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Advantages and Disadvantages of Corporate Social Responsibility

UserMark time01 November,2014

Corporate social responsibility or CSR is a self-regulating business model that allows a company to be socially accountable not only to itself but also to its stakeholders and the public. If that definition went over your head, here is a simpler explanation for you. By practicing CSR, a company adds values to the society and the environment without compromising with the business process.

Here’s a video demonstration regarding the Pros and Cons of CSR for a better understanding:

Primarily, CSR is a strategy for large corporations that have grown to the point where they can give back to society and the environment. It is a great way to boost your own brand by contributing to society through CSR activities, philanthropy, and volunteer efforts. Moreover, CSR activities can also strengthen the bond between the employees and the corporation and make them feel more connected with the world around them.

Some Great CSR Activities

According to Mondo, two noteworthy CSR Initiatives were taken by

“Google: Despite being one of the largest corporations in the world, Google is an excellent example of a business that is constantly working for the betterment of society. In addition to various other CSR initiatives, the company has implemented a widely successful environmental policy called Google Green.

Ben & Jerry’s: This Vermont-based brand is well-known for its corporate social responsibility. In fact, it’s a cornerstone of how this company operates. In addition to speaking out and creating various flavors around social issues, the company has a history of proven social responsibility dating back to the 1980s.”

Advantages of Corporate Social Responsibility

As CSR adoption becomes increasingly popular all over the world, it is safe to assume that businesses have seen great potential in this area. And if you haven’t figured them out yet, here are some of the major advantages of CSR that you must know:

  • Improves the image of a company:

CSR activities reflect positively on the image of a company. When you implement CSR policies in your company, it increases your goodwill. Consumers will be more willing to avail your products/services because of the clean image of your company. “A study by Unilever, found that a third of consumers are choosing to buy brands based on their social or environmental impact.” ( Source: www.cornerstoneondemand.co.uk)

Xerox, through its Community Involvement Program, had been able to drive out a socially responsible image of the organization, by directly engaging their employees in community development programs.

  • Helps attract and retain potential employees:

Companies which are involved in serious CSR activities are more recognizable. This makes it easier for your company to attract potential candidates who seek employment opportunities. Also, when your company starts earning goodwill through significant CSR activities, the employees are more likely to continue with the company for a longer tenure. Millenials generally prefer organisations where they have a flexible work culture and they are able to feel good in working with the organisation.The organisation’s beliefs and value let the employess earn a level of self pride.

In a survey by the nonprofit organisation Net Impact, “­53 percent of workers said that “a job where I can make an impact” was important to their happiness, and 72 percent of students about to enter the workforce agreed.”( Source: Jeanne Meister Contributor, Forbes)

What can be a better way to let employees feel that they have made an impact other than directly engaging them in CSR Activities?

  • You get into the good books of regulatory authorities:

It is the job of the regulatory authorities to scrutinise the operations of various companies. However, when your company starts doing CSR activities on a large scale, these regulatory authorities become less hostile towards your company. Besides, any company that has a strong CSR generally stays within the regulations to gain the benefits.

The The Inglorious Fruit and Vegetable campaign led by Take Chipotle aims at reducing food wastes. So it is complementing Government’s efforts to reduce wasteload. How do you treat anyone, who helps you in your work?. Friendly, right?

So does the Governments and the Regulatory authorities. As the company gains the recognition of being trustable, lesser number of laws and legal implications haunt it.

  • Attracts new investors:

A company’s reputation in the market determines whether it will receive new investments or not. With CSR programs, you can certainly boost your company’s image. And when your company starts to grab enough eyeballs, it also attracts a number of investors. Be prepared to receive investment proposals from venture capitalists, other firms, and even from the government.

  • A brand new way to advertise your brand:

It is often said that any publicity is good publicity. When your company starts a CSR program, it automatically gives your company a certain level of publicity. It won’t be wrong to call such publicity as an advertisement. You just need to make sure your products or services are aligned with the CSR activities you are involved in.

Looking at these advantages, you may think it is time to start your own CSR program. However, it is recommended not to jump the guns and take a look at both sides of the coin.

Advantages and Disadvantages of Corporate Social Responsibility

Disadvantages of Corporate Social Responsibility

Unfortunately, the CSR programs come with their own set of challenges and disadvantages. And while knowing the advantages of CSR can help you exploit those areas more, acknowledging the disadvantages may give you the edge that can help save your business in the long run:

  • Shift in the profit-making objective:

Economist Milton Friedman often criticized CSR by saying that it shifts the company’s focus of the profit-making objective. For any financial entity, profit-making is the utmost priority. However, when you get involved in CSR activities, you need to cut on the profit margin, which can make your shareholders unhappy.

  • Hamper the reputation of your company:

CSR policies mandate the companies to reveal the shortcomings of their own products in case they are found to violate the CSR program. If your existing customers find out the flaws of your products, they are most likely to lose faith in your company. So, it can reflect negatively on your sales figures as well.

  • Customers can get impatient:

Everyone will appreciate you for adopting CSR program for the company at the beginning. In fact, it can gain your company a significant amount of popularity in the market for being associated with a good cause. However, if the program does not offer instant results, people may think this is nothing but a PR stunt. That won’t be good for your company’s reputation.

  • Sudden rise in the cost of production:

Being involved in CSR activities can often increase the expenditure of your company. As you may realize, when you are giving back to society, it costs you a significant amount of capital. If you increase the price of your products to make up for the expenses, the customers will have to bear the burn. Large businesses can absorb the blow, but small businesses can’t.

From the aforementioned discussion, it is quite clear that CSR programs can be a beneficial strategy for a business, but it is not without a cost. If your company is practically a large enterprise, it can be a suitable plan for your business. However, for small and medium enterprises, it can be a risky move to adopt CSR.

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