Definition of Corporate Social Responsibility (CSR)
Literatures suggest two types of definitions for CSR: the traditional and modern approach. Traditional approach basically covers definitions before 1990 when most people viewed corporate social responsibility as a duty. The first definition of CSR expressed in 1953 demonstrates this fact.
During that time, CSR was defined as a company’s responsibility to adopt those policies, and make resolutions to conduct business activities that are right with regard to the goals and standards of the society.
The modern approach began during early 1990s when the idea of CSR transformed from a mandatory concept to a strategic instrument for assisting business promotion activities and to positively impact a corporation’s image and repute. This change is also expressed in the definitions provided by Mullerat (2010, p. 24). Here CSR is defined as a company’s action, intentional by nature that indicates its involvement in social and environmental issues while conducting business.
According to Marrewijk (2003, p. 101), Corporate Social Responsibility is described as a business theory in which companies integrate social and environmental concerns into their operations. Generally, CSR is the approach through which business entities can balance their environmental, financial, and social responsibilities while concurrently addressing the prospects of the owners and investors.
It is necessary to differentiate CSR, which is a strategic corporate management theory, and sponsorships, supports and patronage. Although these can as well help in reducing poverty, directly improve corporation’s reputation, and strengthen its product, the idea of CSR is much more than that. CSR can also be perceived as a kind of company self-regulation incorporated into business strategy (Smith 2010, p. 16).
CSR policy operates as an integrated, self-regulatory instrument in which a company observes and safeguards its vibrant compliance to universal norms, rules of law, and ethics in the society. Every so often, a company’s application of CSR goes further than compliance and involves activities that seem to further social good.
CSR is a practice which aims at embracing accountability for the firm’s actions and emboldens a positive effect through its undertakings on the communities, staff, customers, and the environment. This also includes its impacts to the owners and shareholders of the company (Blowfield & Murray 2008, p. 134).
History of CSR-Origin and evolution
Features and applications of corporate social responsibility have evolved over a long time. Although the concept of CSR is rather novel, the expression has been used broadly since 1960s. Again, while the monetary, legal, and moral expectations placed on corporations may be different, it is possibly right to state that all communities at any time had some extent of expectations that companies would conduct their businesses in a responsible way.
In the 18th Century, Adam Smith stated the standard economic theory of business. He was one of the most prominent economists and philosophers during that time. His theory suggested that meeting the wishes and needs of the society calls for unrestricted interaction of people and businesses in the marketplace.
Manufacturers can give goods and services that not only earn those profits but also satisfy the needs of their consumers if they act in an egocentric way. Adam Smith’s view created a foundation for the modern free-market economy. Nevertheless, even Smith acknowledged that the open market operation was not perfect. Therefore, he noted that business owners must act justly and righteously towards each other to realize the ideal of free market.
In the 19th century, industrial revolution in the United States and Europe caused drastic changes in corporate responsibility. Most of the ideologies adopted by Smith formed the basis for establishing new technologies acceptable for production of goods and services. Most people got employed into jobs that paid better than their earlier jobs.
To a large extent, this improved the living standards of people. Large corporations developed and gained power, and their proprietors became some of the most prominent and rich people in the world. In the late 19th Century, most people adopted and practiced the concept of ‘Social Darwinism’. Basically, this meant that the philosophies of natural selection and survival of the fittest were pertinent to commercial and social policy.
This concept vindicated cut throat, even fierce, competitive policies that overlooked the impact of the successful company on staff and the society. Therefore, even though most of the prominent businessmen of the 19th Century were among the utmost humanitarians of all time, their generosity was personal, not as their company agents.
Certainly, as most of them denoted much of their personal money, the corporations that created their wealth were conducting businesses in a way that was more exploitative as compared to the modern standards (Nehme & Wee 2008, p.130).
In the beginning of the 20th Century, people started criticizing large companies for being too influential and for being involved in antisocial and monopolistic practices. There were laws and regulations that were passed to work in large companies and to safeguard workers, customers, and the entire society.
One such act was the Sherman Antitrust Act. A related effort sometimes called the ‘social gospel’ promoted greater empathy for workers and the poor members of the society. Labor movements also developed and demanded better social responsiveness from corporations. Between the year 1900 and 1960, companies gradually started to accept extra responsibilities apart from generating revenue and observing set laws and regulations.
In 1970s, conservationism, civil rights advocates, and consumer organizations changed the perceptions of the society about business conducts. Based on the common knowledge that corporations with great influence have greater responsibility, most of the organizations pushed for the businesses to become more active in stopping problems in the society. Furthermore, they called for the corporations to take part in solving social snags.
There were several legal obligations associated with staff, product safety and environment statements placed on corporations. In addition, there were legal requirements that demanded equal employment opportunities for the company. Society also started expecting the business world to become more responsive and willing to take part in solving the concerns of the community, regardless of whether they created them or not.
This was grounded on the perception that companies needed to go beyond their commercial and legal obligations and admit responsibilities associated with improving the society. Corporate social responsibility principles were derived from these perceptions and remain effective up to date in the business world. The word, CSR, gained popularity during 1960s and is used extensively by most people to embrace legal and ethical concerns more narrowly understood.
Relevance of CSR to today’s business challenges
Currently, CSR has become one of the most important strategies in business. Basically, there are two aspects of CSR to consider. The first one involves companies giving out resources and funding meaningful social reasons. An example of this aspect is donation of money or staff time to supports.
Actually, most people have this aspect in mind when referring to corporate social responsibility. Another aspect of CSR is formulation of a real strategy to manufacture products or give services that are in conformity to the needs and wishes of the society. This takes into consideration moral business practices such as using safe materials to manufacture goods and business environmental policies.
Additionally, it includes other features such as creation of employment opportunities and economic growth (Painter-morland&Bos 2011, p. 253). Presently, most corporate executives are intently aware of the complications and challenges that face the current society. After establishing successful businesses, most of the executives give back to the society.
Most corporations make donations, take part in fundraising activities and volunteer to support various initiatives. Increasingly, corporate leaders find the opportunities to involve their businesses in transforming the society. Companies are able to do more when they involve their staff, clients, and other shareholders. And by doing this, the company can develop better and become more useful to the community (Idowu& Leal 2008, p. 443).
The most effective corporate social responsibility programs incorporate these two aspects to prove a real commitment to CSR. For instance, a corporation that uses sustainable materials in manufacturing their products contributes monetary resources to environmental issues. Besides, a company allowing its staff to take part in volunteering at environmental services while at the same time paying them would show a real commitment to conservation of the environment. (Beccetti, Giacomo &Pinnacchio 2005, p.34).
In overall, this contributes to a safe environment where everybody would wish to live. There are several factors that push corporations to apply corporate social responsibility to environmental issues. First, the degree of competition in the market influences the levels of environmental CSR companies undertakes. For instance, if the demand for less environmental friendly products is low their prices will fall and most consumers would not want to buy environmental friendly products.
Conversely, if the demand for less environmental friendly products increases, their prices will also increase compelling consumers to go for environmental friendly products. Demand for environmental friendly products influences the decisions of the company to manufacture such products and vice-versa. Secondly, the labor market also influences companies’ initiatives towards environmental CSR. Most workers need to appreciate the companies they work in.
They need to let people know about their contribution to making the world a good place. One method companies use to draw and keep the best workers is by contributing to environmental conservation that is aligned to these worker’s environmental principles. Research indicates that staffs are willing to accept lower pay if a firm practices social responsibility. Environmental laws and regulations also force companies to adopt safe business practices that do not contravene the law (May, Cheney & Roper 2007, p. 105).
CSR is also relevant in today’s business world due to dominance of the social media. According to Kakabadse, Rozuel, & Lee-Davies (2005, p. 285), one of the major reasons that companies need a noticeable CSR campaigns is because of the significance and popularity of social media. Companies that wish to protect their products appreciate that social media play a significant role in changing public perception.
Corporations make advertisements on social media to advocate their social responsibility activities. For example, using social media to promote fundraising activities, or organizing volunteering initiatives.
This helps in creating a positive image and provides a great approach of engaging members of the society at a deeper level.Also, it creates a marketing environment for companies’ products and services (Monks &Minow 2011, p. 457), Social media and CSR give a good opportunity for corporations to build strong public relations, which is an effective tool in influencing consumer perception and developing company’s image.
Companies that dynamically promote their social concern activities usually advertise these efforts through the media. Advertisements about corporate sponsorships, staff volunteer programs, fundraising activities, or other corporate responsibility initiatives is a potent marketing tool that can shape publicity for the firm (Werther & Chandler 2006, p.63).
Government and politics influence businesses in several ways and can pose a serious challenge to companies. They set laws and regulations that govern how companies conduct businesses within their jurisdiction. However, companies that emphasizes on CSR generally have easier experience to deal with legislators and government officials (Kotler & Lee 2011, p. 287).
Most likely, corporations that disregard social responsibility are susceptible to various sorts of investigations and inquiries, caused by assertion of public service societies. When members of the public have perceptions that a corporation is socially responsible, almost certainly, public service organizations will not launch probes and investigations against it.
It can also improve the loyalty of consumers, who would then make repeated and bigger purchases, and promote the company product. Accordingly, these corporations can conduct their businesses effectively and benefit from customer preferences of their brands and services. In addition, they would have betterinnovation ability, and develop fresh products that satisfy the needs of their consumers. Besides, it will leverage the creativeness of their investors (Crowther & Rayman-Baccus 2003, p. 85).
Finally, CSR is important in developing a good workplace environment. Actually, one of the key advantages of encouraging social responsibility in a company is the constructive environment it creates for the staff. Workers and company management tend to become passionate and productive when they are committed to integrity.
This can create team spirit that brings everybody together and results into happier and more industrious workers. Devoted workers are more determined and committed towards business goals in which they intensely believe. Best workers are less likely to quit and join rival companies. This implies lower employee turnover and costs incurred in training. Additionally, the intellectual investment stays in the company (Mcelhaney 2008, p.28).
Can CSR really be a source of competitive advantage
Presently, corporate social responsibility has gained popularity among companies throughout the world. Most companies believe that adopting CSR strategies can give them a competitive advantage over their competitors. However, the truth is that the main approaches to CSR are quite disjointed from business and policy.
Therefore, it is doubtful if CSR can really be a source of competitive advantage. However, if companies could look at their visions for social responsibility by applying the same structures that guide their main business choices, they can realize that CSR is greater than cost, obligation, or benevolent act. CSR can create opportunities, creativity, and competitive advantage (Porter and Kramer 2006, p. 3).
Most corporations have already done a lot to recover the social and environmental concerns of their actions. However, analysis indicate that these efforts are not very productive as expected because of two major reasons. First, they conduct businesses in ways that contradict the expectations of the society. Secondly, they force other corporations to view CSR in general ways and not ways that are suitable to every company’s strategy.
For a long time intensified corporate responsiveness to CSR has been incompletely voluntary. Most corporations only adopted it after getting surprised by the public reactions to matters they had not earlier believed were part of their commercial duties. For instance, in the early 1990s, there was a massive consumer rejection of Nike products after the local media outlets informed about offensive labor conducts.
Different civil societies have become very active and forceful in causing public pressure on companies. They can aim at the most noticeable or prosperous company simply to create public attention, even though those companies really have little effect on the problem. For instance, Nestlé, one of the leading international bottled water distributer, was targeted in the international discussions about fresh water access.
However, amount of water Nestlé sells represents merely 0.0008 percent of the total volume of fresh water in the world. The wastefulness of agricultural irrigation use 70 percent of the fresh water yearly. This should draw more concern, though it offers no similar international company to target.
Why companies are still trying to go around their social responsibilities?
One of the major arguments of companies against CSR is that they are in business to generate revenues to their stakeholders and not the society. Companies still view social responsibility as a burden because it does not give much to their profits. Even though, CSR improves companies’ reputation, the direct link between increments in sales as a result of it is difficult to find (Erickson 2009, p. 256).
Is CSR a rich companies or rich countries issue?
Rich companies or rich countries have vast resources and influence, and most of them use this to make CSR initiative’s to improve the living standards in the people (May, Cheney & Roper 2007, p.35). This could make an individual to believe that CSR is just a rich company or rich country issue.
However, presently, with the consumer watchdogs and international conventions, CSR has become part of business. For instance, if a business entity affects the environment negatively, it is upon them to seek for mitigation measures, regardless of whether it is rich or poor. Businesses use CSR at any level to develop their reputation and become noticeable. Even though the amount of resources may vary across companies, their attitudes towards CSR remain the same.
Coca-cola case study
Coca-Cola Company began in the year 1886 as a local beverage manufacturer in Atlanta, United States. During that period they only sold 9 beverages each day. By the early 1920s, the corporation had started expanding globally, retailing its brand first in Canada and then growing to European, Asian and South American markets.
By the end of the 20th Century, Coca-Cola was retailing its products in almost all countries in the world (Pendergrast 2013, p.46). In the year 2005, it became the world’s leading producer, supplier and seller of the non-alcoholic drinks and syrup. Coca-Cola is public limited company registered in the New York Stock Exchange. In 2003, an Indian NGO called ‘Centre for Science and Environment (CSE)’ published a report that tainted Coca-Cola’s CSR reputation.
In their report, they alleged that there were pesticide residues in Coca-Coca drinks at a level exceeding the recommendations of the European standards. However, these levels were harmless under local criteria. Again in 2006, the same NGO published another test report on Coca-Cola drinks claiming presence of high pesticide residues.
At long last in 2008, ‘The Energy and Resources Institute’ conducted independent research on Coca-Cola drinks. The study found that the water Coca-Cola used in making beverages was free of pesticides. This concluded the long-lasting accusations of CSE against Coca-Cola (Vedwan 2007, p.664).
The company was also indicted for causing water scarcity to Plachimada community in Kerala, India. Coca-Cola was blamed for polluting water by releasing its wastes into regions and water bodies close to the company’s plants. The Kerala high court proscribed business operations of Coca-Cola following these allegations.
There were long judicial processes and protests over the same issue. These, allegations destroyed company’s image in India and most people lost trust in their products. However, the company’s business license was renewed after the same court overturned its first rulings (Burnett & Welford 2007, p. 301).
How Coca-Cola used CSR policies to Resolve conflicts
Even though Coca-Cola denied the allegations, destructions of their reputation due to these conflicts triggered them to take several initiatives. In their first measure, Coca-Cola issued statements to reaffirm their integrity. For instance, in their 2006 ‘Corporate responsibility Review’, the company devoted a page to talk about the dispute. Majorly, the report provided evidence to support their moral practices.
It also discussed their water management principles in India. The conflicts seem to have created a learning experience for the company. It encouraged Coca-Cola to embrace more positive CSR policies internationally that emphasizes on water management. In the year 2007, the company launched a water stewardship program.
One of the goals of the program was to counterbalance the water the company uses in its products through involvement in locally pertinent projects. In addition, the company publishes annual reports on CSR, intended to improve the company’s reputation internationally (Hills & Welford 2005, p.168).
Their top priority in dealing with these conflicts was restoring their reputation, not only in India but internationally. They acknowledged that good reputation is necessary in building trust with the consumers, employees, and increasing sales. Therefore, they sought to become noticeable in championing social services and conserving the environment.
These are important aspects of CSR. In addition, they resolved to cut worker’s salaries by 10% to raise money for supporting social and environmental issues in India. They planned to reinstate these pay cuts once they become successful in this campaign. Afterthe conflicts in India, Coca-Cola became more responsive to social responsibility than in the past. The company committed itself to supporting communities by taking part in environmental, climate change, and water management initiatives.
Besides, the company also provided employment opportunities to many people internationally through their supply networks. Presently, Coca-Cola also partners with charitable organizations to improve the lives of communities. Finally, the company has established Coca-Cola foundation to support students in pursuing higher education. The company has greatly improved its reputation through these CSR initiatives.
Corporate social responsibility is one of the most important aspects of business today. The concept was started several years ago and has evolved to its current prominence. Even though there are many views on CSR, most companies use it not only to attract customers but also to run harmoniously within the society. Failure to integrate social responsibility can taint reputation of the company, especially large corporations.
Coca-Cola case study provides good evidence on how CSR can impact the company. At first, the company had a poor CSR policy that led to conflicts in India. However, now the company has adopted positive CSR policy and implements programs that help improve their reputation.
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