Critical Analysis of Corporate Social Responsibility

Keywords: csr importance, benefits of csr, ethics in business, competitive advantages of csr

INTRODUCTION:

CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the work force and their families as well as of the local community and society at large.

Social responsibility becomes a integral part of the wealth creation process which if manage properly should enhance the competitiveness of business and maximise the value of wealth creation to society.

“social responsibility is neither a fad nor an optional extra. The interest in it reflective of a deeper change in the relationship between companies and their stakeholders, including consumers. Faith in the benefits of profits to consumers has halved since the Seventies, is a viable basics of a relationship, that faith has been replaced by the desire to see the companies acting as active and responsible citizens. Healthy business requires a healthy community, and should be contributing to its creation and maintenance “(-Steward Lewis, Measuring Corporate Reputation,1999)

When times get hard there is the incentive to practise CSR more and better.

CSR is about how business is align their values and behaviour with the expectations and needs of stakeholders-not just customers and investors , but also employees , suppliers , communities, regulators , special interest groups and society as a whole. Csr describes a company’s commitment to be accountable to its stakeholders.

Csr demands the business manage the economic, social and environmental impacts of their operations to maximise the benefits and minimise the down sides.

Csr is not only about fulfilling a duty to society ;it should also bring competitive advantage. Through an effective csr programme , companies can:

Improve access to capital

Sharpen decision- making and reduce risk

Enhance brand image

Uncover previously hidden commercial opportunities, including new markets

Reduce costs

Attract , retain motivate employees

When you first read about csr the most known ones are :

Manage the expectations of the stakeholder.

Change and manage that it should do business more responsibly

Take care of the environmental impacts

csr is different from one company to other and needs to be tailored approach to managing responsibility with in our society of this particular organisation.

“Csr been promoting responsible business practise in the world

Csr is a strategic system approach that examines and influences the behaviour of company while preserving its competitive advantage .Each row in turn took the word means:

Csr means treating the main stakeholders of a company in a responsible manner

Corporate means any group of people that work together in a company or organisation, whether for profit or non-profit.

Social means the social system and includes finance, economy, environment and social issues

Responsibility is about taking issues that affect body seriously and about acting within-and even beyond-society norms.

Strategic means have a strategy that takes an idea in to a working model

A system approach means including all aspects of the system in the decision making process

Competitive advantage is the implementation over valid -creating strategy not simultaneously being implemented by any current or potential competitors.

Csr generally refers to:

A collection of policies and practices linked to relationship with key stakeholders, values, compliance with legal requirements, and respect for people communities and the environment.

The commitment of business to contribute to sustainable development, commonly understood as sustainable development stability of the current generation to meet its needs without compromising the ability of future generations to meet theirs.

The interpretation of csr one makes, influences the dialogue between governments, private sector in civil society. This results in different implications among various parties regarding the legitimacy, obligations and impact of corporate social responsibility standards. For example one has to be careful in understanding and defining the term “csr” because it is sometimes mistakenly equated with either corporate philanthropy or simply compliance with law. Since mid-90′ the business sector has gradually engaged in many actions, which have been traditionally assigned to the sphere of responsibility of the government, yet due to its incapacity, business has taken the lead. Participation in such projects has revealed business as a strategic partner in the process of development, in close cooperation with the government and international institutions.

CSR Main Components

The scope of csr is conceptually quite unbound at the present time. The debate between the private sector , civil society and governments focuses on a few key issues.

CSR is related to :

Human rights

Business practices can profoundly effect the rights and dignity of employees and communities the main focus is on developing workplaces free from discrimination where creativity and learning can flourish decent codes of professional conduct, and where a proper balance can be mentioned between work and other aspects of our lives. This is also related to globalisation and increasing international trade and the challenge of finding ways of doing business world -wide that respect human rights and social justice and facilitate the appropriate development of the emerging economies. Countries are expected to support and respect the protection of international human rights within their sphere of influence: and sure their own corporations are not complicit in human rights abuses

Labour standards

It includes freedom of association an effective recognition of the right to collective bargaining ;to help eliminate all forms of forced and compulsory labour; to help eradicate the phenomenon of screening of children in the workforce and to help eliminate discrimination in employment and work profession

Environment

To proactively address environmental issues;

To promote responsibility towards the environment

Encourage the development and dissemination of technologies that do not degrade the environment.

Maximising the efficiency and productivity of all assets and resources

minimising practices that might adversely a fact the enjoyment of planet’s resources by future generations

Market place

Including distribution, ethical marketing, pracing,building,consumer’s privacy,product disclosure, product quality and safety,etc.These activities may be grouped into six categories:

1)product manufacturing and integrity

2)disclosure ,labelling and packing

3)marketing and advertising

4)selling practices

Fight against corruption

To combat any forces of corruption, including bribery and blackmail.

Trends towards CSR and increased importance of CSR

In contemporary times, constant need for change has become a habit. Persons so the physical and legal services, the develop and to affine, we must continually adapt to evolution of the environment, ask to create something new, to innovate everything we undertake.

In definition or redefining the mission of a company, managers must take in to account the requirements growing on taking an active role in society, an action called csr.

Corporate social involvement has become a commonly encountered due to a combination of factors; economic globalisation, the trend of depletion of resources, the alarming increase danger of pollution and decreasing public sector role.

Csr is an increasingly important component of business interaction with the society in which their organisations operate. This term of interest both to those who apply it in their daily activities, and academic environment to create future managers responsible to be involved in the study.

Today consumers, investors, governments and even employees have become more sophisticated and more aware of good corporate behaviour or lock there of. In this new business environment, a company’s reputation has become one of its most valuable assets, and csr has because one of the key components of corporate reputation positive csr experience build confidence and goodwill with stakeholders.

Increased Importance of CSR

CSR is becoming one of the most challenging issues that both private and public sector, civil

society and opinion leaders, and other practitioners are faced with. The main reason for the

increased importance of CSR can be classified into six broad and overlapping categories:

Globalization: New CSR Issues

™ More complex organizations which operate in diverse cultures and jurisdictions;

™ Different CSR standards among countries; ™ Diverse cultures, norms and values, languages, laws and regulations, quality of life, and readiness to recognize the existence of these issues and willingness to confront them;

™ Need to achieve consistent business conduct standards;

™ How to deal with local CSR standards (including health, safety, and environment), which are

lower than ones back home?

™ Importance of local champions among community leaders, beyond company level initiatives.

New Technology

™ Impact of information technology:

Companies are first to be exposed to these issues

Questions of security – data protection and customer privacy

Emerging industries, such as “dot.coms”, have different base of competitiveness

– once mature, they will pay more attention to business ethics and corporate

social responsibilities;

™ New technology, such as telecommuting reduce face-to-face communication between

employees and managers;

™ Technological changes: new CSR dilemmas, including engineering and privacy on the

Internet:

Real-time exchange and conversation on the Internet is available instantly and

globally, thus allowing citizens to express their opinions, make suggestions, and

post their complaints online. The Internet empowers customers to shape

corporate reputation.

The Internet provides a very efficient way to check the company history, its economic,

social, and environmental attitudes.

Complexity and Risks

The complexity arises because of discontinuities in technology, demography, revolutions, societal and cultural trends, and from the fact that the next rules of competition have yet to be written. Furthermore, unpredictable and turbulent changes can come to any industry (even in those where the rules of competition are clearly defined today) thus exposing countries and companies to unforeseen competitive pressure. In addition to competitive pressure, increased importance of societal expectations being placed on businesses put the issue of competitiveness on an unprecedented scale and level of complexity. This includes such issues as

Increased merger and acquisition

™ Increasing complexity, likelihood and significance of risk from wrongdoing

™ More complex organizations and risks of “cultural clash” due to increased complexity of operations: even a single act of wrongdoing can have far reaching consequences

™ Rapidly changing world: leads to increased uncertainties and need for continuous “keeping

up”

™ New laws and regulations: increase complexity and the potential for non-compliance

™ Increasing influences of stakeholders, particularly NGOs

™ Increased vulnerability of big companies due to:

“Life in CNN world”

responsible for their partners in other countries

big scandals lead to more government interventions including regulations

™ Corporate downsizing and decentralization often leads to:

Loss of valuable experience

Loss of control mechanisms

Greater Likelihood of Discovery due to:

New technology: high speed of information access and dissemination.

™ A more powerful and aggressive media

24 hours global news services

Increased scrutiny by stakeholders, such as governments, NGOs, the public and customers

Greater Cost of Misconduct due to:

™ Increasing fines and penalties – still primarily driven by “new legislation and regulations”

™ Increasing reputation damages in an era of expanding customer choice

™ Growing interests of the investment community, in “softer issues” such as CSR and impact

on the environment.

Increased Importance of CSR – Case Studies

¾ Global Communication Revolution

¾ Communication Skills

¾ Global News – Nike

¾ Global News – Pfizer

¾ Complexity and Risks – Shell

¾ Greater Cost of Misconduct

¾ Greater Cost of Misconduct: Increasing Fines and Penalties

Global Communication Revolution

“Indeed, the revolution in communication technologies has created all sorts of new ethical dilemmas. Because it is mainly businesses that develop and spread new technologies, business also tend to face the first questions about how to use them. So companies stumble into such questions as data protection and consumer privacy. They know more than ever before about their customers’ tastes, but few have a clear view on what use of knowledge is unethical. There might still be two good reasons for companies to worry about their ethical reputation. One is anticipation: bad behavior, once it stirs up a public fuss, may provoke legislation that companies will find more irksome than self-restraint. The other, more crucial, is trust. A company that is not trusted by employees, partners and consumers will suffer. In an electronic world, where businesses are geographically far from their customers, a reputation for trust may become even more important.” Source: The Economist “Doing well by doing good”, August 22, 2000

Communication Skills

” Awareness of corporate community involvement is low, and has remained low throughout the past decade despite the growing focus on social and environmental activities by both Large companies and SMEs. This goes a long way to explaining why nearly three-quarters of the public believe that industry and commerce do not pay enough attention to their social wider communities. It is up to companies to find ways to communicate effectively with their costumers, employees and their local and wider communities. The overall message is clear-companies are now expected to be able to meet the responsibilities of the society in which they live and operate, whilst competing effectively. The rewards are high because if the public knows the values that a company stands for, and sees how these beliefs are actively demonstrated, they are more likely to have a positive image of that company” Source: Corporate Social Responsibility Update, Autumn 2000

Global News – Nike

The momentum for global social change in this era of instant communications is unprecedented. Consider Nike. In March 1998, the company announced that its financial performance had deteriorated substantially over the past year. One of the main reasons addressed by company management for Nike’s decline was resistance of consumers that the company mistreats its factory workers.

Global News – Pfizer

“Oxfam and South African groups have called for global action against Pfizer on the grounds of its pricing policies. Fresh from their positive welcome for recent actions by GlaxoSmithKline, Oxfam accused Pfizer of “moral bankruptcy” for pricing drugs out of the reach of millions of poor people.” Source: CSR News, Pfizer targeted on drugs pricing, July 25, 2001

Complexity and Risks – Shell

“In 1995 Shell suffered two blows to its reputation: one from its attempted disposal of the Brent Spar oil rig in the North See, and the other over the company’s failure to oppose the Nigerian government’s execution of a human rights activist in a part of Nigeria where the company had extensive operations. Since then Shell has rewritten its business principles, created an elaborate mechanism to implement them, and worked harder to improve its relations with NGOs. Shell’s efforts had no clear legal or financial pressure behind them.” Source: The Economist “Doing well by doing good”, August 22, 2000

Greater Cost of Misconduct

“Fear of embarrassment at the hands of NGOs and the media has given business ethics bigger push. Companies have learned that hard way that they live in a CNN world, in which bad behavior in one country can be seized on by local campaigners and beamed on the evening news to consumer at home. As NGOs vie with each other for publicity and membership, big companies are especially vulnerable to hostile campaigns.” Source: The Economist “Doing well by doing good”, August 22, 2000

Greater Cost of Misconduct: Increasing Fines and Penalties

“In the USA companies have a special incentive to pursue virtue: the desire to avoid legal penalties. The first attempts to build ethical principles into the corporate bureaucracy began in the defense industry in mid 80′, a time when the business was awash with kickbacks and $500 screwdrivers. The first corporate-ethics office was created in 1985 by General Dynamics, which was beginning investigated by the government for pricing scams. Under pressure from the Defense Department, a group of 60 companies then launched an initiative to set up guidelines and compliance programs. In 1991, federal sentencing rules extended the incentive to other industries: judges were empowered to reduce fines in cases involving companies that had rules in place to promote ethical behavior, and to increase them for those that did not.” Source: The Economist “Doing well by doing good”, August 22, 2000

Increased Importance of CSR – Data

CSR Impacts

An opinion leader survey on corporate social responsibility in France, Germany, and UK, conducted by Burson-Marsteller shows that:

• 66% of opinion leaders agree strongly that corporate citizenship will be important in the future.

64% of opinion leaders agree strongly that the health of a company’s reputation will affect their own decisions as legislators, regulators, journalists, NGOleaders e.t.c.42% of opinion leaders agree strongly that corporate responsibility will affect share prices in the future. The survey also asked if they agree that corporate responsibility will influence the decisions they make in the future.