Introduction
The concepts of corporate social responsibility within the business encompasses all those practices that the firms undertake to increase efficiency in the management of resources as well as enhancing good relations with customers, employees, as well as shareholders (Starcher, 2006).
On the other hand, ethics are the moral considerations that firms undertake in their business practices.
Corporate social responsibility, together with strong business ethics remains critical to the company growth and development. Most businesses agree that promoting excellent ethical standards and social responsiveness is one of the critical successes.
The case examines how Coca-Cola has applied the concept of social responsibility in its operations, particularly in India. The company realized that practicing social responsibility and strong business ethics have direct influence in its efficiency, reputation, as well as the stakeholders’ relationships.
Practicing social responsibilities enables its good reputation. Good reputation results in increases profits as well as long-term benefits to the company. Moreover, good reputation increases public confidence on the company and its products and services, leading to increased sales.
Theories governing the corporate social responsibility based on the four-part model of CSR
Corporate social responsibility is governed by various theories and concepts. From the middle of the 1970s to date, researchers have critically assessed and categorized the CSR theories. However, given that the concept of CSR has evolved overtime, scholars classified the CSR theories into three major groups to help readers in comprehending the variations amid different CSR theories.
The utilitarian theories
Using this perspective, scholars define a company as an economic system constituent. That is, a company just attains its significance when the purposes are well defined given that most of the undertaken activities are somewhat automatic.
Under the utilitarian theories, the actions of a corporation are geared towards the maximization of returns (Iphoneproj, 2011). The purpose must be realized despite the ensuing challenges such as social costs as well as externalities problems apparent within the box.
However, based on the four-part CSR model, the practical framework asserts that firms have acceded to the economics of irresponsibility. In fact, according to this theory, the firm’s operational ethics should be developed to ensure that corporations have economic accountability.
Although the laissez-faire approach yields public control, individuality, and determinism, it necessitates both social and personal accountabilities (Secchi, 2007). The idea is that for the economic system to prosper, corporations and businesspersons must be held accountable.
The social accountability can be better understood through examining the social cost theory and the theory of profit maximization. Under the social cost theory, the focus is shifted towards the distribution of responsibility measured in terms of social costs.
When gauging social performances, they should be related to the reported and unreported social and economic problems generated by firms. For instance, as corporations become global, the undertaken operations tend to affect the surroundings.
Therefore, the theoretical CSR foundation claims that social costs, including the social losses and profits generated from the production factors, should be taken into consideration.
Since accountability is part of the contracts, the state and citizens must always intervene to ensure that corporations pay for the social costs (Kotler & Lee 2004).
The neoclassical economics state that the disequilibrium in the economic systems results from the correlations between the environment and the firm.
For instance, to determine the worth of any production factor or social element when commodities are produced, the generated social costs and returns should be considered (Iphoneproj, 2011).
On the other hand, under the profit maximization theory also dubbed the functionalist perspective, firms operating in social places only aim at generating profits. The method gives priority to the fulfillment of the stakeholder interests.
Anything above the shareholders’ interests, including social accountability, is perceived as fallacies of the free economy’s nature and character. The theory views a company as a venture intended to generate returns to the shareholders.
The neo-functionalists claim that corporations need to observe corporate philanthropy. That is, all the activities undertaken should generate both economic and social benefits to the community and firms (Secchi, 2007).
The managerial theories
The inside the firm perspectives ensure that an organization addresses all matters in the administrative processes.
The managerial theories are categorized into three groups, namely the social concerns in global trade, social reporting, auditing, and accountability theories, as well as CSP models.
According to Drucker (1973), there is hardly any theoretical significance attached to business ethics, implying that economics hardly requires ethical concerns. Drucker further claimed that business owners and corporate managers do not have social accountability in their operations.
However, contradictions emerged when the same scholar asserted that managers have social responsibilities that are directly correlated to the influence and command possessed.
Drucker hardly disregards corporate social accountability but believes that selflessness and philanthropy activities could jeopardize the operations of a company.
According to corporate social performance (CSP) theory, it is essential to gauge how a company appears to be socially accountable (Belal, 2002). The method concentrates on the behavioral results that give operational significance to collective accountability.
Besides, CSP integrates various social responsibility variables including; the social responsibility philosophy namely response, protection, accommodation, and pro-action; the involved social issues such as shareholders, industrial safety, product safety, favoritism, environment and consumerism; discretionary, ethical, legal, as well as economic responsibilities (Scott, 2003).
Social reporting, auditing, and accountability (SRAA) theory are associated with CSP theory. SRAA theory however defines, assesses, and reports corporate activities, which appear to be essential and have collective impact on the organizations’ operations.
In fact, the theory evaluates the flow of the financial collective reporting and accounting procedures to offer confirmation on the socially accountable actions.
Corporate social responsibility is built on the SRAA, given that the theory supports and emphasizes on all activities integrated into the CSR plans.
Conversely, the international business social responsibility theory highlights challenges and competitions encountered by global corporations (Kotler & Lee 2004).
This theory states that ethical standards are required in the global economic environment besides stating the reasons why ethics emerge to be great essence in international commercial business operations.
The theory also offers solutions to the global corporate responsibility problems by defining various guidelines to be followed by corporations to act ethically in overseas contexts.
Relational theories
Based on this perspective, the correlations amid the environment and the corporation are deemed imperative during analysis. However, the analysis hardly focuses on the environment; neither does it analyze the internal commercial dynamics that address collective concerns.
Relational theories merely concentrate on how these two issues interrelate. The concept is divided into the social contract premise, corporate citizenship, and the stakeholder theories (Belal, 2002).
The social contract perspective justifies the morals attached to the economic actions that might be drawn on when formulating the theoretical foundation used to analyze the societal affiliations existing between the society and the corporation.
The theory asserts that collective accountability stems from the ethical legality a company realizes in the community.
The elements and societal activities act as the base constituting the legal behaviors and existence of a company. Thus, economic organizations, the company, and the community should share the inherent and casual associations to describe an ethical society (Scott, 2001).
Corporate citizenship theory defines the associations among stakeholders, transformations, commercial opportunities, partnership culture, and practical commitment. The theory claims that companies that have these associations conduct their businesses responsibly.
Besides, the perspective a company must continue to build triumphant affiliations with the community to be an ideal citizen. To realize this, corporations must participate in the voluntary actions, which go past the permissible, economic, and collective responsibilities.
Conversely, the stakeholder theory assists in the improvement of a corporation, given that it spearheads the social accountability concerns.
For instance, the stakeholder theory underlines the ethical activities that might assist a corporation to handle its actions in a socially accountable manner while improving the CSR doctrines (Scott, 2001).
Thus, the theory states that the society and the company appear to be separate entities linked through accountability.
The implications to the business of water case study
From the above theories governing corporate social responsibility, the four-part model of CSR has some implications to the business of water case study.
Whereas water appears to be a scarce commodity highly demanded by the consumers, the model requires water companies to behave socially responsible every time (Carroll, 1991).
The expectations of the society remain high, as it requires water companies and other manufacturing corporation operating within communities to observe and uphold philanthropic, ethical, legal, as well as economic responsibilities.
Despite the fact that businesses and companies should adhere to the constituents of the four-part model, philanthropic responsibility is of great essence to the business of water case study.
Whether private or public, a company should encourage discretionary activities meant to improve the societal lifestyle.
For instance, just as the Coca-Cola Company did, philanthropic accountability necessitates that a company should sponsor various community events, provide recreational facilities as well as charitable donations to the societal members where it operates (Carroll, 1991).
The impact of CSR on demand and supply
Businesses are currently integrating the needs of all their stakeholders in their corporate strategies. Incorporating the interests of customers and shareholders in the corporate strategies is beneficial to the firm not only in the general growth and expansion but also in profit generation (McWilliams & Siegel, 2011).
Therefore, the management should seek an optimal balance while responding to the diverse needs of various customers and stakeholders. However, several concerns crop up from the programs undertaken by firms on the part of demand and supply.
Firms must take these concerns seriously to inculcate good relations with the communities as well as other stakeholders of the firm, including customers.
These concerns have far-reaching consequences on the relations between the corporation and the customers as well as the public (Crane & Matten, 2004).
For instance, the coca cola’s plant in Palchimada took into consideration the needs of the local community such as the provision of water to people, which in turn had positive impacts on the company operations.
Immediately good relations were developed, there was an increase in the demand for clean water and the company sales volumes increased that prompt increased production of clean water.
The company also had an opportunity to maintain the demand for clean water around Palchimada as well as nearby states.
The moral behaviors and environmental awareness of firms determine the customers the customers’ responses towards their products (Korten, 2004). For instance, there have been increased concerns by clients on the circumstances and places under which products and services are provided.
Further, whereas the privatization of companies is seen an effective way of providing quality services to consumers, opponents argue that this is a way of revitalization of full costs at the expense of quality (Korten, 2004). The effects of such initiatives result in low purchases by customers.
In addition, through corporate social responsibility, the firm achieves long-lasting relations with its customers leading to enhanced company performance.
As a result, a firm that puts customers’ satisfaction first ensures building long-lasting relationships with customers leading to increased demand and supply of its products.
Further, it is evident that environmental principles are more and more continuing to affect the ventures of business organizations as well as that of customers (McWilliams & Siegel, 2011).
In other words, these exterior forces have an escalating manipulation effect on the company as well as enhanced corporate performance information.
For instance, the high court’s verdict to close the coca cola’s bottling plant in Southern India was sparked by protests of local communities as well as national organizations.
The concerns of the protestors were the diminishing levels of water; a factor attributed to the activities carried out by the firm in its plant. As a consequent, both the community and the company suffered.
From the company perspective, the supply of water was affected and the demand was severely impacted on as the local community refused to buy the company products. Because of the company closure, many loyal customers around the plant faced scarce supply of water.
Initiatives undertaken by the firm in collaborating with other organizations
The increasing identification of the significance of affiliations of firms and the customers in dealing with many of the predicaments facing the society has had a lot of impact on demand of consumers (Crane & Matten, 2004).
Firms have realized that solely the individual firms cannot achieve corporate social responsibility. Firms must build partnerships not only with the local communities but also with other firms, governments and non-governmental organizations.
As a result, many firms are increasingly reaching out to many organizations, including non-governmental organizations and other foundations in jointly carrying out their ventures for the benefits of their customers as well as the local communities.
For instance, the coca-cola company, through its partnership with the Worldwide Fund in Water conservation has enabled it to effectively use water in manufacture of its products as well as stock up water supplies in the communities.
Further, the company also rolled out a Replenish Africa Initiative aspiring to enable easy access of water by other communities far from the firm bottling plants.
Moreover, to ensure continuous water management programs in its functions, the firm has also come together with other big firms and the UN Global Compact to lay down CEO Water Mandate where the managers of these firms obligate themselves in ensuring continuous water supply.
These initiatives have enabled the firm to develop good relations with the governments as well as the communities in which it operates. Moreover, the firm’s reputation has been enhanced, which in turn has led to increased productivity and profitability.
As such, the firm has been able to achieve cost advantage over its competitors that have not recognized this business aspect. As a result, the firm achieves excellent relationships with its customers (Starcher, 2006).
In addition, through water management programs due to partnership with international organizations, coca-cola has achieved recycling of water used for manufacturing procedures and returning them to the surroundings safely for communities’ consumption.
Moreover, the increasing involvement of firms in partnerships with other stakeholders has effectively enabled execution of water management policies. Consequently, efficient continuous water supply has been achieved.
Conclusion
From the case, it can be concluded that practicing strong business ethics and good corporate social responsibility has an impact on the operations of the business.
In essence, these two concepts provide a coherent framework that is used to explore the relationships within the business and the communities in which they are operating.
Moreover, companies with strong business ethics and social responsibility have increased efficiency hence more excellent performance.
In addition, businesses organizations with increased ethical and socially responsible practices have enhanced customer satisfaction, which in turn add more value to the company shareholders.
In this sense, socially responsible behaviors take into consideration ethical behaviors being practiced by the firm.
The two concepts encompass all those practices that the firms undertake to increase efficiency in the management of resources as well as enhancing good relations with customers, employees, as well as shareholders.
List of References
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