies in similar sectors and share the knowledge of best practices. Companies with lower performance can receive informative materials about how to improve their CSR duties.
Governments should have a solid role with this regards as to force further regulations which in the end, will be at the benefit of the company. A real image can’t be reflected except after full surveys and analysis being extracted from proper reporting. As company activities vary, a guideline could be set with relative to each field as to which factors of CSR should be considered. Penalties and strict supervision should be implemented by authorities to assure companies are reporting CSR and following the given guidelines. On top of that, a link between CSR and taxes is needed as a sort of incentive for companies. Reduction of taxes, for example, is for companies that are properly reporting and implementing the CSR within their activities. This tax reduction can have many forms like exemption on the employees working on CSR or on all expenses invested in CSR.
In my own opinion drawn from the research above, I fully support the idea of CSR. This can only be to the organization’s advantage rather than a burden if well implemented. Companies should adhere to the later to their legal mandate as stipulated in their article of operations. Keeping to these rules is beneficial to all starting with the organization itself, to the consumers and even to the government. Environmental concerns are addressed with companies that have CSR policies in place. Currently the major societal concern in terms of environmental destruction is the level of carbon emissions. Reducing the amount of carbon released in the atmosphere is a social responsibility that all organizations who in the course of their operations release the gas should take action against (Bouten 2011).
Companies using locals as employees have a responsibility to effect a reasonable pay package. In most cases, such companies have on the contrary exploited locals offering minimal and exploitative remuneration. Social responsibility involves valuing the workforce with decent compensation in exchange for their services. In situations where an organization’s activities cause environmental pollution, the responsibility lies on its sphere of influence to cover up for the damage probable as a result of its operation. Although CSR has been upheld by most of the organizations, stiff actions should be taken against any organization that does not take the initiative to meet its social obligations.
In this case, the government can come up with incentives aimed at promoting corporate social responsibility. Such incentives as reduced tax rates would encourage organizations to create CSR policies and adhere to them. The government can also make it mandatory by law for all organizations to have stipulated social responsibility policies. Failure to do so becomes an offence hence adherence becomes the only option. With such actions, CSR would be upheld as a regular law hence the society will be protected from exploitation and the environment as well. A harmonized exploitation of resources which is in the best interest of many governments can be achieved.
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