Write an essay on Corporate Social responsibility.
CSR or say Corporate Social responsibility has been given a lot of attention by the public in this late decade or so. Nowadays, a company is not evaluated by the value of profit which it has been making rather the success of the company is decided by the services it gives back to the community which the company is affecting along with the environment. CSR is more of a moral duty rather than a rigid and fixed law in the international market. This is the reason why many people have raised a question at the very existence of the CSR principle, and many have doubts regarding the mutual benefits which both the community and the company can have a single set of CSR.
Corporate philanthropy, which is sometimes confused with corporate social responsibility, is an important component of corporate social responsibility. The key to corporate philanthropy is to give back to the society with its resources, often financial donations or non-financial aids like providing education programs, medical programs, food, etc. (William 2016).
Some corporate are more committed to corporate philanthropy than others. The reasons why corporate are committed to corporate philanthropy can be summed up into three different types. To start with, it is because corporate can use their charitable acts to improve their competitive context, meaning that corporate can improve the quality of the business environment in which they are operating. Secondly, corporate can use corporate philanthropy to get support from different communities or organizations and surrounding markets, because by committing to corporate philanthropy, a corporate can show the society that it is fulfilling its duty and it has good social ethics. As a consequence, communities and surrounding markets might be willing to cooperate with the corporate. Thirdly, a good will that a corporate can generate through corporate philanthropy is capable of increasing customers' interest and raise favorable opinions towards the corporate. However, some corporations do not commit themselves to corporate philanthropy as much as their peers on account of human psychology. They believe that "the more companies donate, the more is expected of them." (Porter & Kramer, 2002)Also, the associated costs can be very high. It might be true in some cases, but it should not be the reason not to commit to corporate philanthropy.
Now, let us discuss CSR in detail then we will discuss different benefits and disadvantages of CSR, and the very last section of our paper will talk about acceptance and negligence of corporate philanthropy by some organizations and not by some of them. The big fat entrepreneur companies have always had an impact on the society as to providing the basic needs of day to day life, raising the standard of living and creating newer and maintaining old financial and physical assets. As soon as these objectives have been achieved, societies have grown further targets for the firms to take care of and soon the corporate had to look farther than their own employees' well-being to keeping the needs of nature and society under check. Right from the 19th century- the owners of different business realized that to boost their sales of activities and production, it was required to improve the then current problems and issue which included medical facilities, living conditions, and poverty. Preceding to 1900s', people used to take CSR with a cynical eye and thought that CSR led to giving away the benefits of the stakeholders' without their endorsement and the benefits were lawfully limited to the advantages of an organization. From the year 1930 till now, the bigger and stable organization were looked at as a team which was bound by social welfare and obligations. Hence, the concept of CSR and Corporate philanthropy started taking place in the years of 1950's and had undergone several changes to become what it is known in today's world (Caroll, 1999).
It can be said that CSR has been the bridge between good and sound corporate duties and obligations and the loopholes of several government and private sector policies. Corporate philanthropy and CSR are a way for promoting and backing up the firms and people who have been left behind under the transition of rapid growth.
CSR tends to be a major principle or duty of an organization because the range covered by CR is very wide starting from legal, social, environmental and economical. It is a fact that more than 500 Fortune companies have allocated more than 90% of their resources for activities of CSR. The traditional sense of business asks the management to maximize the cash flow of the firm within the market as much as possible, and the activities done through CSR and Corporate philanthropy indirectly help the managers and CEO's to stay true to this facet of the traditional business keeping. As per a survey or more than 600 companies, the initiatives of CSR can be streamlined under categories namely non-country. operations environment, employee support, product and diversity (Kinder, 2003).
There are a lot of benefits to a firm for engaging in corporate philanthropy and the CSR activities (the paper will talk about CSR and philanthropy collectively in the following sections by just naming CSR). These impacts are not just centered on the organization rather the activities have a positive effect on a lot of stakeholders also such as the management, employees, nation, locality, society and finally nature.
Let us look at the advantages of CSR. Firstly, it leads to the increase in market value and profit. Yes, it is true that CSR activities are weakly linked with this but still a positive relation is visible between market value and the CSR initiatives. As per an empirical study, it was noticed that an average placed company with a market value of $48 would be affected by a single unit of CSR rating, and an increase of $17 can be visible in their total growth. Secondly, some of the unique and well-planned initiatives create a good image in front of the customers and the society which works as an instant publicity and hence, attracting the potential customers and keeping the active customers interested. Thirdly, CSR helps in increasing the satisfaction of the customers because these activities help in creating goodwill such that the customers are easily able to drag the products out of competition. Fourthly, CSR activities lead to increase in enhanced productivity and employee satisfaction. The philanthropic activities back up and support the employee of the organization who has not been able to help the society till now in a productive manner. These activities also assist in harnessing different quality sets in the employees. Hence, a combined personal and community advantage to the employee is helping the firm for creating a hassle-free and healthy working environment (Kramer, 2002).
CSR helps the organization in creating a positive brand image as well as corporate reputation and the entire CSR system is flexible enough to align the activities with the business activities. As per various studies, CSR leads to positive environmental and social impact and reduce the number of operations costs through a process of innovative processes, services and products- for example, at times firms are engaged in re-engineering their plants such that pollution is reduced in the surrounding society and this at times may also lead to a reduction in the production cost.
In recent times, CSR activities and corporate philanthropy have become more of an obligation and quite pervasive in nature, hence, there are some challenges obstacles, if one looks through an old view of the stakeholder. Most o the activities of CSR act as a cost centre for the organizations and most of the times, organizations are not able to fulfil their primary motive of maximizing the value of shareholders, these sources of investment do not lead to any considerable measures for returning good values to the stakeholders. At the time of allocation of duties many of the good employees are made to invest time in such philanthropic activities which result in a reduction of working hours for their primary objective hence, hindering the collective goal of the firm, stake holder, and personal goals. The employees are exhausted due to absolute requirements of such tasks. A lot of NGO's and other firms have pointed out at the very intent of big financially fat organizations for doing such noble works. Today, it can be said that most of the corporate are doing such activities to practice PR exercises and keeping in mind the financial benefits alone. So is it right? If it is helping both society and the firms but if it not ethical?
In today's time, the CSR and philanthropic works have become integrated into the system of the businesses and this at times can hinder the smooth working of the organizations as companies are not ready to face the repercussions of untimed and over CSR activities. Because of inculcation of CSR activities, many workplaces can become hub of tension and packed schedules as the employees will be forced to work on their primary task and the philanthropic tasks simultaneously which will make the employees fatigued and over burden, this, in turn, is not a good sign for stakeholders to invest time and money in such organizations. Hence, CSR can be seen as a potential risk
Now, the following sections will talk about reasons why different firms are opting for philanthropic tasks and why they do not.
Grounds for some companies being more committed to corporate philanthropy
It is so true, and it can be experienced by us in many ways, all we need to do is just go to any nearby university, hospital or museum and we will find several examples of corporate philanthropy.
The organizations have been empathetic about contributing to the society both through charity and also by making their practices more and more socially responsible. As the CEO of Unilever, Paul Polman says that a CEO today is not judged alone by the amount of profit he is making for the organization rather he is also judged by the impact which he/she is having on the society in all. Hence, this dip in the ratio of contribution does bewilder but as some of the experts have marked this drop as an indication of corporate giving by theory that quality of giving overpowers the quantity of giving. Well, no sure shot proof is provided regarding his trend but now let us see at some of the factors which do affect corporate organization while doing philanthropic tasks (Kramer, 2002).
The arguments by Friedan in 1970 started a debate which is still persistent, and firms are still under dilemma of using or not using corporate philanthropy. Yes, Friedman can be stated as true looking at the current status of social services given by organizations. They are unfocused and profit oriented, but there are other facets also which organizations are doing and practicing social philanthropy in a proper manner.
Companies use these services for enhancing their competitive context, for improving the quality of business in the regions where they operate and also in the periphery regions (Watch, 2006).
Secondly, usage of social philanthropy aligns the socio-economic goals of a company, and the company can enhance the long-term prospects.
Thirdly, corporations which are practicing social giving in today's tome can provide charity and leverage their relationships and capabilities in social and charitable causes. Such acts from the firms have a far-reaching effect on the society which cannot be encompassed by individual donors, government or foundations (Wasson, 2015).
Context-focused philanthropy helps the firms using corporate philanthropy to gain socially as well as economically. For example, Cisco Systems has invested in an ambitious program for education purpose named the Cisco Networking Academy which has taken the onus to train administrators of computer networking, which has led to enormous growth of the company and at the same time it has helped in providing the society with opportunities of new jobs to the high school graduates. Cisco has been able to turn another stone and unlocking the potential of social philanthropy by focusing on the social needs which affect its business and also using its unique features of organization for addressing these needs (Smith, 1994).
CSR activities have been helping the companies in indulging and involving with the local communities in an intensive manner. Some of the sustainable business has today turned out to be the biggest profit gaining firms and it is all due to the trust of stakeholders in the transparent working of the firm. Today, more the companies are vocal about their operation more trust they gain from the people which attract more customers automatically. Hence, there is no doubt as to why some companies have really taken the bull of CSR by its horns and are trying to inculcate the different practices in their system of working and be an arsenal of socio-economic growth for society
Reasons for some firms being less committed to corporate philanthropy
It is important to keep in mind that quantity alone and percentages are not the right markers for measuring the philanthropic works done by organizations. For example, in U.S. in the last 30 years, the percent e of the pretax profit have important one down from a high of 2.1 percent in the year 1981 to a low 0.8 percent in the year 2012. The year to year ratios do vary, but it is ironic that the contribution purposes have risen in periods of reduced corporate earnings.
Now, not everyone feels that social philanthropy is something which an organization should practice so intensively and on a regular basis. At the times of social calamity, yes, the groups should help on the grounds of humanity but not under flourishing economic times. In a New York Times article, Chicago economist, Milton Friedman said that every business organization has the onus of just one social responsibility, and that is to use its resources potential and engage in activities which boost the productivity and profits of the organization. As per Friedman, corporate philanthropy was just simple giving without even authorizing formalities or the business plan with various stakeholders such as customers, employees, and management and for him, this entire scheme is nothing more than a fraud. People might find his thinking to be unorthodox, but this is the view which many firms share and do not practice the CSR and philanthropic duties and neglect them entirely.
When he was provided at the notion of community sport being an imperative for better business and increasing profits, he apparently dismissed the idea saying that it was just, "hypocritical window dressing." In America, FDR also opposed the legislation of community support to be deducted as a business expense on similar grounds as Friedman, but it was only after vigorous opposition from big business firms that it had to be pulled down by Roosevelt's government.
CSR became more and less known, and if we peep back in near the past, then we can say that Steve Job steered Apple was almost missing from any philanthropic activity, and there is no doubt that silent support within the organization for such notions works as an effective brake on the corporate giving (Du, 2015).
Secondly, it can be said that the decline in corporate giving is directly related to the increase in pay of CEO's of the company. Not only the CEO pay had risen fourfold, but the mix compensation also changed drastically effecting social giving. This led to more money staked at stock market from the end of the CEO, and they had to work around tight corners to keep the higher quality of a company by neglecting the social welfare activities. Now for example, in the window of 2001-03, the aggregate percentage of the salary of top five CEO was around $92 billion which rounded up to more than 10.3 percent of the firms total and almost seventy percent of this compensation was tethered to the share price. Most of the payments were made on the short-ranged measures and as Curt Weeden who is a leading expert of corporate philanthropist, said that if corporate firms are eyeing at short-ranged results than the social giving are going to experience the bad impact (Stern, 2013).
Thirdly, the more you give, the more expectations rise, this is definitely at the back of the management team's mind, and they feel no matter how much they cater to the society, the society will keep coming back with bigger and heftier needs which will soon engulf the private organizations and make them virtually Non-profit organizations or finish them. The organizations at times go way beyond in order to be philanthropic which can hurt their image. For example, in the year 2003, Coca-Cola was forced to release sensitive information about a problem in their systems due to which chemical had leaked in their bottled beverages. Although, the company did a good work by informing the society of its own short comings but the sales of the company dropped 60% for a short term window of two weeks.
Philanthropic duties lead the organizations to a more sophisticated working and they are forced to change their thinking for the business in many ways which leads to a cumbersome working and operations. For example, Wall-Mart has a strict regulation for product quality. Hence, the suppliers are forced to invest more time in production which overburdens the suppliers whereas other competitors are able to work at lower budgets and invest less time in activities related to production (Evans, 2012).
As the income gap increases rapidly and as there is tremendous pressure on the natural resources for sustaining the human population, the CSR initiatives are really important for restoring the very faith amidst our mankind. This belief has to be backed up by the capable and strong resources of the business firms. The CSR should be seen as an innovation, opportunity, and competitive advantage by various firms which ultimately lead to happier consumers. Nowadays, companies are adopting the CSR strategies more rapidly into their vision, system and mission statements and aligning it with their aims. Hence, bringing the CSR initiatives closer and more integral to their very existence (Luo & Bhattacharya, 2006)
It is really important for today’s world industries to follow CSR and for their company's competitiveness. The CSR brings along with itself various factors ranging from cost savings, risk management, customer relationships, and access to capital, innovation capacity and human resource management. CSR will help in promoting as well as encouraging more environmental and social responsibilities to be extracted from the big and small corporate companies at such a time when consumer confidence on companies and entrust in businesses has slumped down considerably due to crisis.
If we talk about the European nations alone, then through CSR, firms can contribute in a hefty manner to the treaty objectives of the European Union which promote and account for a high level of competition in social market economy and sustainable development. The principles of CSR clearly support the objectives of the master strategy of Europe which is supposed to be fulfilled till 2020 strategy relating to sustainable, smart and inclusive growth.
Engagement with various internal and external stakeholders is the need of CSR practices hence, it help the company to anticipate the future prospects in a better way and they are able to get advantage in rapidly changing expectations of the society along with the operating conditions which means that CSR can also act as a medium for developing the newer markets. Hence, CSR helps in creating real time opportunities for growth purposes. The social responsibilities ensure that enterprises are able to build and maintain the long-ranged consumer, citizen and employee trust as a core for their sustainable models of business (Ariadne, N.D.).
Although, it is important for the companies to go round the obstacle of disorientation and non focussed philanthropic activities because it will only burden the companies stakeholders and make them despair as they will see loss of resources in unwanted situations. It is really essential to keep a check on CSR activities and management should be vigilant enough not to exhaust their resources or empathy from the society. The competitors can use the ploy of CSR for regarding a company’s image and represent the company as using CSR activities for only PR activities and doing it for their own good.
Companies have got a really fine line to work around CSR and it is their duty that they should ensure that Friedman’s word should not turn out to be true and they are able to grow also along with helping the society and its stakeholders equally.
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