Corporate Social Responsibility (CSR) Essay: Nature, Obligations, And Approaches.

Nature of Corporate Social Responsibility

Social responsibility helps the businessmen to draw a balance between the profit oriented activities and all those activities that are beneficial from the societies point of view (Hartman, Desjardins and MacDonald, 2014). A corporation is an artificial person that has completely different identity for its owners. Being an artificial it cannot see or touch but still it has some responsibilities towards the society. CSR stands for corporate social responsibility. It can also be read as, corporate citizenship or corporate conscience. As, every business acquires resources from its surrounding so, it become their responsibility to take care of the same. CSR policy assures that all the functions are performed by the business man in compliance with ethical standards, national as well as international rules and regulations (Kesselring and Selvage, 2013). CSR helps an organisation to attain its mission by drawing clear lines or the path which clarifies how the organisation will represent to its target group members.

As per the section 135, all those companies who had invested more than five core or sum equal to it, are liable to undertake all the social consideration. In order to assure that all the entrepreneurs make the payment and fulfil their responsibilities well with the specified period, special committee are setup.

In this essay discussion will be carried on CSR, its nature, chances of increase in profitability of the organisation after adoption of Corporate Social Responsibility.

There are three main approaches of social responsibility they are - corporate social responsibility, the triple bottom line, stakeholder theory.

Under the Corporate social responsibility companies have to fulfil four basic obligations. This includes- economic, legal, ethical and philanthropic responsibilities (Pedersen, 2015). Every firm is establish to earn profit but there are few non-profit organisation whose main focus is not on the profitability but still they earn reasonable amount so, that they can help other organisations if they are in need.  In this way these firms fulfil their economic responsibilities.

Figure 1 corporate social responsibility pyramid

There are certain rules and regulations made by the government that every organisation need to keep in its mind while working. Whereas, there are few organisations like W. R. Grace which at the initial stage do not follow rules and regulations but later when the government impose fine on them they started giving importance too all laws.

Few responsibilities are needed to be performed without any obligation. These are commonly known as ethical responsibilities (Johnson, 2017) for e.g. in Woburn, Massachusetts deals in Beatrice foods. Company was engaged in disposing all the waste in water which resulted in water pollution and destroyed the image of organisation in the eyes of its customers so, it’s important to pay attention towards the ethical responsibility. Similar to this is philanthropic responsibility, in this entrepreneur tries to ease conditions for the society. For e.g. Google has developed the programme name “DATA-driven”. It focuses on improving the education for the students.   

The triple bottom line is another important theory of social responsibility. This theory is based on the sustainability. As per this theory a company can rate its performance on the basis of three major scales, they are- economic, social and environmental sustainability. Economic sustainability has a persistent nature (Wheelen and Hunger, 2017). Few companies like Ford Pinto, had taken many decision which has helped the organisation to attain tremendous growth within the short span of time, but this might cause long term harm to the society. In such cases there is a need to take strict actions against such organisation.

Obligations under Corporate Social Responsibility

Social and environmental sustainability focuses on few things such as, competition is quite normal in the business world but there should be a healthy competition. This will help the organisation in building goodwill in the market. Apart from this, there are some responsibility of the companies towards the environment in which they are performing different task. Many a time they may also indulge in degrading natural resources such as, air water and soil because of which they might be in charged to pay heavy compensations. For e.g. BOSCH, this company works on the guidelines that “it’s better to lose the money then trust among people” main focus of the firm was on maintaining ecological and social balance in the environment by planting more trees (Schaltegger and Wagner, 2017).

Although business provides many things to the society but on the other hand, it also put burden over it. These burdens are mainly because of the manufacturers as, they are actively engaged in production work which causes water, air as well as soil pollution. JVCKENWOOD industry under that they will be able to run their organisation for the longer period of time only after contribution to the society. These contributions can be done in many ways. Some of them are involving in active interaction with the stakeholders, performing all the activities that shows, organisational supports to culture and religion.

There are wide ranges of theories that are given by different authors. But stakeholder theory is most important among all. Although the theory is one but all there are different opinions given by different writers/authors, which have resulted in different approaches of earning profit by CSR.

According to Frenchman, business is not all about earning profits; it also involves serious focus on eliminating discrimination on the basis of cast, colour, creed, sex and provide proper employment opportunity to all those who are unemployed. This will improve the image of organisation in the eyes of all stakeholders which will results in, increase in the profitability of the company.

Milton Friedman has taken shareholder approach for fulfilling all the social responsibilities. As per this approach shareholders are taken as, economic agent because they are the one who invest the money in the business with the expectation to earn reasonable amount of returns in near future (Wieland, 2017). Contrary to this, as the main aim of the organisation is to be to earn profit so, there is no need to fulfil their responsibilities towards public.

This concept is properly explain in the book name “Capitalism and freedom”. The book was published at the time of World War 2. In this book clear explanation is given that there is only one responsibility of the business that is, use all the resources and perform all those activities that helps in increasing profits. This will help an organisation to stay in the game.

Freeman and Friedman both have different opinion regarding the goals and the responsibilities of firm. Mr Edward was the first to give stakeholder theory. It’s considered as one of the major element of CSR because of this many organisation had made it an important part of their corporate strategy. Although they all are trying their level best but still they are unable to convert their words into actions. For e.g. many big organisations such as, Google and Starbucks had given major importance to this theory. Both the companies have adopted legal measures because they were taking advantage of loopholes present in British taxation system. Now the Starbucks in order to win over its customers has to pay Euro10m in the upcoming next two years (Andriof et.al. 2017).                                              

Approaches to Corporate Social Responsibility

As per the views of Freeman (stakeholders theory) all those number of people who are having stake in the organisation can give their contribution in determining the factors which will help the organisation to move ahead (Phillips, 2011). However, Friedman has completely different opinion. According to him, businessmen’s are not responsible for all those number of people who are outside the organisation but still have their ownership in it (Harrison and Wicks, 2013).

In the opinion of Freeman Employees, competitors, local community any one can be the stakeholder, apart from this author is quite clear regarding all his queries. Some of them are, among all the stakeholders who will pay the expense to manage the firm and who are able to attain its benefits. Friedman does not pay much attention to all these questions, which result in earning high profitability (Harrison, Freeman and de Abreu, 2015).

Employee segment is the important area which Friedman has overlooked. Whatever the success that organisation is able to attain is because of its employees which are considered as an essential asset of the organisation. If the firm is able to keep their employees happy, then then it will reduce employee turnover ratio and help to build strong team of good workers within the organisation. These good workers will work more efficiently and effectively which will further help the organisation to earn satisfactory amount of profit.

Each and every thing in this world has two faces, “one is good and other is bad” and it is because of the different perceptions of individuals living in this universe. Similarly, Friedman in his theory believes that in spite of paying attention to an individual sector of employees, multiply groups should be taken into consideration as, all the segments are interrelated. Therefore by establishing equality among all the segments organisation can earn considerable amount of profit.

Similarly, Clarkson and Wood possess different opinions. Clarkson has divided the stakeholders into two major categories, primary and secondary. Primary stakeholders are very important for the organisation as firm cannot survive longer enough without their participation whereas, secondary stakeholders are not directly involved or have capability to influence the corporation.

On the other hand, Mr Wood divide the stakeholders on the basis of three major attributes such as, their command over the others, legitimacy and earnestness (Clemens et.al. 2014). Further on the basis of these attributes they are broadly divided into three major classes namely- latent, definitive and expectant stakeholders.  If the powerful group of stakeholders are shareholders then there are high chances that there firm is able to earn high profits only because of their existence.

There are three models of social responsibility that will help us to understand all the above statements in properly, some of them are- Carroll’s, Halal and Ackerman’s model (Yakovleva, 2017). Among all these models (Yakovleva, 2017) is the best as, it’s used by, any organisation in order to fulfil their social responsibility. This model in involve three important concepts based on corporate performance. Each and every firm have some duties towards the society. Some these duties may include, economic, ethical, discretionary and legal.

Triple Bottom Line

As every corporation came into existence in order to perform some work with the motive to earn reasonable amount of profit. This help them indirectly to fulfil their all the legal obligations well on time. On the other hand, there few responsibilities that are not mandatory to be performed but still entrepreneur should pay proper attention toward them (Suliman, Al-Khatib and Thomas, 2016). Similarly, discretionary responsibilities are the one which aim at voluntary contribution of corporation in all the social causes such as, Starbucks has aim to strengthen community. Carroll had presented all these four categories in the pyramid form.

Halal’s model is based there are many conflicts that occur within the organisation and the most prominent among them is the conflict that occurs between shareholders and social obligations with the motive of increasing wealth (Yunan et.at. 2017).

Ackerman’s model involves three phases different phases involved in the development of social responsibility (Yang et.al. 2011). First phase, it focus on identifying the social problem that firm is facing from the longer period of time. Second phase, at this stage experts are been appointed so, that they can give their suggestions for improvements and in the last phase, full prove social responsibility programme is made. One of the best example of CSR is TISCO an Indian firm, in which social audit was conducted by the firm in year 1970s.

It can be concluded that, “The social responsibility of a business is to increase its profit”. It is very important for any organisation to earn reasonable amount of profit so that it can make payment to all its stakeholders well on time, as the result of contribution made by them in the organisation by making some investment. There are different models which explain different approaches to perform social work in order to establish good image in the eyes of society members. This good image can be set by performing different social activities such as, ethical, social and many more. Apart from all these, there are certain theories that given experts to show different approaches towards fulfilling social responsibility.

Now a day’s governments of all the countries are also giving it importance to social obligations, by developing appropriate policies as well as laws. So, we can say that social work is preformed not with the motive of earning income but with the aim of getting suitable outcomes. Further this will help organisation in increasing its profitability.

References

Andriof, J., Waddock, S., Husted, B. and Rahman, S.S., 2017. Unfolding stakeholder thinking: theory, responsibility and engagement. Routledge.

Clemens, M., Rijke, J., Pathirana, A. and Quan, N.H., 2014, September. Effective stakeholder analysis for urban flood resilience in Vietnam using design proposition. In the International Conference on Urban Drainage, Sarawak, Malaysia (pp. 7-12).

Harrison, J.S. and Wicks, A.C., 2013. Stakeholder theory, value, and firm performance. Business ethics quarterly, 23(1), pp.97-124.

Harrison, J.S., Freeman, R.E. and de Abreu, M.C.S., 2015. Stakeholder theory as an ethical approach to effective management: Applying the theory to multiple contexts. Revista Brasileira de Gestão de Negócios, 17(55), p.858.

Hartman, L.P., DesJardins, J.R. and MacDonald, C., 2014. Business ethics: Decision making for personal integrity and social responsibility. New York: McGraw-Hill.

Johnson, T. ed., 2017. Globalization and the Ethical Responsibilities of Multinational Corporations: Emerging Research and Opportunities: Emerging Research and Opportunities. IGI Global.

Kesselring, P. and Selvage, C.S. eds., 2013. The IEA/SSPS Solar Thermal Power Plants—Facts and Figures—Final Report of the International Test and Evaluation Team (ITET): Volume 1: Central Receiver System (CSR). Springer Science & Business Media.

Pedersen, E.R.G. ed., 2015. Corporate social responsibility. Sage.

Phillips, R.A. ed., 2011. Stakeholder theory. Edward Elgar Publishing.

Schaltegger, S. and Wagner, M. eds., 2017. Managing the business case for sustainability: The integration of social, environmental and economic performance. Routledge.

Suliman, A.M., Al-Khatib, H.T. and Thomas, S.E., 2016. Corporate Social Responsibility. Corporate Social Performance: Reflecting on the Past and investing in the Future, p.15.

Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. Pearson.

Wieland, J. ed., 2017. Creating Shared Value–Concepts, Experience, Criticism (Vol. 52). Springer.

Yakovleva, N., 2017. Corporate social responsibility in the mining industries. Routledge.

Yang, J., Morris, M.R., Teevan, J., Adamic, L.A. and Ackerman, M.S., 2011, July. Culture matters: A survey study of social q&a behavior. In Fifth International AAAI Conference on Weblogs and Social Media.

Yunan, Y.S.B.M., Well, C.A.C., Osman, L.H., Yazid, Z. and Ariffin, A.A.M., 2017. Post Service Quality as Predictor for Halal Warehouse Adopter Satisfaction. International Journal of Academic Research in Business and Social Sciences, 7(4), pp.999-1008.