Introduction
Business investments participate in many communal activities that may not be directly related to their operations. It is necessary to note that these activities are usually done within the community where the business is located. This is one way of ensuring the business appreciates the benefits given to it by the community (Baumol 2007).
Therefore, these activities do not generate profits to the business but are a reflection of the appreciation of the business to the community. This essay explores the significance of corporate social responsibility and how it affects the operations of a business.
Definition
Corporate social responsibility refers to all activities a business performs to ensure it interacts with the community. These activities do not generate profit or increase sales directly but are meant to strengthen the bond between a business and its neighbors (Friedman 1970).
They include sponsoring community activities like sports and participation in other public initiatives like cleaning and tree planting. It is highly recommended that the community takes part in these activities to promote bonding between them and the business.
Impacts of Corporate Social Responsibilities
Friedman argues that a business that participates in social activities will have advantages over the one that does not. Businesses must develop programmes that will ensure they are actively involved in communal activities. It is necessary to explain that corporate social responsibility ensures that the business widens its market in the community through the following ways.
First, a business has to ensure that it has established rapport with the local community through establishing programmes that will promote interactions between workers and the community.
Their operations are deemed part of the community since they take place within the boundaries of the community. People from the same community must live with each other well and coexist without conflicts. However, since most business activities do not directly involve the participation of the community it is necessary to establish forums where the community will interact with employees (Friedman 1970).
The only way this is possible is through the establishment of programs like tree planting, cleaning and sports. Even though, a business may not necessary participate in these activities it can make them identify with it through branding these activities with its label (Stout 2012).
This will make sure that everybody understands that the company is the sponsor of that activity. Most companies print playing kits or label town seats with their names to make sure the public knows that they have sponsored the programme.
Secondly, Friedman claims that this activity is one way of ensuring that the business appreciates the contributions of the society in developing and implementing its policies. It is necessary to note that a business relies on the community for labour and raw materials to be used various processes (Friedman 1970).
Therefore, it is important for the business to appreciate the role of the community in promoting its activities. A company cannot operate smoothly if it does not have workers from the local community and can fail to meet its targets if it ignores the voice of the people.
Therefore, it participates in these activities to ensure that it appreciates the work done by the community and shows that that it has recognized the effort of its members as workers and as suppliers of raw materials (Chandler 2010).
The fact that a company employs and pays workers from the local community does not mean that this is an adequate way of appreciating the community since only a handful of people get employment opportunities. Therefore, it must participate in activities to assure the public that it appreciates its contributions.
Moreover, Friedman presents that the community offers ready market for the products or services that a company offers. Most companies locate their premises near their markets to reduce the burden of transporting their services and timing that are serious challenges to business investments (Stout 2012).
It is necessary to explain that while some businesses may prefer locating their premises near their sources of raw materials this is influenced by the nature of the raw material and the costs involved.
However, in most cases it is easy to transport raw materials that finished products since most of these products are either fragile or perishable. Therefore, they require fewer movements to ensure consumers get them when they are in good conditions.
A company that locates its operations near its make must always ensure that it engages incorporate social responsibilities to ensure it takes advantage of the local market.
In addition, Friedman claims that this activity does not only involve doing the correct thing but also showing responsible behavior to other members of the community. It is necessary to understand that the society belongs to businesses, consumers and the state (Friedman 1970).
Companies must build their reputation as responsible players in the society by ensuring they not only take part in community activities but also promote healthy and safe environments.
This ensures that the business will not participate in the production of illegal or contraband goods, pollute or degrade the environment or engage in human rights abuse. These activities elicit controversies regarding the operations of a business and may make the government to close it.
All businesses have the right to engage in production activities provided they do not interfere with the lives of the local population or environment.
Therefore, it is necessary to explain that while some accompanies may take active roles in these activities some may decide to take a different approach by contributing money towards environmental conservation programmes or giving material support like trees, water or food to the workers. In addition, a company that shows it is very responsible in community activities will attract consumers and this will widen its market.
Moreover, this will attract good will from the government that may decide to exempt it from taxation. These are fertile grounds to compete with similar companies that do not participate in these activities. The participating company is likely to win more consumers and public interest more than the one that ignores these activities.
In addition, these activities ensure a company saves money and time in various situations. First, a company that is actively engaged in repairing roads, water and sewerage drainage and other activities will reduce costs incurred in repairing and maintaining its vehicles. Bad roads are responsible for a high number of stalled vehicles and huge maintenance and repair expenses.
However, when a company maintains the local roads this will promote accessibility to the community, transportation of goods and reduces costs of maintenance and repair (Baumol 2007). Environmental activities like reducing pollution and land degradation will attract other investors and this means the area will have a large population that will offer market to the goods and services produced by the company.
Moreover, a company with a good corporate social responsibility record will have a good reputation that will attract employees. This record will set high standards of this company and make sure it attracts qualified and competent employees whenever it announces vacant positions (Lee 2010).
It is important to explain that everybody likes to associate with responsible people and companies and this is one way of ensuring that people are always looking for ways to associate with a company. In addition, it will be easy to retain workers since nobody will want to stop working in a company that has a good reputation.
Therefore, this will reduce unnecessary expenses and time wastage incurred in recruiting new workers. In addition, employees working in these companies will be motivated to work hard and this will be a good step towards achieving the goals and aspirations of a company.
Corporate social responsibility ensures a company shapes its image for proper press coverage. The media is always looking for unique characteristics that differentiate companies from one another and this will be an effective way of taking advantage of this situation. Most of these activities are usually of significant value to the local community and this means that the press will hardly miss these events.
For instance, a company that sponsors school games will volunteer to give sports kits and other requirements in addition to giving them trophies. The winners are usually given presents, trophies or other rewards after these events are over and this is a good opportunity for the sponsor to make their remarks (Vogel 2009).
The media is always keen to get these messages and broadcast them to millions of viewers. A good example is evident in the many sponsors of football matches that are broadcasted to all regions in the world. People are able to know companies like Nike, Adidas and Fila that sponsor sports activities like football, basketball and hockey amongst others.
Moreover, these events are good avenues to interview people and get information regarding their perception about their products or services. Sometimes companies hire experts to conduct research about their services but they fail to get correct audiences. This means that the research will not yield accurate results due to wrong choices of audience (Friedman 1970).
However, corporate social responsibility targets consumers and the local population who are closest to the company compared to other distant markets. The company conducts direct interviews and is able to gather information that will help it in planning its future objectives.
Lastly, some companies engage in dirty tricks like manipulation and propaganda that affect the sales of a company. People are easily swayed by regular propaganda and lies that make them to think that what they are being told is true. As a result, they develop a wrong perception about a company and its products and this becomes a serious threat to its operations (Vogel 2009).
It is not easy to correct propaganda and develop efficient damage control measures if a company relies on the media to do this. However, corporate social responsibility establishes rapport with the community and this means that consumers will be willing and ready to inform the company about its disadvantages.
This will be a good opportunity to inform, and educate the public about the policies of a company and its products; therefore, this will correct all the wrong perceptions that had been developed by its competitors.
However, corporate social responsibility has been attributed to failures and mismanagement of investments due to the disadvantages associated with it. Some critics argue that this activity is not as helpful as they seem to sound due to the following issues.
First, this concept was developed during the 21st century to ensure companies participate in environmental and social activities. It was developed because people thought that private and state companies were generating a lot of profit which was not helping he community. In addition, it seemed that these companies were focused on their operations and had distanced themselves from the society.
Therefore, this was a capitalist society that did not care about the society since every business was involved in making profits and ignored the need to conserve the environment and appreciate the efforts of the community (Vogel 2009).
Therefore, it was necessary to ensure these companies donate some of their profits to the society and this means that this activity is not voluntary even though that is how most companies make it to look like they are not forced to participate in them.
Secondly, Friedman claims that most companies experience significant challenges in allocating recourses and time to these activities since most managers do not consider these issues when planning their calendars. In addition, most investors forget or ignore to consider the activities a company will participate in when establishing them (Lee 2010).
Therefore, they are usually squeezed in their calendars after pressure from the government or other competitors. Therefore, it is necessary to explain that this activity is usually considered when there is no option to evade regulations set by the government or when other competitors make it necessary for a new company to tale part in these activities.
In addition, the role of profits is to increase the activities of a company and ensures it develops. However, corporate social responsibilities have short term losses that force investors to shun them since they drain all profits generated by a company.
It is necessary to point out that even though this activity ensures that all stakeholders are included and made to feel part of the company it is an unwise move as perceived by investors (Chandler 2010).
Profits are difficult to predict due to financial threats posed by inflation and other factors; therefore, companies must use their profits wisely since they never know whether tomorrow they will make similar profits or huge losses.
However, this activity assumes that with time companies will continue to expand their operations and make huge profits. This belief has forced many operators to close their businesses since they are not able to manage their operation costs.
Moreover, Friedman claims that this exercise exposes some investors to competitive disadvantages if there are no strict policies to ensure all companies participate in this activity. This means that some companies are usually forced to participate in corporate social activities while others do not (Friedman 1970).
Therefore, they spent a lot of money in promoting the activities of the community and this reduces their operating capital. On the other hand, their competitors who do not participate in these activities continue investing their profits in promoting their businesses. Therefore, this gives some companies competitive advantages over others.
In addition, these activities make many companies to lose focus and concentrate on issues that are not identified in their objectives. Most companies participate in these activities since they fear public backlash that may affect its market. However, the reality of this issue is that governments have set very high standards in terms of community development, human rights and environmental sustainability (Baumol 2007).
Many companies struggle to meet these regulations and these forces workers to be subjected to pressure to meet deadlines and other objectives set by the management.
In addition, most companies pass these conditions to their workers and this exposes them to poor working conditions. Some creative managers pass all costs to consumers and this means they increase the prices of their services and goods. This discourages customers from buying their products and leads to low sales.
Lastly, Friedman claims that businesses cannot compete against global changes and the high population growth rate. This means that corporate social responsibilities cannot be sustained given that companies are not able to make huge profits to sustain their operations.
People argue that this activity was motivated by accidents involving investors and their environment like the BP oil spill that forced states to demand that companies must develop measures to take care of the environment.
Conclusion
Corporate social responsibility enables a company to interact with its immediate market, establish rapport and clear any propaganda created by its competitors.
Even though, at the beginning this exercise may be expensive it has long term advantages that will propel companies to achieve their objectives. Therefore, companies should establish and regulate these activities to ensure they do not interfere with other programmes of the company and kill workers’ morale.
References
Baumol, W 2007, Good Capitalism, Bad Capitalism and the Economics of Growth and Prosperity, Yale University Press, Connecticut.
Chandler, D 2010, Strategic Corporate Social Responsibility: Stakeholders in a Global Environment, Sage Publications, New York.
Friedman, M, 1970, ‘The Social Responsibility of Business is to Increase its Profits’, The New York Times, 13 September, p. 31.
Lee, N 2010, Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause, Wiley, New York.
Stout, L 2012, The Shareholder Value Myth, Barret-Koehlen Publishers, San Francisco.
Vogel, D 2009, The Market for Virtue: The Potential And Limits of Corporate Social Responsibility, Brookings Institution Press, Massachusetts.