Corporate Social Responsibility (CSR) – Advantages and Disadvantages

Keywords: Advantages of CSR, Disadvantages of CSR

Introduction

Today, corporate social responsibility is considered as part of business strategy, there are many debates and reports about the nature and value or business opportunities that can be achieved when implementing corporate social responsibility. Also as corporate social responsibility can be “a source of opportunity, innovation, and competitive advantage” rather than just “a cost, a constraint, or charitable deed”. Along with the comprehensive the renovation of the country, the success in accelerating economic growth rate are posing the country for many social and environmental problems the urgent. The main issues that are demanding economic entities, including businesses, are responsible for contributing to; if not itself economic growth will not be sustainable and will pay the price too expensive environmental and social issues. Related to this report will evaluate the benefits and problems when implementing corporate social responsibility. And to clearly understand about these issues, this report will explain “what is the corporate social responsibility” (Porter and karmen 2006).

Definition of corporate social responsibility

Corporate social responsibility is known as a number of other names: corporate responsibility, corporate accountability, corporate ethics, corporate citizenship, sustainability, stewardship, triple bottom line and responsible business, to name just a few.

Corporate social responsibility is an evolving concept that currently does not have a universally accepted definition. Generally, corporate social responsibility is understood to be the way firms integrate environmental, social and economic concerns into their values, decision making, strategy and operations in a transparent and accountable manner and thereby establish better conducts within the firm, create wealth, material and improve society (Michael Hopkins, 2011)

The World Business Council for Sustainable Development has described corporate social responsibility as the business contribution to sustainable economic development. implemented based on compliance with legislation and regulations, corporate social responsibility typically includes “beyond law” commitments and activities pertaining to: business management and ethics, health and safety, environmental stewardship, human rights (including core labor rights), human resource management, community involvement, investment and development , involvement and respect for indigenous people, corporate philanthropy and employee volunteering, , anti-bribery and anti-corruption measures, customer satisfaction and adherence to principles of fair competition, accountability, transparency and performance, supplier relations, for both domestic and international supply chains ( Richard E. Smith, 2011).

Generally, corporate social responsibility is understood to be the way firms integrate environmental, social and economic concerns into their values, decision making, strategy and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth, material and improve society. These elements of corporate social responsibility are often interconnected and interdependent, and use to firms wherever they operate.

Since businesses play a pivotal role in job and wealth creation in society, corporate social responsibility is a central management concern. It positions companies to both proactively manage risks and take advantage of opportunities, especially with respect to their corporate reputation and broad engagement of stakeholders (Leonardo B, Rocco, C and Hasan, 2007). The latter can include shareholders, employees, customers, communities, suppliers, governments, non-governmental organizations, international organizations and others affected by a company’s activities (Cynthia D. M. 2008).

Above all, corporate social responsibility is about performance: moving beyond words on a page to effective and observable actions and societal impacts. Performance reporting is all part of transparent, accountable and, hence, credible corporate behavior. There is considerable potential for problems when stakeholders perceive that a firm is just engaging in a public relations exercise and cannot demonstrate concrete actions that lead to real social and environmental benefits (Saeed Khan, 2010).

The advantages and the tangible, intangible benefits gained from the practice of Corporate Social Responsibility.

Corporate Social Responsibility is longer a familiar in the world but it is still a hot term to not only enterprises, customers, entire society but also investors. Every day, there are many activities related to corporate social responsibility. Enterprises use corporate social responsibility as a tool to develop their reputation in the global market. Investors use corporate social responsibility as a main reason to consider in decisions of enterprises to invest responsibility. Customers and entire society consider corporate social responsibility as an important factor to decide the cost, quality and progress of an enterprise. Because of important of corporate social responsibility, many corporations can pay a lot of money for corporate social responsibility to become a perfect business model, responsible for society, and have beliefs of community. In the current context of globalization, customers, investors, policy makers and non-governmental organizations around the globe are increasingly concerned over the impact of globalization on the rights of employees, the environment and community welfare. These businesses do not make social responsibility can no longer access to the international market. A typical example, Nike Corporation 1990 global boycott because of harsh labor conditions in factories in East Asia and Southeast Asia. During that period, there were a large number of workers demonstrated more and more on the implementation of Nike’s labor regime, especially the countries of the world as Vietnam, Indonesia, and China. Protesters against the company including organizing a boycott of Nike products, on the media attention on the subject and create pages wed to decry the implementation mode Nike’s labor. In fact, there are more than 240 weds have talked about it as “Anti-Nike”. Nike companies were operating and employ about 500,000 people. Protestors who is the claim, abused physically and mentally. Workers have to work in unsafe conditions and low wages or salary is not enough. In addition to the salary is not enough for Nike factory workers, the protesters also spoke about the poor working conditions of the factory Nike. Many Nike factories have found poor air quality and dangerous conditions.

Therefore, the product of Nike was ostracized throughout a period. So when Nike began to focus on the implementation of the company’s responsibility for employees. And Nike Corporation has committed to the responsibility of the company to employees. Nike created working conditions for laborers to work in better conditions and ensure the health of people do. Through Nike’s annual report on corporate social responsibility, and consumers begin to trust and Nike’s business began to recover. So far, Nike is one of the largest sellers of sports shoes and clothing in the world. Company is currently active in over 110 countries, and other Nike products were people trust.

In fact the world has shown that, does good corporate social responsibility, their benefits are not only not decreased but increased. The business benefits gained from implementation of social responsibility include lower costs, increase revenue, increase brand value, and cut incidence of employee severance, increased productivity and more opportunities to reach new markets. Corporate social responsibility can be broken down into specific actions with objects are employee, shareholder, supplier, consumer, community and environment ( UKessay, 2012).

Firstly, corporate social responsibility for employee, the evaluation criteria to performance of corporate social responsibility to employees including compensated, without discrimination, remuneration policy and good training, and acceptable working conditions. There basic conditions, although simple, but not all enterprises can also perform complete. Most employees prefer their work by good working conditions and reasonable salary regimes. Enterprises meet these requirements also means creating team cohesion, love of work, proud of the company’s image and determination to work for the benefit of company. Benefits gained here are in addition to significantly improved productivity, there is a cohesive culture in enterprise. Strong culture has a positive impact not only to the business itself but spread very well in the business community. This is what every corporates wants to build. Moreover, actual costs, opportunity cost, and energy plus the spiritual loss due to constantly looking for new personnel and training (in the case of former the termination of employment by the personnel policies of unsuitable) completely removed. Treatment policy and good culture and work environment to attract qualified staff look to the company ( UKessay, 2012).

Secondly, corporate social responsibility for shareholder, information disclosure and transparency, companies operating efficiency and rational use of capital to increase value for the product done for any enterprise for sustainable development of the enterprise. Addition, create confidence for investors, that belief is the emotional. These the decisive factors contributing to profit or destroy the value of stock shares only narrowly ( UKessay, 2012).

Thirdly, corporate social responsibility for supplier and consumer, as for suppliers, shortened work on the key is to pay on time and good communication. Once embarked on the business, keeping good relationships with suppliers of strategic significance in ensuring a stable supply for production at reasonable prices; since then, the product is classified distribution to consumers in time and quality commitments. For customers, the corporate social responsibility shown in selling good products to satisfy the needs, at affordable prices, delivered on time, and safe for use. In fact, if the products meet the needs of consumers, product images and now kept in the minds of consumers. In business “word of mouth” has spread very strong pervasive. To maintain and expand market share is the goal of any business that reflects the spirit of “customer is God”. Mrs. Lurita Doan, the first woman head of Service Delivery and Technical Supervisor of the U.S. government (General Services Administration) has also said “the customer is king, if you do not provide services well; you will not have a second chance, and so will not be sustainable”. To build a brand and customer confidence, the business becomes much more favorable ( UKessay, 2012).

Fourthly, corporate social responsibility for community, for community in general, the first task is to protect the environment (also the protection of public health) and then the charity. Environmental pollution, natural resource depletion, climate change … Business environment protection, in addition to complying with government regulations is not been wasted costs negate the consequences or damages litigation. Green investments are the hot issues in many developing countries ( UKessay, 2012).

Corporate social responsibility reporting has become important because it help the companies to communicate with society, consumers, workers, investors. The corporate social responsibility reporting will show the companies develop sustainably and protect environment or not. From the information in corporate social responsibility reporting, investors will consider to invest or not. A good corporate social responsibility report will increase the image and reputation of one business.

Corporate social responsibility makes a difference, brand positioning for the company. Corporate social responsibility has shown the role and responsibilities “citizens”, has helped build the image of a “good citizen” in the society. This is a contributing factor “position” enterprise customer in mind, to make a difference with other businesses and bring sustainable development of enterprises. Investors will also trust in the company’s ability to develop long-term and sustainable businesses develop strategies to optimize the interests of stakeholders and the application of ethical standards in the process of decision business. Benefits followed by binding workers, attract talent and motivate the staff. Many researchers around the world to see, good people, often reputed to work in what they think is good in society and feel proud; where they can achieve personal development and participation contribute to community development.

An example about one of many companies is conducting good corporate social responsibly, that is Starbuck Company. Starbucks is the largest coffeehouse company in the world, with about 20,891 stores in 62 countries. One of the factors that make up the success of Starbucks is considered corporate social responsibility as a strategy for sustainable service business. Starbuck’s success is not only based on the quality of product or service but also based on the company’s responsibility towards society. There are many studies on the behavior of consumers and most of them question” “Why do consumers buy?” and “what they buy?” the answer lies not with the product or service itself but with the way a company conducts itself. Starbucks Coffee has made its mark in the global coffee industry by not only delivering a quality product but also striving to benefit the local community and the environment, as well as its employees and consumers in the process. Starbucks has run its business by driving corporate social responsibility as a tool that covers the company in every sector of their business. Let’s take the environment, for example. Starbucks is really concerned about affecting the environment. By utilizing innovative technologies to improve the effectiveness in its processes, they reduce costs and at the same time they are preserving the environment. In terms of social strategies, Starbucks has splendid strategies to cooperate with its partners and stakeholders. Starbucks has created a lot of activities to encourage communities and to create long term relationships with them, which reflects on their brand. In terms of economics, Starbucks is not only thinking about its benefits but also for all parties related with their business, by following the laws of each country. Starbucks has managed to create fair trade with its suppliers, customers, and even for their competitors. It has made Starbucks very successful in its economic situation. Moreover, corporate social responsibility can build competitive advantage over competitors that Starbucks gain more competitive advantage by engaging in corporate social responsibility into every part the company. Specially, the company focuses on their suppliers and partners which they have run business as sustainable together.

Disadvantages when implementing Corporate Social Responsibility

However, in addition, must admit that, many businesses have not done seriously its social responsibility. It shows in the business scams, financial reporting, quality goods business, production, labor safety, intentionally causing environmental pollution. besides, many companies that violate the law of wages, insurance, labor safety issues for workers is no longer a rare phenomenon, has been causing urgency for social .

Nowadays, there are different opinions about the cause of the non-implementation of social responsibility of business. Some people believe that corporate social responsibility has not been legalized in all businesses. For large enterprises with export markets, as required by the customer should be forced to make social responsibility, also for small as well as medium enterprises, due to financial difficulties and lack of legal constraints many businesses understand social responsibility as “charitable contributions. Some others said that the implementation of social responsibility will increase costs for businesses, thus reducing the initial competitiveness not immediately see the immediate benefits, so that small and medium enterprises do not want to implement social responsibility. The main reason any company would object to participating in corporate social responsibility is the associated costs. With Corporate social responsibility, the companies have to pay for environmental programs, more employee training and reduce waste management programs. Proponents of corporate social responsibility agree that any expenses to businesses are ultimately covered by stronger relationships with key customers. Though , David Vogel indicates in his Forbes article “corporate social responsibility doesn’t Pay” that investment in corporate social responsibility programs may not necessary result in measurable financial results. Another challenge for companies when considering corporate social responsibility is the possible negative perception of shareholders. Historically, publicly-owned companies had a primary focus of maximizing shareholder value. Now, they have to balance the financial expectations of company owners with the social and environmental requirements of other stakeholders. Some shareholders are happy to invest in companies that operate with high integrity. Some other may not approve of the aforementioned expenses of operating under corporate social responsibility guidelines (Neil Kokemuller, eHow Contributor, 2011). In summary, the implementation of social responsibility of business is relatively difficult. The reason so primarily due to incomplete understanding of corporate social responsibility; corporate social responsibility merely be understood as charitable contributions. Second, the implementation of corporate social responsibility also caused difficulties for small businesses due to lack of capital and technical resources to implement corporate social responsibility standards. The causes listed above can be attributed to three main reasons, which cause cognitive, economic reasons and legal reasons.

Provides a good example of the limited importance of corporate social responsibility to financial performance. The firm enjoys a strong corporate social responsibility reputation due to its generous labor policies and its commitment to improve the earnings and environmental practices of coffee growers in developing countries.

Yet since the beginning of 2008, its shares have recently declined nearly 50% (at last glance the S&P 500 is down “only” 36%). The stock’s disappointing performance has absolutely nothing to do with corporate social responsibility: It is entirely due to the firm’s over expansion and, most recently, the increasing unwillingness of consumers to pay as much for a cup of coffee as for a gallon of gasoline (Kristin Todd, 2009).

Conclusion

In conclusion, social responsibility has existed in enterprises in the world for a long time. This is an important factor affecting the quality and reputation of the business in the competitive business. Although the corporate social responsibility appears to generate more profit than the cost, many commentators have criticized it on a number of social issues, and ethics. There are many people advocate free market policies to advocate the notion that the only purpose of a company to maximize profits for its shareholders, while it must comply with the law in countries where it is active. Others even considered it more important and for that reason companies implement corporate social responsibility policy is better, they do provide Corporate Social Responsibility policy to ensure that the relationship business ethics. The success of Starbucks shows how companies can do well by doing – that is, by issuing the practices of sustainable, profitable, and ethical. On the contrary, the company Nike is one example for the implementation of corporate social responsibility, and social criticism, boycott their products for a long time. And can clearly see that when Nike made corporate social responsibility, customer response has become better and they have been successful in business. Thus two examples above, we can see that the implementation of corporate social responsibility is as important as how, and the benefits achieved when implementing it.