What is corporate social responsibility? Essay Example

7Corporate Social Responsibility

Corporate Social Responsibility:

Corporate Social Responsibility (CSR) describes ways by which businesses ensure compliance and accountability for the social and environmental consequences of their activities. CSR therefore entails putting in place specific policy measures which enhance responsibility and accountability in business operations whose implementation progress must be regularly reported. In management practice and theory, CSR has become a trend (Guthey, Langer, & Morsing, 2006).

In general, some of the policy measures to be adapted in CSR include; a commitment to strong internal controls systems to regulate accounts, ensuring diverse and non-biased recruitment, good employer-employee relations, all-inclusive management decision making mechanisms, compliance with social and environmental laws and regulations, efficient resource utilization processes which allow for recycling for instance, and accepting responsibility arising from activities throughout the entire supply chain of a business firm. According to Hockerts, many business firms perceive CSR as a tool for cost and risk minimization (Hockerts, 2008). Firms pursue ethics with the major aim to reduce possibility of “dirty hands” (Grace and Cohen 2005). However, great progress has been made in the last few years aimed at integrating CSR into major companies, mainstream culture.

Previously, CSR reports were mainly philanthropy driven. In today’s society, the philanthropy notion has been replaced by more elaborate commitment toward the preserving and enhancing the quality of lives of workers’ and the surrounding communities where they do their businesses. The typical issues upon which CSR reports focus include: Energy effects on the environment, ethics in governance, recruitment of workers, opportunity and training issues, and ethical policies in purchasing and supplies (Grace and Cohen 2005).

Any Corporate Social Responsibility policy must put into consideration issues to do with ethics, stakeholder communications, legitimacy, and sustainable growth. The main focus of most CSR reports revolves around economic and ecological sustainability. Initially, sustainability was perceived to mean preservation of the resources of the Earth. The World Commission on Environment and Development drafted and published an environmental sustainability action plan in 1987. According to the Gro Harlen Brundlandt commission, sustainability implies ability to fulfill present needs without necessarily compromising on future generations’ ability to fulfill their needs. It is for this reason that various stakeholders including; activists, laborers, clients, and investors have challenged companies to publicize blueprints on measures they have put in place in order to ensure sustained economic progress that is employee and environment friendly (Hockerts, 2008).

Similarly, mainstream investors have been encouraged to reconsider CSR requirements in the process of company assessment. For instance, in 2005, an international law firm was asked by the United Nations Environment Program Financial Initiative to make an inquiry into whether investors in institutions (e.g. insurance and pension) are lawfully allowable to pursue integration of social, environmental, and governance related issues. The report findings concluded that it is within the law to integrate social, environment, and governance concerns into investment evaluations with the aim of predicting a firm’s financial performance (Grace and Cohen 2005).

It is common to find firms caught up in violation of human rights provisions while pursuing their supply chain management activities. On the other hand, interest groups expect transparency and accountability from corporate governance. People hold street demonstrations to protest the negative effects of globalization and costs that come with trade liberalization. Because of these, scholars have analyzed CSR in four theoretical approaches; individual, institutional, organizational and global approaches (Hockerts, 2008). Starting at the individual level, Ackermann (1975) observed that corporate policies fail to fully define managerial actions. As a result, it is upon the managers to weigh moral impacts of their choices amid constraints from the environments in which they operate. Ackerman thus argued that CSR is a managerial discretion.

At the Institutional level, CSR is associated with Organizational legitimacy. While defining the iron law of responsibility, Davis (1973) argued that in the long run, society will hold firms accountable for how they exercise power society vests to them. If firms abuse these powers, they are likely to lose the approval of society. The endorsement by society is a crucial requirement hence CSR as organizational legitimacy has been viewed lately as “a firm’s need to retain its license to operate” (Post, Preston, & Sachs, 2002, P. 21). At the Organizational level, the CSR has been associated with stakeholder management. Stakeholders need be incorporated in the processes of an Organization’s management framework toward identifying and implementing strategic policy measures aimed at achieving the goals and objectives of the Organization, (Freeman & Velamuri, 2006). Put differently, stakeholders play a vital role in ensuring that an Organization satisfactorily serves her customers while sticking demands of the stakeholders (including; workers, suppliers and surrounding communities) (Post, Preston, & Sachs, 2002, P. 22).

At the international level, CSR has been evaluated in relation sustainable development. Individual firms and Corporations face many new challenges and limitations in their pursuit of expansion in the face of a globalised economy. Some of these capacity limiting challenges include; security issues, volatile tariff structures, government restrictions, labor exploitation differentials and environmental limitations. For this reason, some business firms have adapted CSR strategies as a means to position themselves in the international market and gain global public support. As these firms utilize their social contributions to generate intuitive publicity platforms, they develop and maintain competitive advantage as well (Fry, Keim, & Meiners 1986, P. 105). An inherent aspect of global practice in CSR perspective is the pressure on participants to observe the entire supply chain labor practices other than individual regional ones. This brings us to another important aspect; laws and regulations.

Independent mediators (esp. governments) perform a vital role in CSR to see to it that business Organizations do not harm the wider communal good. Robert Reich, a critic of CSR argued that it is a responsibility of governments to establish social responsibility agenda through legislation and control to allow for responsible business operation. There emerge various government regulatory related issues. First, such regulation may lack ability to exhaust all aspects pertaining to operation of Corporations. As a result, there is a related legal burden to do with interpretations of the laws and deliberations on grey issues (Sacconi 2004). In the matter in which after contamination of Hudson River, General Electric failed to clean it up and the clean up stagnated as the firm engaged in exchanges with the legal mechanism regarding assignment of liability (Sullivan & Schiafo 2005).

Regulation also imposes a heavy financial burden to the economy of the country. In agreeing with this observation, Bulkeley gave an example of the attempts by the Australian government to avoid enforcement and implementation of the 1997 Kyoto Protocol giving as excuse, economic loss issues and national interest concerns (Bulkeley 2001, pg 436). Ratification was later signed by Prime Minister Kevin Rudd in December 2007 after November 2007 elections that saw a change of government (Post, Preston, & Sachs, 2002).

CSR has been criticized for lacking a universal performance measure. For this reason, a multi-stakeholder process; Global Reporting Initiative (GRI) was established with a major aim to create universal CSR and sustainability reporting procedures. This has attracted more than 700 companies internationally to publish CSR (sustainability) reports on the basis of GRI guidelines. Active participants include; research institutions, human rights organizations, labor and environmental groups, investment and accountancy firms among other organizations (Guthey, Langer, & Morsing, 2006). In the recent past, CSR has been applied by several Banking institutions. Banking institutions adopt CSR policies so as to restrict issuing out loans that would contribute to establishment of destructive projects. For example, the Citigroup and Bank of America stopped funding illegal logging projects following pressure from shareholders and environmental activists. The first international investment Bank which fully applied the environmental policy and recognized the significance of globally reducing greenhouse discharges was the Goldman Sachs (Guthey, Langer, & Morsing, 2006).

In conclusion, it is worth noting that corporate social responsibility has both benefits and disadvantages. However, the strengths of any CSR depend on the environment in which it is applied. Since Corporations have been associated with economic growth and development, most Administrations have greatly empowered Corporations. For this reason, it is vital that these Corporations comply with ethical standards and regulations in order to meet the expectations of the international communities from which they draw their customer base. Furthermore, any business relations can only thrive where certain basic ethical principles are observed. These principles enhances integrity of the Organization, builds and preserves the Brand image and name to the public, builds trust and loyalty from both the employees and clients, and boosts productivity of the business. Corporate Social responsibility is beneficial for the general society.

References:

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