Corporate Social Responsibility or CSR is the modern structure of corporation’s ethical principles. CSR defines a corporation’s ethics or duties towards different stakeholders. The popularity of CSR has developed considerably in between large organisations due to globalisation. While conducting their business in forging countries, the international corporations are required to maintain certain ethical regulations for not misusing their position to augment revenues.
Most of the organisations misuse their CSR policies to enhance their revenues. There are no strict guidelines provided by the government that ensures the proper implementation of CSR strategy by a firm. This essay will evaluate different advantages and disadvantages of CSR strategy and its influence over a company. Further, the essay will determine the actual position of CSR strategies from different corporation’s perspective and discuss theories provided by various experts on the same topic.
Analysis of Corporate Social Responsibility
The requirement and popularity of CSR strategies have grown considerably in past few years, with the improvement of company’s role. As per Hopkins (2012), modern organisations have a reputation in between people; the companies can face significant losses if they lose their reputation in the marketing. CSR strategy ensures corporations positive steps towards the welfare of society and environment. A maximum number of large organisations have implemented some type of CSR policy. These policy shifts corporation’s primary focus from revenue based on welfare based. CSR policies require the organisation to implement certain policies to protect the interest of various stakeholders such as workers, customers, environment, supplier, and shareholders (Crane, Matten, and Spence, 2013).
One of the primary advantages of CSR policies is that it helps organisations in their recruitment and retention procedure. As per Saeidi et al. (2015), a corporation with an effective CSR policy provides various benefits to their employees since they are part of stakeholders. The employees are treated as an integral part of the organisation, without them the corporation cannot function. Other than monetary incentives, the employee receives various other non-monetary rewards as well, such as opportunities for growth and scholarships. Apple, Google, Amazon and various other large corporations are known for their effective CSR policies regarding employees. According to Edmans (2012), most people in the world already want to work for these corporations which make the recruitment process easier for human resource management. The incentives provided by these corporations to employees help them in retention process. Google has won the best place to work award several times. Google provides its employees family time, personal projects time, free snacks and scholarships for further studies.
The corporations with effective CSR strategies have a high reputation in the market when compared to companies with no CSR policies. According to Aguinis and Galvas (2012), a maximum number of multinational corporations already implemented CSR policies which assist them while operating in foreign countries. CSR policies include various steps taken by the company regarding protection of entrainment. Corporations such as Apple, Starbucks, and Google are known for their CSR policies regarding protection of the environment. These corporations while manufacturing their products did not use the environmental hazardous material, and also operates their activities using natural energy. Apple uses solar energy to operate its factoring in China and to run its data center in the United States. They are also committed to manufacturing 100 percent recyclable products which can be refurbished and used for other purposes (Brammer, Jackson and Matten, 2012).
By effective implementation of CSR strategy, a corporation can attract a large number of investors. Calabrese et al. (2013) provided that the CSR strategy requires corporations to maintain transparency in its transaction which provided a correct valuation of the organisation in financial accounts. It is difficult for companies with effective CSR policies to conduct fraud with its investors. According to Tai and Chuang (2014), the financiers feel that their money is safe in the organisation with CSR strategy because they provide regular disclosures of their performance. Investors can easily measure a corporation’s performance and decide to invest in such company.
Another advantage of CSR strategy is that it increases the sales of a company. As per a study conducted over online retailers, most of them provided that they prefer to buy products from an organisation with environmentally friendly policies (Servaes and Tamayo, 2013). The development in people’s lifestyle increases the requirement of quality and environmentally friendly products. Due to such demand, the corporations can charge a higher amount than their competitors and still sell more products. Apple and Starbucks are good examples, both corporations maintain environmental friendly strategies and charge a high price for their products but still, their products are purchased by a large number of customers.
With all such benefits, there are several shortcomings of CSR strategy as well. The main drawback of implementing CSR strategy is that it changes the preferences of a company. As per Dam and Scholtens (2012), a corporation is based upon revenue based model and their primary objective is to raise their revenues. But after implementing CSR policies, a corporation has to shift its focus to welfare based objectives. By establishing welfare based strategy, instead of enhancing their revenues the corporation has to focus regarding their welfare of society which can be affecting a company’s financial status adversely.
An effective CSR strategy increases the expenditures of the corporation because the company has to implement environmental friendly technology and pay extra benefits to their employees. Fransen (2013) provided that most organisations avoid implementing environmental friendly technology due to its high cost, for example, converting whole data center or factories electricity with solar or wind energy cost high expenses such as solar panels are expensive and building new channels for electricity. The incentives are given by corporations to their employees also increase their expenses and the time given to them for personal things reduces their overall work. Increase in expenses eventually reduces corporation’s profits.
Proper CSR policies provided various benefits to stakeholders, one of which includes full and regular disclosure by company’s directors regarding organisation’s performance and future goals. Investors can use such information to decide whether they want to invest their capital in the organisation. But from corporation’s perspective, regular disclosure can be frustrating and risky. For regular disclosure, the company will require hiring new staff and maintain the record for every small decision, which can be frustrating for the directors. And the future goals disclosed by the company can be used by their competitors while making their competitive strategies (Hsu and Cheng, 2012).
Another drawback of CSR strategy is that it is in demand in developed countries, but in developing countries or underdeveloped countries, the CSR policy is not demanded by customers. According to Rao and Tilt (2016), in developed countries, most customers can afford to pay extra for environmentally friendly products but in developing countries, the customers prefer less expensive products. The corporations can face significant loss if they start charging a high price for similar products in the market. For example, while entering in India, Starbucks enter into a joint venture with Tata groups to keep their product’s prices low, according to the customer requirements. In case of developed countries, if the customers did not see any significant progress quickly, they might change their decision for using the environmentally friendly product and it is tough for corporations to measure their environmental impact.
Even with numerous shortcomings, the impact of CSR strategy has been overall beneficial for the society. As per Loannou and Serafeim (2015), due to CSR policies, most large organisations act as a corporate citizen and did not abuse their power to enhance their revenues. The disclosure made by corporations ensures that proper information is given to stakeholders regarding company’s performance and it reduces the fraud made by organisations. The effect of CSR policies over the environment has been great which helps in reducing pollution in several cities. But, still, there is a requirement of strict guidelines to enforce the CSR policies over organisations.
Many large organisations still abuse their position, for example, Volkswagen has implemented a CSR policy regarding environmental protection but in the recent controversy, theory found guilty of using the highly polluted material in their vehicles. In 2014, the corporations such as Starbucks and Google, which are known for implementing strict CSR policies, has found guilty of tax evasion in the United Kingdom. Apple has been involved in a controversy regarding their factories in China, which makes their employees work under dangerous working environmental with a considerably low salary (Fisher, 2014). Incidents such as this show the requirement of strict implementation of CSR policy by the government for the benefit of society and environment.
In conclusion, the CSR strategy has gained significant popularity in past few years, but there is still a long way for global implementation. Most corporations still avoid implementing CSR strategy due to its shortcomings. The advantages of CSR policies significantly overcome its weakness. It is necessary that small and medium enterprises became aware regarding the benefits of CSR policies. The government should prepare new regulation for strict implementation of CSR policies. Such policies will be beneficial to the interest of society and environment.
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