Is the Socially Responsible Corporation a Myth? The Good, the Bad, and the Ugly of Corporate Social Responsibility
Society expects organizations to engage in corporate social responsibility (CSR) initiatives. The CSR initiatives should encompass the social environment of the society, ethical environment, public policy environment, ecological environment, and stakeholder environment. However, it is impossible for an organization’s CSR initiatives to fulfill the expectations of everyone. In addition, an organization may not necessarily use CSR activities to improve the welfare of its stakeholders. The organization may use the CSR initiatives to fulfill its ulterior motives (Devinney, 2009, p. 45).
In order to have a clear understanding of the implications of CSR, it is critical to have a concise definition of CSR. The words ‘social’ and ‘responsibility’ may have conflicting meanings. The word ‘social’ generally means society. However, society may have conflicting views on various spheres. A clear example is religious and secular views. It is hard for a company’s CSR initiatives to accommodate the views of both religious and secular views since they may be contradictory (Devinney, 2009, p. 47).
Corporations’ continuous research enables them to have a clear understanding of the diverse needs of society (Devinney, 2009, p. 48). Therefore, they engage in CSR activities that benefit most people in society. However, corporations do not engage in CSR activities blindly. Corporations ensure that the CSR activities would ultimately lead to financial returns. In some instances, corporations may know the needs of a certain segment of the society, but choose to overlook the need. This is because fulfilling the need of society may not lead to financial benefits (Devinney, 2009, p. 49). An organization may also overlook the needs of these people since these people do not represent the organization. Generally, corporations represent the middle urban upper-middle class (Devinney, 2009, p. 50). Therefore, corporations will be more receptive to the needs of this group within the society.
Corporations are at liberty to engage in experimentation CSR initiatives. This would enhance the entrepreneurial spirit of the corporations. Experimentation enables an organization to realize new markets for its products. An organization may experiment on organic products or CSR initiatives that target marginalized or disadvantaged people (Devinney, 2009, p. 49). However, consumers are not usually receptive to most experimentation initiatives of organizations. This reduces the impetus that organizations may have to undertake various CSR initiatives. Therefore, corporations are usually conservative and desist from initiatives that would not reap huge financial benefits (Devinney, 2009, p. 50).
The ultimate aim of any company is to make a profit. However, in so doing, it must ensure that it meets the needs of its stakeholders. However, it is almost impossible for an organization to fulfill the needs of all stakeholders. Engaging in CSR initiatives may violate the needs of some stakeholders. Spending money on CSR reduces the returns of the investors. In addition, CSR may lead to a significant rise in the price of the company’s products. This would violate the needs of the customers. Engaging in CSR activities may also force the company to reduce the wages of its customers as it strives to reduce operational costs (Devinney, 2009, p. 49). Therefore, it is hard to determine whether CSR is ultimately beneficial or detrimental.
There is no comprehensive study that shows engaging in CSR initiatives would generate value. In some instances, customers may be more receptive to other factors than a company’s CSR initiatives (Devinney, 2009, p. 52). This reduces the impetus of companies to engage in CSR initiatives. In addition, a company may use CSR to reduce competitiveness. A company may use its CSR competencies to lobby for standards that would lock out small companies and reduce the competitiveness of the market (Devinney, 2009, p. 53).
The Effect of Corporate Social Responsibility (CSR). Activities on Companies with Bad Reputations
Companies use CSR to improve their image and reputation. Companies with a bad reputation use CSR to improve their image. However, the use of CSR does not guarantee the companies that customers will improve their perception of the company. CSR usually ascribes to the naïve business theory that consumers would take the activities of the company at face value, and therefore, improve their perception of the image of the company. However, this is not usually the case (Yoon, Gürhan-Canli & Schwarz, 2006, p. 377).
The article uses three experiments to determine the effect of CSR on companies with bad reputations. In the first experiment, consumers assumed that the companies engaged in CSR activities to boost their image. However, the effect of consumer perception on the company was dependent on the source from which the consumer learned of the CSR activities. The sources from which the consumers learn the CSR activities determined their perception of the sincerity of the company’s motives in the CSR activities. Consumers attributed sincere motives to CSR when they learn of the CSR from a neutral source. On the other hand, consumers did not attribute sincere motives to a company’s CSR when they learn the CSR from the company’s own advertising. A company improved its image when customers associated sincere motives with the CSR initiatives (Yoon, Gürhan-Canli & Schwarz, 2006, p. 382). The second experiment also showed that companies improve their image when customers think their CSR initiatives are sincere. The source from which the customers learn of the CSR initiative determines the customers’ perception of the sincerity of the CSR (Yoon, Gürhan-Canli & Schwarz, 2006, p. 385).
The third experiment determined whether other variables influenced customers’ perception of the sincerity of a company’s CSR activities. The experiment used the ratio of the amount of money that a company spends on marketing the CSR to the amount of money that the company spent on the CSR initiative itself. From the research, it was clear that companies that used more money in the CSR initiative itself than in marketing the CSR initiative improved their image. This is because customers thought the companies were more sincere in their CSR initiatives. On the other hand, CSR activities of companies that used more money in marketing the CSR activity backfired. The CSR initiative did not improve the image of the company as customers thought that the company was not sincere. Therefore, it is vital for a company to allocate more resources to the CSR initiative than in marketing the CSR initiative (Yoon, Gürhan-Canli & Schwarz, 2006, p. 387).
The above experiments show that CSR may not always achieve the desired results. The customer’s perception of the sincerity of the CSR initiative determines the success or failure of the CSR initiative. It is critical for a company to use the proper methods of CSR to improve its image. In some instances, CSR may tarnish the image of the company even further. This article relates to the main article in that both articles appreciate the fact that CSR may not always have desirable outcomes. Both articles also show that companies that engage in unethical activities are more likely to engage in CSR to boost their image.
Exploring the Nature of the Relationship between CSR and Competitiveness
To determine the relationship between CSR and competitiveness, it is critical to have a concise definition of competitiveness. The article adopts the financial analysts’ definition of competitiveness, which looks at the current and future financial position of the company. In addition, it is critical to define CSR. CSR is the voluntary integration of the societal concerns in an organization’s activities, and in the interaction with its stakeholders. There are five dimensions of CSR issues. These include marketplace, vision, community relations, workplace, and accountability (Vilanova, Lozano & Arenas, 2009, p. 58). Companies should apply the issues of the five dimensions of CSR within the context of their operations. However, various firms approach CSR from a purely cosmetic perspective to respond to demands of the society. CSR is one of the major tools that companies use to improve their image and reputation. However, an organization should use CSR as a strategic issue as it has significant impacts on a company’s operations (Vilanova, Lozano & Arenas, 2009, p. 59).
On the other hand, competitiveness is the strength of an organization in relation to its rivals. Traditionally, productivity has been the major measure of competitiveness. However, this measure is not adequate as it does not consider the intangible capital of the organization. There are five key dimensions of competitiveness. These include performance, productivity, innovation, quality, and image (Vilanova, Lozano & Arenas, 2009, p. 59). The relationship between competitiveness and financial performance is unclear. However, it is evident that the most innovative companies give special emphasis to CSR (Vilanova, Lozano & Arenas, 2009, p. 62).
It is clear that managers appreciate the importance of CSR in an organization. Companies use CSR to improve their image and reputation. However, in most instances, organizations do not integrate CSR into their activities. The lack of a common measure of CSR makes it difficult to evaluate the impact of CSR on the competitiveness of an organization. In addition, companies adopt CSR as a reactive measure instead of a proactive strategy. Therefore, a company may use CSR to clear its image after a scandal. This makes it difficult to determine the efficiency of CSR in improving a company’s competitiveness (Vilanova, Lozano & Arenas, 2009, p. 63).
Paradoxes of CSR restrict its effectiveness. CSR and the business goals, values, and processes may conflict. In addition, various CSR frameworks may have conflicting goals, values, and processes. This restricts the effectiveness of CSR. Companies usually abandon CSR activities that conflict with the organization’s business goals. There may also be a paradox between the CSR objectives and stakeholders’ objectives. This creates a dilemma for an organization (Vilanova, Lozano & Arenas, 2009, p. 65).
The article relates to the main article in that both show that CSR is vital. However, it is not clear what impact CSR may have on an organization. In addition, companies may use CSR for the wrong purposes. Companies usually use CSR as a reactive strategy. Both articles show that CSR may contravene the expectation of various stakeholders who are vital for the organization’s success.
References
Devinney, TM 2009, Is the socially responsible corporation a myth? The good, the bad, and the ugly of corporate social responsibility, Academy of Management Perspectives, 44-56.
Vilanova, M, Lozano, JM & Arenas, D 2009, Exploring the nature of the relationship between CSR and competitiveness, Journal of Business Ethics, vol. 87, 57–69.
Yoon, Y, Gürhan-Canli, Z & Schwartz, N 2006, The effect of corporate social responsibility (CSR) activities on companies with bad reputations, Journal Of Consumer Psychology, vol. 16 no. 4, 377–390.