The growing phenomenon of Corporate Social Responsibility

Introduction

Corporate social responsibility (CSR) is a growing phenomenon worldwide. The 20th century has seen many organisations increase their effort in supporting non-related activities in the society (Tsoutoura 2004)

This phenomenon has grown so much that some companies decided to incorporate the aspect of CSR in their organisational policies. In developed countries, different companies give reports on CSR in their books of accounts annually, disclosing where they have spent their money and how the community benefited (Tsoutoura 2004)

The major international companies all over the world have been linked with the CSR activities. British petrol, Shelly, Nokia which are some of the largest and globally known companies have been linked with CSR activities all over the world. Most of these companies have highlighted on how they ensure the survival of the environment through aspects of refining their processes of production, minimizing unnecessary and harmful waste products etc. This shows that the present CSR activities of most international companies have been oriented on the environment rather than the other aspects such as the society, the employees, customers, the government, suppliers etc

In addition to the above companies, the phenomenon of CSR has been clearly seen in the telecommunication industry in most of countries. In Tanzania the private sector companies, particularly, the telecommunication companies have been major participants in the CSR activities.

Over the years, the Tanzanian telecommunication sector has participated in development activities within the society. Vodacom-Tanzania for example has constructed water-wells, built schools and supported sports among others. In 2001, the company provided a five year sponsorship to the football association in the country. (Vodacom Tanzania limited 2010)

Moreover, Zain-Tanzania, a global telecommunication Company, is an active player in conducting CSR activities within the country; including supporting education by providing school desks and computers to the primary and secondary schools respectively, and through the Zain Africa challenge program and various environmental campaigns. (Zain Africa limited 2010)

In order to analyze the future trend of CSR on whether it will focus more on the environment than other areas, and to further discuss whether CSR is primarily about making money for international businesses, the concept and theories of CSR will be identified, along with an analysis of the existing empirical literature.

The concept of CSR

Corporate social responsibility is an evolving term that does not have a standard definition. Although it is not a new concept, it still remains an emerging and elusive idea for academics and a contested issue for business managers and their stakeholders. Many people have vague ideas about what corporate social responsibility is all about. They view it as “a big corporation giving some money to the environment or a community initiative” Middle East corporate social responsibility (Annon,2007)

The European Commission defines corporate social responsibility (CSR) as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” (European commission 2010)

Alternatively Corporate social responsibility (CSR) is defined “as a concept whereby Organisations consider the interests of society by taking responsibility for the impact of their activities on Customers, employees, shareholders, communities and the environment in all aspects of their operations. This is seen to extend beyond the statutory obligation to comply with legislation and sees organisations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.” (Johnson et al, 2009, p 100).

3.0 Theories on Corporate Social Responsibility

3.1 Theory of shareholder profit maximization

“The conventional theory of CSR believes that companies, as a business setup, should take optimal profit making for shareholders as their most fundamental objective”. (Zhang Shi Yuan, 2006) The corporate objective should not in any way be replaced by other objectives of individuals within the organization. (Zhang Shi Yuan, 2006)

Theory of stakeholders Interest

The theory maintains that “maximizing the interests of the shareholders of the company is the most important objective that a business organization should achieve” (Zhang Shi Yuan, 2006) but this should not be the only objective that the business organization should have. The business should therefore look at other aspects such as well being of the members of the society i.e. the employees, customers, the government, the suppliers, the public at6 large as well as the well being of the environment. (Zhang Shi Yuan 2006).

Theory of good citizenship

This theory maintains that “companies should take profit-making as the corporate objectives”, (Zhang Shi Yuan 2006) however, they are also liable to offering help, and i.e. companies shall have the obligation to help solve certain social problems. An example could be that organizations are obliged to make donations to education or charity organizations.

Theory of minimum requirement of morality

The theory states that “companies have the obligation to satisfy shareholders’ interests” (Zhang Shi Yuan 2006) without damaging other parties. Therefore provided that organizations have avoided causing or helped the society overcome social damage caused by to their behavior during the process of business activities, hence the companies will demonstrate social responsibilities.

CSR ACTIVITIES

There are so many aspects that are linked to CSR but the following are the major activities that define the aspect of CSR.

The concern for the environment

The concern for the customers

The concern to the employees

The concern to the local community

Many companies have been engaged in CSR through the aspect of going green i.e. taking care of the environment due to their operational activities. From this the question comes to whether CSR in the future will become primarily concerned with environment or will other areas benefit equally.

5.0 LITERATURE ON CORPORATE SOCIAL RESPONSIBILITY AND PROFIT MAKING

Many empirical evidences have linked CSR with improved financial performances in an organization. Others have linked it with better employee performances and customer demands which are all related to profit making. These literatures include the following;

According to Orlitzky et al (2003), corporate social performance and corporate financial performance are positively correlated and their relationship is statistically significant. This conclusion was reached after carrying out a Meta analysis of that integrated 30 years of research from 52 previous studies and used Meta analytical techniques to support that notion.

In 2004, Margarita Tsoutsoura a lecturer at the University of California published her results on the same research in the USA. She also indicated that there is a positive relationship between CSR and financial performance. (Tsoutsoura 2004)

6.0 A DISCUSSION ON THE CSR ACTIVITIES IN THE FUTURE AND CSR IN INTERNATIONAL BUSINESSES

Many studies done on CSR have shown that the aspect of CSR influences the performance of the company directly and indirectly. There has been a link between the CSR activities and the employee retention and performances in their organisations. Therefore it can be suggested that companies will tend to embark more on other aspects of CSR and not just on the environmental part because most firms value the well being of their businesses a lot more than any other side objective. Hence if by engaging in other aspects of CSR does provide a means of fulfilling interests of the business then they will act in favor of it.

Furthermore in many multinational corporations (MNCs) CSR has been incorporated in their strategic planning process. The reasons behind social responsibility towards environmental and human responsibility are still questionable to whether it is based on genuine interest or has underlining ulterior motives. http://psychology.wikia.com.

There are groups that argued that the only reason to why corporations put in place social projects is for the commercial benefit they see from raising their reputation with the public or with government. They suggest a number of reasons why self-interested corporations, solely seeking to maximize profits are unable to advance the interests of society as a whole. http://psychology.wikia.com

They give examples of companies that have spent a lot of time promoting CSR policies and their commitment to Sustainable Development on one hand, whilst damaging revelations about business practices emerge on the other. For example Royal Dutch/Shell a multinational oil company has a much publicized CSR policy, although the 1995 hanging of Saro-Wiwa and his fellow men authorized by the Nigerian government brought bad image to the company’s subsidiary since human rights Watch accused its operations on provoking the environmental and human rights policies. Additionally, in 2004 the company was involved in a scandal over the misreporting of its oil reserves which seriously damaged its reputation and led to charges of hypocrisy. It is within my view that the can be seen that international businesses do stand a chance of making more profits by engaging in CSR. http://psychology.wikia.com

The aspect of humanity is not supported by most of the existing literature. The famous authors such as Modigliani, Milton Friedman in1970 in the New York times as well as from the financial management views (Jaffe et al 2000) all show that the main objective of the firm is to maximize the profit of the shareholders of the company and therefore if the activity is worth the profit it is done otherwise it is dropped. Hence international businesses are primarily making more profits through CSR. These critics generally suggest that host-governments and international regulations should enforce the environmental and human rights policies more strongly to ensure that international businesses behave in a socially responsible manner.

7.0 Conclusion and Recommendation

It can be conclude, that the company’s future tend to be on the divergence from simply being responsible to the environment and to be more responsible to the other aspects of corporate social responsibility such as the well being of the employees, customers as well as the society. Furthermore, it’s in the view of this paper that the international businesses are involved in the CSR activities to maximize the profits or wealth of the shareholders. This is to say that the future of CSR is in all directions and it is on the side of the international business to decide on which aspect should be focused upon to achieve the objectives of the business.

It’s within the limits of this paper to recommend that the companies should correctly focus on all the aspects of corporate social responsibility. A specific CSR policy should be placed in all businesses so that it becomes p[art and parcel of the business operations. In doing so, the businesses stand a large chance of surviving in the competitive business world that is currently in play. For the benefits of the international businesses, they should also continue with the CSR activities by looking at what are the most valuable activities for the people and the areas at which they are operating. For example if an international business is expending to Africa country areas that have people in the rural regions who have no education, then the CSR activity for the international organizations should be on how to empower these local people with education.