СОRРОRАTЕ SОСIАL RЕSРОNSIBILITY 1
Соrроrаtе Sосiаl Rеsроnsibility
Соrроrаtе Sосiаl Rеsроnsibility
On the global business arena, businesses focus is trained on generating profits and sustainability. Although sustainability was not of concern, in the recent past it has gained currency and organizations can no longer ignore it. Most organizations cannot conduct destructive or unethical business practices without attracting negative feedback. With the increased global information sharing and increased media attention, there is an increased demand from consumers, civil society, and governments for companies to engage in sustainable business practices (Scherer & Palazzo, 2007). In order to retain customers and employees, many organizations have realized the need to carry out their businesses in ethical manner, consequently, the adoption of the concept of corporate social responsibility has gained currency among many corporations as way of giving back to the society. Some examples of CSR are environmental stewardship, safe working conditions, and contribution to the community.
“Improving the lives of the billions of people at the bottom of the economic pyramid is a noble Endeavour. It can also be a lucrative one.” (Prahalad & Hammond, 2012).
The bottom of the pyramid (BOP) concept was developed and popularized by Prahalad & Hammond (2002). The thought behind BOP posit that the way to help meet the needs of the world poor is by using a market-based approach. The authors argued that there are many benefits the organizations that chose to deal with the underserved markets in the bottom of the pyramid. The poor also get significant benefits through poverty reduction, empowerment, and productivity. The World Resource institute 2007 report described the BOP market segment as encompassing the individuals with an annual income that oscillates between 0 and $ 3000. According to Prahalad & Hammond (2002), individually, the people represent an insignificant commercial interest for enterprises, however, collectively; the people at the bottom of the pyramid present a considerable purchasing power. Thus, Prahalad & Hammond (2012) are of the opinion that being in the low income group does not necessarily mean that these people do not earn an income, consequently, when addressed together, the low income people presents a great opportunity for investors. The low income segment is characterized by many unmet needs including no access to banking facilities, no basic services, and is dependent on greedy money lenders or shylocks. Essentially, the practice an informal economy. As consumers, they are neglected because there a few products that are designed for them and when they access the products, the prices are prohibitive while the quality is poor.
The argument for the BOP further claims that the multinationals organizations have not only undermined the people at the bottom of the economic order efforts of building their livelihood, but have also ignored them altogether. It means, therefore, that the poor marginalized people cannot access the benefits availed by globalization. They need an active engagement and access to products that reflect global quality standards. Consequently, they have to be exposed to the various opportunities offered by globalization. According to the BOP approach, the poor people represent what has been described as a latent market (Kozlowski, Bardecki & Searcey, 2012). It is therefore, observed that an active engagement provided by private enterprise at the BOP level could create an inclusive capitalism as the private sector compete for the market segment which in turn would foster attention to the low income people as significant consumers with sizeable choices. Thus, if the corporation could approach the low income earner market segment with the poor interest it could lead to massive growth and significant profits. However, the benefits accruing to the multinationals can only be realized if they engage with the civil society organizations as well as the local authorities to create localized business models to uplift the lives of the poor.
However, Karnani (2007) does not see much benefits for the multinationals since, as the author argues, there is no fortune and the market is small. Karnani (2007) offers a different approach, focus on the poor as producers and empower them economically instead of laying the emphasis on their consumption capabilities. Uplifting their living standards would in turn encourage them to consume the global products. There are a few other scholars who promote the idea of focusing on the low income people as business partners instead of treating them as potential producers and consumers (Karnani, 2007). Such ventures as developing business partnership with low income communities would create benefits for both the organizations and the low income people.
BOP is a noble concept; however, The BPO concept can only be a viable enterprise especially when it is coupled with sustainable development. However, there are certain obstacles encountered when the efforts of integrating sustainable development at the BOP level such as limits to growth that hamper the intended development to the individuals with low income particularly when applying the obtrusive resource- intensive European life styles (Karnani, 2007). Nevertheless, from a normative ethical perspective the alleviation of poverty should be an integral part of the development of sustainable development as per the notion of intergenerational justice.
2. what are the core corporate responsibilities with regard to the ecological environment?
Many organizations face some challenges with regard on how to become more accountable and responsible towards the society and the environment. It is widely held that multinationals should address the concerns regarding sustainability in their operations. initially, sustainability focus was on environmental issues (Kozlowski, Bardecki & Searcey, 2012). However, the concern has shifted towards adopting a bottom line that is composed of three elements including the environment, social, and economic approach. According to the literature available, there are two terms that comprehensively link sustainability and organizations SCM concepts; green energy supply chain management and sustainable supply chain management (Kozlowski, Bardecki & Searcey, 2012). There are a wide range of literature published regarding supply chain selection and green supply chain management.
the production and marketing of environmentally friendly products should be seen as a growth business, rising starting from organic food to hybrid cars. There have arisen several scholars who have attempted to provide a vigorous and robust economic explanation of the green consumerism by applying some standards model of differentiation in order to capture consumer heterogeneity in their acceptance of environmental attributes in the products (Smith, 2003). Consequently, a notion has been creates that green products should command a premium price according to various CSR studies. It is acknowledged that the level of competition in any market affects the CSR activities directed at the environment issues. Therefore, investors allocate their investments between savings and charitable donations towards an environmentally and socially responsible business.
However, Friedman (1970), an economist best known for his free-market capitalism, begs to differ, he promotes what has often referred to s the stockholder theory which posits that businesses are merely the grouping of people, the stockholders, who come together to advance capital to the organizations managers in order to realize particular ends where the stockholders receive some interest out of the venture (Friedman, 1970). The company executive acts as agents appointed by the stockholders and obligated to act in accordance with the set goals delineated by the stockholders. The bottom line is that, according to the Friedman theory, the executive cannot expend the organizations resources in manners that the stockholders have not authorized despite of any social benefits that may accrue. Suffice to say, employees are bound to advance the interests of the stockholders and should never divert resources from the promotion of the stockholders interests, which is essentially the maximization of profits. The Friedman theory recognizes only one social responsibility of business, to engage in activities designed only to increase profits in an open and free competition.
According to the supporters of the Friedman theory, profit maximization is a fiduciary responsibility, but more significantly, it is a social responsibility. It is, however, noted that the Friedman theory was developed in a time when the economy had not reached the globalization level and dealing with different social norms was not a contentious issue. He could therefore, afford to promote the anti-CSR mantra by advocating for the shareholders as the ultimate social responsibility. The second argument against the corporate social responsibilities was that managers are not in a position to discern the common good. Friedman saw the market as the only mechanism through which the promotion of the public good can be undertaken, and, therefore, through the pursuit of profit, the business should be seen as giving back to the community.
The Friedman (1970) argument seems to be self-centered and focus only on the maximization of the profit regardless of how such profits are made. It is appreciated that, although corporate social responsibility is voluntary, the successful corporations should give back something to the people that they exploit in order to make the profit (Smith, 2003). Giving back to the community is not a misuse of resources; rather it is an investment on the interconnectedness between the corporation and the community hosting the organization.
whereas the deep green environmental activist believe that the human activities impact negatively on the environment or nature, and, therefore, should be restricted urgently for the sake of the planet, nevertheless, a risk exist in regard to the shift of emotional environmentalism to the professional management of natural resources that may threaten the humans touch with nature that may eventually lead to less concern with the preservation of nature (Kozlowski, Bardecki & Searcey, 2012). Suffice to say, the emotional element in the discussion of environmental protection may obscure the concern of those who wish to contribute to the protection efforts. There are many organizations that are put-off by the overzealousness of the green environmentalist and their contribution to saving the world is negated.
3. Stakeholders Ability To Place Pressure On Corporations
According to the neo-institutional theory, not all organizational choices are intended, and conversely, not all business outcomes result from the mangers decisions. The theory purports that external values, norms, and traditions that offer the sense of social legitimacy to corporations have a significance influence on the organization management practices and choices. The social legitimacy is viewed as a significant factor in the determination of an organization’s long-term profitability as well as survival (Scherer & Palazzo, 2007). Thus, the outcome is a social process where external entities have a notable influence in organization decision making process and the implementation of strategies. Some scholars have describes the isomorphic influences as normative, mimetic, and coercive and emphasize the outcome of the pressures exerted by Professions, government agencies, and social expectations.
Scherer & Palazzo, (2007) opines that Professional networks, Environmental organizations, consumer organizations, and industry organizations among other stakeholders can put significant influence on organizations’ behavior through the diffusion of norms and values of behavior from their members. Normative pressure does not always have to involve direct sanctions on organizations; public embarrassment and opprobrium have been used effectively in the motivation of adherence to norms and values (Utting, 2007).
There is a dominant perception that suggests that corporate behavior and their selection of environmental practices may be influenced by economic rationality that considers financial benefits and costs. However, institutional theory highlights the importance of the roles of stakeholders, social factors and political influences in predicting corporate social responsibility choices (Utting, 2007). Thus, an organization enrollment in a social responsibility initiative can be viewed as a social construction engagement with the intention of gaining acceptance and legitimacy. Consequently, in such social construct and processes, various stakeholders may be seen as exerting coercive and normative pressures to induce participation and adoption of corporate social responsibility initiatives and practices. In this regard, consumers markets, labor markets, industry association, government agencies, and environmental groups are the key influential stakeholders.
Utting (2007) observes that consumers have high expectations on CSR from businesses and most consider corporate ethical behavior as a significant consideration when making their purchase decisions. Some scholars have observed that as the society gets more sophisticated and affluent coupled with a high level of awareness, the consumers often get sensitive to how corporations behave and consequently base their buying decisions behavior and the perceived ethical orientation of the business.
According to some researches, businesses are viewed as operating in several interrelated markets; the customer or product market, the investors or equity market, and social pressure market which may include activists, labor movements, and non-governmental organizations. These markets can put demands on corporations to enhance their corporate social responsibilities or social performances (Utting, 2007). The pressure may be exerted through such actions as product boycotts, internet campaign, government regulatory enforcement or industrial actions. Greater social pressure often leads to better corporate social performance. It means, therefore, that corporations respond to pressure by improving their responsible behavior. Many companies have responded to pressure by promoting better working conditions and consequently saw an improvement on their profits (Smith, 2003). Other organizations have responded to criticism by adopting progressive community employee, and environmental practices.
Social pressure effectiveness is in the ability to hurt an organizations brand equity, reputation, or productivity, for instance, when activists protest at an organization’s poor environmental practices, the consumers may be dissuaded from purchasing the organization products, reduce productivity, or cause investors to avoid its stocks.
Friedman, M. (1970). The social responsibility of business is to increase profit. The New York Times Magazine, September 13.
Karnani, A. (2007). The mirage of marketing to the bottom of the pyramid: How the private sector can help alleviate poverty, California Management Review, 49(4), pp. 90-111.
Kozlowski, A., Bardecki, M., & Searcey, C. (2012). Environmental impacts in the fashion industry: A life-cycle and stakeholder framework, Journal of Consumer Citizenship, 45, 17-36.
Prahalad, C. & Hammond, A. (2002). Serving the world’s poor, profitably, Harvard Business Review, 80(9), pp. 48-57.
Scherer, A. & Palazzo, G. (2007). Toward a political conception of corporate responsibility: Business and society seen from a Habermasian perspective, Academy of Management Review, 32(4), pp. 1096-1126.
Smith, N. (2003). Corporate social responsibility: Whether or how? California Management Review, 45(4), pp. 52-76.
Utting, P. (2007). CSR and equality, Third World Quarterly, 28(4), pp. 697- 712.