The Importance of Integrating CSR

 

            CATHERINE MAE J. SADIAN-BUMANGLAG

Abstract

In this article, " Integrating CSR," we explore the growing trend of companies integrating Corporate Social Responsibility (CSR) into their business models. Companies are realizing the need to not only make profits but also have a beneficial influence on society and the environment. Nowadays, consumers are becoming to be more socially and ecologically aware. This article will tackle into the reasons why companies are choosing to integrate CSR and the benefits that it might bring.

The main purpose of doing business is to generate profit. But a lot of companies have considered CSR as another reason for them to continue business. Because of CSR, businesses became more socially and environmentally aware. Businesses have claimed that CSR benefitted their companies in a lot of ways.  

However, others claim that there are also challenges that companies face when implementing CSR initiatives. This article will tackle both the benefits and challenges of implementing CSR. By providing a comprehensive overview of the topic, this article aims to serve as a valuable resource for companies looking to take their first steps towards integrating CSR into their business models. Ultimately, this article argues that CSR is no longer a choice but rather a requirement in doing business. Companies that don't embrace CSR risk falling behind in today's rapidly changing market.

Key Words: CSR, purpose of doing business, CSR importance, challenges of CSR

Introduction

In today's fast-paced and competitive business environment, it is easy to get caught up in the pursuit of profits and short-term gains. Some companies become so blinded in generating large profits that they turn to unethical and illegal ways of doing business. They fail to realize that this will stain the company’s name and might risk its’ existence.

However, an increasing number of companies are beginning to realize that there is more to business than just making money. They dig deeper to their purpose. These companies are turning to corporate social responsibility (CSR) to meet the needs of their stakeholders and differentiate themselves in the market. They realized that CSR can also build brand loyalty, and long-term value. But what exactly is CSR, and why is it important for businesses to integrate it into their operations? In this article, we will explore the concept of CSR and the many reasons why it is crucial for businesses to embrace it.

Brief History of CSR

During around mid-1800’s, issues on employment have risen. Growing criticisms of the emerging factory system, working conditions, and the employment of women and children were being brought to light, especially in the United States. Worker wellbeing and productivity became a growing concern among industrialists. 

Corporate Social Responsibility started as a mere act of giving something to other people for a certain purpose. During the late 1800’s, an industrialist from the steel industry business named Andrew Carnegie donated large portions of his wealth to help in the education and scientific research sector. Later, John D. Rockefeller of the oil industry business donated more than half billion dollars to religious, educational, and scientific causes.

In 1953, Howard R. Bowen coined the term “Corporate Social Responsibility in his publication “Social Responsibilities of the Businessman”. Bowen is referred to as the “Father of CSR”. He defined CSR as the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society."  

The 1990’s marked the beginning widespread approval of CSR. In the 1991, Donna J. Wood published Corporate Social Performance Revisited, which expanded and improved early CSR models by providing a framework for assessing the impacts and outcomes of CSR programs. In that same year, Georgia Archie B. Carroll published his article “The Pyramid of Corporate Social Responsibility” and expanded on areas he believed were crucial when implementing CSR in an organization. 

By the early 2000s, CSR had become an essential strategy for many organizations, with multi-million-dollar companies, such as Wells Fargo, Coca-Cola, Walt Disney, and Pfizer incorporating this concept into their businesses processes. 

Other Definitions of CSR

Aside from the earliest and most prominent definitions of CSR by Howard Bowen and Caroll, Frederick (2006) summarizes what CSR stands for in the 50’s under three basic issues: corporate managers are appointed as public trustees, the need to balance competing stakeholders claims with corporate resources; and the acceptance of philanthropy as a humane philosophy and discretionary principle of the organization.

Moving onwards from then CSR has transformed from philanthropy to regulated practices and instrumentality or strategic CSR. Corporations are increasingly receiving more pressures on compliance with regulations on environmental protection, transparency, and the market is saturated with competitors thereby necessitating the introduction of CSR as a strategy to survive and be more efficient (Glan, 2006).

Researchers in this period are focusing on the impact of CSR on financial performance (Brammer & Millington, 2008; Ruf et al, 2001; Surroca et al, 2009). The focus of CSR conceptual review and empirical studies has shifted from an ethics orientation to a performance orientation. The essence of engaging in CSR in the new millennium is tagged as “doing good to do well” (Rosamaria & Robert, 2011). Institutional pressure for CSR improvement has increased necessitating introduction of CSR initiatives that focus beyond shareholders wealth maximization (Waddock, 2008).

Definitions of CSR shows that corporations are expected to contribute towards the welfare of the whole society.

Lei (2011) in his analysis on evolution of CSR definitions maintained that the area of focus to all analyzed definitions are; sustainability and social obligations like economic, legal, ethical and discretionary responsibilities.

(Dahlsrud, 2008) concluded that doing CSR is based on five dimensions; environmental; social, economic, stakeholder and charity dimension.

(Shafiq, 2011) gave a ten dimensional points on CSR definitions, which gives a full summary of all issues mentioned in various definitions of CSR, they are: obligation to the society, stakeholders involvement, improving the quality of life, economic development, ethical business practice, law abiding, voluntariness, human rights, environmental protection, transparency and accountability.

European Union’s Official Definition Of CSR

The European Union, in an attempt to offer a framework for companies wishing to invest in sustainable development, published in 2001 a Green Paper on Corporate Social Responsibility defining CSR as:

“The voluntary integration of companies’ social and ecological concerns into their business activities and their relationships with their stakeholders. Being socially responsible means not only fully satisfying the applicable legal obligations but also going beyond and investing ‘more’ in human capital, the environment, and stakeholder relations.”

ISO 2600 Official Definition Of CSR

The International Organization for Standardization (ISO) is an international standard-setting body that also addressed the definition of CSR through its ISO 26000 standards on Corporate Social Responsibility. In these guidelines, ISO defines CSR as:

“The responsibility of an organization for the impacts of its decisions and activities on society and the environment, resulting in ethical behavior and transparency which contributes to sustainable development, including the health and well-being of society; takes into account the expectations of stakeholders; complies with current laws and is consistent with international standards of behavior; and  is integrated throughout the organization and implemented in its relations.”

The Growing Importance of Social Responsibility In Business

1.    CSR can help you attract and retain employees. 

One of the major reasons people apply to various companies is because of their CSR projects. CSR demonstrates that a business is caring and treats everyone fairly, including its employees. A company that is dedicated to making the world a better place is likely to draw in more talent. This demonstrates how seriously employees consider social responsibility. CSR initiatives also support the development of a more effective and enjoyable workplace for employees. It encourages workers to put out good work and volunteer.

2.    CSR can save money. 

Because of CSR, employees might stay longer in the company. They perceive that they are helping the community while doing their job because of the CSR initiatives of the company where they work. This helps cut money since employee turnover will be low and there would be lesser expenses for hiring new employees. 

3.    CSR can improve customers' perception of your brand.

The competition in the business world of today is stiff, and it can be quite challenging for a company to set itself apart in the eyes of customers. However, companies who take social responsibility seriously may attract customers and provide a platform for marketing and grabbing the interest of their target market. CSR may make a firm appear to be a force of good in the community advancing general welfare. The CSR projects can help raise awareness for important causes and keep the business on top of the minds of customers or potential customers. Consumer loyalty goes a long way in helping a business stay afloat. 

4.    CSR shows a sign of accountability to investors. 

Businesses that are socially responsible can also appear more attractive to investors. A business that is able to manage finances while still helping its’ community is perceived as accountable and transparent. According to a 2016 report by Aflac, investments in CSR are not typically viewed by investors as a waste of money, but rather an "indicator of a corporate culture less likely to produce expensive missteps like financial fraud." The study said 61% of investors consider CSR a sign of "ethical corporate behavior, which reduces investment risk." 

5.    CSR can enable you to better engage with customers.

CSR can help your business have better connection with customers. Some CSR activities requires businesses to interact directly with members of society, who may also be customers or potential customers. With directly interacting with customers, the business will have direct feedback on what the company is doing right and what the company needs to improve on. Word-of-mouth is still an effective form of advertising, and customers who have been part of the social responsibility created by a company are able to tell other potential customers about the business.

Famous Companies with good CSR practices

Jollibee Foods Corporation and Ayala Corporation are two of the companies that have committed to using their business to make a positive impact on society, in addition to generating profits.

Jollibee Foods Corporation is a Filipino multinational company that operates a chain of fast food restaurants. Jollibee is famous with its “Busog, Lusog, Talino” program which aims to aid children who are identified as undernourished.

The company's corporate social responsibility (CSR) program known as "Busog, Lusog, Talino" and focuses on three main areas: Busog (Nourishment), Lusog (Well-being), Talino (Knowledge). Jollibee believes that if they help children receive enough physical nutrients, it will contribute a lot to their overall well-being, physically, emotionally, socially, and mentally. In turn it will be more possible for them learn at school and accumulate more knowledge for them to be successful in the future. Overall, Jollibee's CSR program is focused on promoting nourishment, well-being, and knowledge in the communities in which it operates.

Jollibee Group Foundation (JGF) first became involved in school-based feeding in 2007, when it launched its Busog, Lusog, Talino (BLT) School Feeding Program to address shortterm hunger and malnutrition among public elementary pupils in different parts of the country. By SY 2015-2016, BLT school feeding had reached 165,000 pupils in 1,567 public schools together with over 200 partners.

In 2016, the Department of Education’s (DepEd) budget for its School-Based Feeding Program (SBFP) was increased to cover all undernourished pupils in public elementary schools in the country. With this development, JGF shifted its approach from direct school feeding to building BLT School Feeding Kitchens. Each BLT Kitchen serves as a commissary or a central site for food preparation and distribution to surrounding schools, feeding hundreds of children daily with less time and effort. The model was piloted in Tarlac in 2015 where the first kitchen served 5,000 pupils. With the proof of concept established, DepEd adopted the BLT Kitchen as a modality for SBFP implementation starting SY 2016-2017. Ten (10) more BLT Kitchens were constructed, reaching 7,700 undernourished pupils in 60 public schools in various municipalities and cities. As of SY 2018-2019, there are 33 BLT Kitchens across the country catering to more than 25,000 severely wasted and wasted pupils in 235 public schools.

Beyond school feeding, BLT Kitchens are platforms for various members of the community to work together. DepEd facilitates school selection and provides funds for feeding. The principals and feeding coordinators oversee kitchen operations while parent volunteers prepare, cook, and serve the food. Local Government Units (LGUs) provide allowances for parent volunteers, facilitate their medical screening, and coordinate the pick-up and delivery of food. For its part, JGF leverages the strengths of Jollibee Foods Corporation (JFC) as a food company and provides kitchen equipment, facilitates food preparation and distribution system, as well as volunteer training. JGF’s publication of this recipe book forms part of its technical assistance and continuing support to the BLT Kitchens and DepEd’s SBFP.

Ayala Corporation is a Philippine conglomerate with a number of subsidiaries and businesses in various sectors, including real estate, banking, telecommunications, and water. The company's corporate social responsibility (CSR) programs are focused on three main areas namely: Environment, Education and Community.

Ayala Corporation is committed to supporting the communities in which it operates and has several initiatives in place to address social issues and improve the quality of life for people in these communities.

Ayala Corporation have seen the need for a drug rehabilitation center in Marawi. Along with its’ continued commitment to its community and as part of their CSR, they built “Siyapen”, the first community-based drug rehabilitation center. Siyapen is named after the Maranao word for “care”. Siyapen was built in partnership with the City Government of Marawi and the Autonomous Region of Muslim Mindanao (ARMM). The facility has a 60-bed capacity and amounts to around PHP30-million over to the local government unit in January 2018.

The facility seeks to provide a space that encourages physical wellness and social integration. Located within the community, the center allows drug dependents to have better access to family and other forms of social support, which are crucial to their recovery. In addition, its proximity to a mosque opens opportunities for spiritual counseling. The facility also allows for other therapeutic activities such as exercise and group sessions.

“The Siyapen Drug Rehabilitation Center is our way of addressing another challenge Mindanao faces, and of responding to the national government’s call for private sector support in addressing the drug problem,” said Jaime Augusto Zobel de Ayala, chair and chief executive officer of Ayala Corp. and co-chair of Ayala Foundation.

During the pandemic, Siyapen was converted as a quarantine facility housed locally stranded individuals (LSIs) who are tested positive for Covid-19 but asymptomatic. But only Marawi residents were allowed to be housed at Siyapen.

Challenges of Implementing CSR

1. Responsibility towards Shareholders only

            Some argue that a business is accountable only to its shareholders and not in the whole society. Some entrepreneurs claim that the sole aim of the business should be to gain profit for its stakeholders. Doing CSR violates this objective and does violates the basic rule of serving its stakeholders.

2. Failure of the public to recognize organizations through CSR

            Some communities sometimes neglect or put little attention to organizations that do CSR. While other communities are warm and are very conscious of companies that do CSR. Organizations that do CSR are not sometimes recognized eben though it benefits both the company and the society.

3. Input not equal to the output

            Doing CSR entails a lot of effort for a company. It uses its financial resources and allots time for it to successfully implement CSR for the betterment of the society. But sometimes the public fails to recognize this effort and denies the appropriate appreciation and acknowledgment that a company deserves.

4. Mentality of consumers

Some consumers always think that every move of a company is done solely for its own benefit. Because of this, the efforts of doing CSR by some companies become neglected. This upsets some organizations to do CSR as they see that there is no need to do CSR initiatives.

Conclusion

Over the years, CSR has grown to be of a more serious topic. Businesses have viewed it as a way that they could give back to the community where they operate. Businesses can no longer operate with the sole aim of making profits at the expense of the environment, society, economy, consumers, and employees. It led to a growing concern to take good care of their employees, the environment, comply with legal requirements set forth by the government and give back to the society. CSR became the balance between just merely gaining profit. CSR became a purpose to some businesses. That to give back to society, act ethically and be responsible in their business pursuits is a must. CSR lets business owners to rethink their purpose and realign their actions to what is right and ethical.

References: 

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