The bottom line for any business enterprise, regardless of scale, is profit. Every other consideration falls behind this main point of focus. However, of late, companies have come to place an almost equal weight on their impact to public interests. This is because it is the public – after all – that forms the customer base, or client base, of the companies. Any policy by the company that improves the interaction with potential customers also potentially improves the company’s revenues. This is the concept of public relationships – PR. Corporate Social Responsibility (CSR) takes this relationship a step further, to include the concerns of a wider social, environmental and civil field. The policies born out of CSR determine how well a business enterprise will integrate with the neighborhood.
CSR evolved out of a simple fact: no business enterprise is an island. Every business has an environment it operates in. In this environment, there are all sorts of other entities – some business in nature, others not – but all trying to coexist. Such a system works best when each entity is its own watch dog- upholding its own standards, staying within the legal range, and basically not being a nuisance to other entities within the environment. It works even better when the business entities embrace social, cultural and environmental factors in its policy making.
CSR nowadays has both proponents and critics. Those in support of it suggest that CSR eventually makes a business enterprise more prosperous, as the long term goals become the focus. The critics insist that CSR is a diversion from a business’s core function, and makes it lose focus on its immediate goals. In order to determine who is right amongst these two, it is important to examine business enterprises from a wide perspective that incorporates all manner of scale and business orientation (Wikipedia, N.D).
The origin of the word “company” tells a lot about the mindset of people when it comes to business. The word was derived from the Latin words “cum” and “panis”. These words mean “to break bread together” (Miami, N.D.). In other words, people see companies as an avenue for accomplishing things that they wouldn’t be able to as individuals. And while generating revenue still retains the core position in a company’s priorities, the staff and shareholders for any business enterprise feel the need to contribute to the wider society’s well being. Policies are then generated to cater for this new function by the company.
John Mackey, co-founder of Whole Foods, once said that generating revenues is the sole responsibility of any business enterprise, as far as the investors are concerned. However, the company has also a responsibility for the other stakeholders: the employees, the suppliers, the customers and the wider community. This responsibility is best effected under CSR programs, since, while all the stakeholders have a valid and legitimate claim on the business, this latter group’s interests can not be catered through the revenue- generating capacity of the business (John, 2005). John explained that CSR can, in some instances, be viewed as a customer-centered way of doing business.
In 2000, a Business Week/Harris poll was carried out on the public opinions of the American citizens about CSR. The poll showed an overwhelming support for CSR. Only about 5% of the entire population interviewed rejected it. Those who rejected it had the main idea that CSR shows misplaced priorities by companies, and could eventually be self-defeating. The other 95% were of the opinion that companies owe the wider community and the environment a fraction of their earnings, and so should use some of those earnings to make life better in the society (William, 2006:108).
A study in 2004 by Oracle showed that the CSR is becoming more central in the policy making of most companies. 85% of all interviewed executives and investors were in support of this trend. This was a significant rise from the 44% observed in a 1999 study. During the 2004 study, it also emerged that the main areas of concerns for CSR was ethical behavior by the staff, exemplary governance by the company board members and transparency during the corporate dealings (Oracle, 2005:3).
Application of CSR
Corporate social responsibility goes beyond occasional social handouts to the wider society. It also factors in during such business processes as hiring of new employees, partner selection and brand development (Miami, N.D.). All these processes require a business enterprise to be in tune with the wider environment in which it is operating in. To clarify this, consider a company that is entirely opposed to CSR. Such a company is likely to be out of touch with the trends in the wider society. It hence becomes impaired when making new brands to suit the market. On the other hand, a business entity that practices CSR is likely to be in tune with most social trends, and hence more effective at discerning new demands in the market. The 2004 study by Oracle showed brand enhancement as being a major benefit of CSR to any business enterprise (Oracle, 2005:3).
There are many other reasons that would make a business body opt for CSR. For example, through it, a company is better placed to demonstrate transparency to the shareholders and other interested parties like audit bodies. All activities associated with CSR expose a facet of the company to public scrutiny. Thus, the more into CSR a company is, the more the public feels confident with its internal workings. The public eye here becomes a social audit, and its influence on the prospects of a business entity is profound (Miami, N.D.). When a company gains the approval of the public, its reputation soars, and so does its revenue generation. A company that is viewed with suspicion by the public is doomed.
CSR also gives businesses a humane face, garnering more patriotism from the wider society. In any business field, competition from similar business enterprises is a reality. Sometimes, the competition is such that a company can no longer gain an edge by manipulating market forces like price or overheads. In such a scenario, a company can improve its prospects by letting the potential customers or clients develop a spirit of patriotism with it. In this case, the company will have an edge over its competitors not because of its superior service or goods, but because it has gone an extra step towards getting the attention of the customer (Anne, 2007).
The benefits outlined above can be termed as offensive strategies by a company. This implies that the company is getting involved in CSR deliberately so as to create some favorable conditions for itself in the wider society. However, sometimes companies can use CSR as a defensive mechanism. They can use it to evade regulatory fines and penalties from the government. This is because activities performed under CSR are not considered to be the company’s business mainstay, and do enjoy tax reliefs and other related benefits. CSR can also be used to maintain a company’s reputation within the market, in case of a market crackdown. And finally, CSR provides a formidable avenue for mitigating conflicts between shareholder’s interests and the company’s core business prospects (Ramon and Daniel, 2005:115)
Some benefits by a company from CSR are hard to differentiate from the conventional business strategies employed. For example, in Japan, Lawson is the second-largest convenience store. The company has an extensive and detailed report about its CSR activities, running under the theme “a gentler approach to our earth and its people” (Oracle, 2005:3). In this report, there are statistics about the company’s efforts to recycle products, avoid artificial preservatives in food and the economic use of available resources. The final effect is a direct, increased profit margin, while still declaring all these activities to be part of their CSR initiative. Thus, in addition to all the social and ethical benefits, CSR can have a direct economic impact to a business.
The benefits of CSR are recognized even by government bodies, and encouraged within business bodies. The UK, for instance, recognizes CSR as an avenue by which a business enterprise maximizes its benefits and minimizes its downsides by taking control of its social, economic and environmental responsibilities (Berr, 2009.). With this in perspective, the government is actively pushing for more involvement in CSR by companies. The government has several strategies tied in with this drive. It wants to open avenues for open dialogue with the private companies. It also wants to encourage responsible behavior by companies by forming a relevant policy framework. And finally, it wants to ensure that minimum levels of performance in health, environment and equal opportunities are attained (CSR, N.D).
All in all, it is clear that the benefits of corporate social responsibility far outweigh the demerits. When a business enterprise engages in CSR, it increases its overall presence in the neighborhood – a benefit that no business, regardless of present scale, can afford to ignore. Additionally, CSR lays the foundation for a long-term relationship between all the stakeholders of the business: the staff, the suppliers, the customers, and the environment. A well designed CSR policy hence can radically improve the prospects of a business.
List of References
Anne Shar (2007) Corporate social responsibility. Web.
Berr (2009). What is corporate Responsibility. Web.
CSR (N.D.). Corporate social Responsibility: an update. Web.
John Mackey (2005) Rethinking the social responsibility of businesses. Web.
Miami (N.D.) Corporate Social Responsibility. Web.
Oracle (2005) The importance of Corporate Social Responsibility. Web.
Ramon Mullerat (2005), Daniel Brennan Corporate Social Responsibility: The Corporate Governance of the 21st Century, Kluwer Law International, pgs 114-117.
Wikipedia (N.D.) Corporate social responsibility. Web.
William B. Werther Strategic Corporate Social Responsibility: Stakeholders in a Global Environment SAGE, 2006 pgs 107-109.