Marivic B. Gonayon
Divine
Word College of Laoag
Abstract
The term "Corporate Social
Responsibility" or CSR came into common use in the late 1960s and early
1970s, after many multinational corporations formed. Corporate Social
Responsibility or CSR is when a company operates ethically and sustainably and
deals with its environmental and social impacts. This means careful
consideration of human rights, the community, the environment, and the society
in which it operates. Corporate Social Responsibility or CSR is a business
approach companies follow to make a social impact and focus beyond profits. CSR
is titled to aid an organization's mission as well as a guide to what the
company stands for and will uphold to its consumers. Considering different
aspects that have a huge impact on a business is vital for the business'
success and profitability. This article answers the question, "Is CSR
beneficial for those who decide to put up a business someday as well as the
society and environment?". This article also discusses a lot of arguments
from different authors which help readers to fully understand the essence of
CSR concerning business, whether someone is still starting to put up a business
or for the improvement of business.
Keywords:
Corporate Social Responsibility, Social Responsibility,
Categories
of CSR, Business Benefits of CSR, Ways to Incorporate CSR into Your Business
Introduction
CSR stands for Corporate Social
Responsibility and is a business’s approach to sustainable development by
delivering economic, social, and environmental benefits. It also encapsulates
the initiatives by which a company takes responsibility for its effect on
social and environmental well-being. CSR looks beyond the company's profits and
focuses on benefiting the greater community (Hall 2020). The comprehensive
definition of social responsibility is concerned with what is or should be the
relationship between global corporations, governments of countries and
individual citizens. More locally, the definition is concerned with the
relationship between the corporation and the local society in which it resides
or operates (Kapur 2020).
It is important to look at the wide range
of aspects that can affect a business including the reputation of a business.
By following the business approach which is the Corporate Social Responsibility
main focus is to bring together people of different cultures, backgrounds, and
ideologies to support and advance a single common initiative for the betterment
of all people and to increase profitability in business. The main purpose is to
build a positive business reputation, build stronger relationships with
customers and generate more sales. This business approach not only benefits the
business itself but also the society and environment for it also works to
satisfy the needs and wants of the society.
According to Friedman (1970), a corporation's
purpose is to maximize returns to its shareholders, and since only people can
have social responsibilities, corporations are only responsible to their
shareholders and not to society. Socially responsible activities conducted by a
corporation are distorting economic freedom because shareholders are not able
to decide how their money will be spent. Friedman thus argues that corporations
should focus on those activities that are causally related to company profit,
excluding charitable activities that do not directly generate revenue.
Friedman's main message is that the main responsibility of a business is to
create wealth and that the corporation is an instrument of maximizing profit and
that their priorities should be to maximize shareholder value, have a high
competitive advantage and use whatever means, as long as it remains legal, to
increase their sales and profitability. CSR which focuses beyond profits, has a
close resemblance with Milton Friedman's argument for it focuses also on
maximizing profits for its shareholders. Friedman's claim could help in
achieving the purpose of the CSR approach. In generating more sales and
building stronger relationships with customers, then a business could generate
more profits that will benefit itself.
In contrast with Friedman’s
arguments, Reich (2008) stated that Corporate Social Responsibility (CSR) is a
dangerous distraction, focusing hyped-up attention on the social interventions
of corporations rather than laying responsibility squarely on the government,
which is the only factor that can solve social problems. Reich still holds the
view that CSR is about virtue and generosity rather than social impact and
competitive advantage. He believes that we must also give importance and focus
on virtue and generosity when applying the CSR approach to business. It is
because businesses that want to stay relevant to new generations and who want
to help people in need around the world while increasing their revenue and
efficiency will benefit from embracing CSR. I agree with Robert Reich's
arguments because nowadays, consumers want to spend their money on products and
services that they believe in and engage with companies that follow ethical
practices that meet their own beliefs. He does not only want businesses to
focus on maximizing returns or profits but more on building good relationships
with customers through applying both virtue and generosity in business.
Handy (2002), in his article named
"What's a business for" stresses the need to reevaluate why
businesses exist. He proposes that the purpose of a business "is not to
make a profit, full stop". Handy argues that companies should be managed
as communities, for that is what they are, communities of employees organized
to serve communities of customers. While Friedman's focus is to maximize
profits that will satisfy shareholders' expectations because they are the
investors that provide funds and will contribute to them their business. Handy,
on the other hand, in contrast to Friedman's arguments, strongly believes that
it should not only focus on shareholders' expectations but should also think
about the benefit that an individual and employees of a corporation can get in
a business. In connection with his article, businesses have a bigger purpose because
it exists. What is the purpose of putting up a business? In his arguments, we
can simply understand what's business for and it is not only for profits and
shareholder's expectations towards a business but also take into consideration
the employees involved in the everyday operation of a business and people who
are part of the business which contribute to the success of a business. The
employees of a corporation should be treated as an asset because they have a
big influence on the operation of a business. Unlike Friedman's, which is not
in favour of charitable activities, Handy’s purpose includes donating to a
charity. Compared to the two articles by Friedman and Reich, Handy has a bigger
scope to consider in business. I strongly agree with Handy’s arguments because
we cannot just think for profits and shareholder expectations in a business but
we should give importance to the assets of a business which are the employees
that involve in a day-to-day operation of a business and customers by which
businesses cannot be successful without them.
Why
should businesses be embracing CSR?
To be complete, the concept of CSR
had to embrace a full range of responsibilities of business to society (Carroll
2018).
According to Hall (2022), there are five
reasons why should businesses be embracing CSR:
1. CSR
is a moral obligation. Domestically, businesses need to give
back to the communities and nations that provided them the opportunity to
succeed. Globally, economic and security concerns/events can immediately have a
negative global impact. Investing, developing, and doing-no-harm will
strengthen all sectors of business. As businesses use resources that a given
society provides, they are obliged to give back to that society as their moral
obligation. Giving back to society is a moral obligation that results from
social contracts (Tamvada 2020). Amao (2008) argues that morality, which is
driven by societal expectation, forms the basis of the corporation's entrance
into the existing social contract. He further argues that the modern
corporation has acquired the capacity to enter the existing social contract
under the status the law has afforded to it.
2. It
helps in engaging customers/ clients. Building relationships
and rapport with both customers and clients is important within any company and
having a social responsibility policy can impact this. Using CSR can also help
you engage with your customers in new ways. Since the message of CSR is about
something ‘good’ it can often be an easy way to connect with your customers or
clients. Creating this positive relationship with customers/ clients and the
wider community can lead to a potential increase in sales and rising profits.
3. It
can improve brand perception. Being socially
responsible can strengthen both a company's brand and image. As mentioned, the
public perception of a company is critical to client confidence. By portraying
a positive image through taking part in CSR projects, a company can make a name
for itself by not only being successful in what they do but by being socially
conscious too. Also, by engaging actively and positively within the community,
companies’ employees could be interacting with potential customers, indirectly
marketing the company in the process. Companies that actively promote their
social responsibility activities, can take steps to publicize these efforts
through the media. Getting the word out about corporate donations, or other CSR
initiatives is a powerful branding tool that can help build publicity, for you
in both online and print media.
4. It
supports employee engagement. Employees tend to perform
better when they engage in socially responsible activities. Good CSR programs
are proven to be more economically effective when trying to engage leaders and
team members than things such as training and conferences. People also want to
work at a company who have CSR ambitions in place – as a company's greatest
asset is its people. Corporate responsibility can help a company to build the
best team possible as companies which demonstrate impact initiatives, will have
an easier time recruiting talent.
5. It
can improve innovation and collaboration within businesses. When
employees engage in social good activities, it is proven that they become more
innovative and collaborative. A lot of skills can be developed when taking part
in any kind of CSR activity and beyond this, employees can learn about
potential clients, develop their communication skills, improve leadership, and
gain invaluable local insights. In turn, these new skills can develop within
the workforce and allow the company to flourish within its market. If the
employees are happy, their work will be of a higher quality.
Putting
forth the business case for CSR requires a careful and comprehensive
elucidation of the reasons why companies have concluded that CSR is in their best interests to pursue (Carroll 2018).
Categories
of CSR
According to CFI Team (2020), although
corporate social responsibility is a very broad concept that is understood and
implemented differently by each firm, the underlying idea of CSR is to operate
in an economically, socially, and environmentally sustainable manner.
Generally, corporate social
responsibility initiatives are categorized as follows
1. Environmental
responsibility. Environmental responsibility initiatives
aim to reduce pollution and greenhouse gas emissions and the sustainable use of
natural resources.
2. Human
rights responsibility (also called Ethical responsibility).
These responsibility initiatives involve providing fair labour practices (e.g.,
equal pay for equal work) and fair-trade practices, and disavowing child
labour. Companies campaign to improve their business ethics, which in turn has
a positive impact on society (Easley 2019).
3. Philanthropic
responsibility. Philanthropic responsibility can include
things such as funding educational programs, supporting health initiatives,
donating to causes, and supporting community beautification projects. This
criterion pays attention to the well-being of the unprivileged or needy people
who badly require our support to sustain themselves on this planet (Nafi 2018).
4. Economic responsibility. Economic responsibility initiatives involve improving the firm’s business operation while participating in sustainable practices – for example, using a new manufacturing process to minimize wastage. In this context, companies try to find out a solution that can facilitate their business growth and generate profits by benefitting the community and our society (Nafi 2018).
Business
Benefits of CSR
The business benefits of corporate social
responsibility include the following:
1. Stronger
brand image, recognition, and reputation. CSR adds value to
firms by establishing and maintaining a good corporate reputation and/or brand
equity.
2. Increased
customer loyalty and sales. Customers of a firm that practices
CSR feel that they are helping the firm support good causes.
3. Operational
cost savings. Investing in operational efficiencies
results in operational cost savings as well as reduced environmental impact.
4. Retaining
key and talented employees. Employees often stay longer and are
more committed to their firm knowing that they are working for a business that
practices CSR.
5. Easier
access to funding. Many investors are more willing to
support a business that practices CSR.
6. Reduced
regulatory burden. Strong relationships with regulatory
bodies can help to reduce a firm’s regulatory burden.
CSR practices can also benefit both
society and the company by creating innovation (e.g. new products/services and
efficient production processes) through CSR practices. However, further study
is required on the motives for CSR initiatives which are becoming important to
attract an increasing number of businesses to integrate the CSR concept into
their core operations.
Ways
to Incorporate CSR into Your Business
According to Newlands (2017), Corporate
social responsibility lets companies put their expertise and money into helping
local communities while illustrating that business is not just about making
profits. If anything, the business has become about giving back and working in
a collaborative way that offers solutions to help people and, indirectly, the
world.
Below are some ideas on how to incorporate
CSR into your business based on some methods he implemented in various
companies he had worked with:
1. Establish
your corporate social responsibility values and relevancy.
To make CSR part of your company culture, consider establishing a set of values
and a sense of relevancy that explains why your business is socially
responsible. This can become the basis for any employees or talent who is
onboarded as you grow. They can look at your values and better understand the
reasoning behind behaviours that promote corporate social responsibility. You
can relate these to health and wellness, education, diversity, or anything else
you value and want your team to believe in.
2. Determine
the skills related to social responsibility. If you are slim on
resources to participate in social responsibility programs, focus on those
activities that can rely on your time and talent. This includes specific skills
you can put to work within the company, as well as volunteer activities outside
of the company. These skills are often worth their weight in gold, as they
offer programs and other organizations-specific capabilities that they would
not otherwise be able to tap.
3. Identify
potential projects for your company. While it may take
considerable time to keep your business going, you will always be busy. That
means you can start taking the time now to participate in internal or external
projects related directly to corporate social responsibility. This way, these
regular projects will become a living example of the CSR values you are trying
to promote.
4. Target
talent who are on the same page about corporate social responsibility. One
of the millennials' key traits is their interest in doing work that matters, so
they are usually already willing to participate in CSR. They may even help you
shape your policies and strategy related to corporate social responsibility. Do
what you can to identify the team members who are willing to participate in
these types of activities, as you will not be paying them to join nonprofit
projects or volunteer. Try to work side by side with your team so they see you
putting your words to work, knowing you share the same beliefs for the greater
good.
5. Identify
ways your company can be environmentally sound. By
focusing on specific initiatives related directly to the environment, which is
one of the pillars of CSR, you may find that you can save more money in terms
of overhead costs. For example, you can focus on initiatives directed at
lowering the company's impact on the environment through solar-based energy use
and smaller office spaces. Try to identify how being socially responsible can
also result in this added benefit and consider implementing those tactics to
help promote a lean operating structure.
6. Take
baby steps when implementing your CSR program. Realistically,
you may want to take small steps related to corporate social responsibility.
Any action that helps the community, society and environment can make a
difference. You can build on your CSR
program as you develop and expand your company. You are imbuing your business
with the spirit of doing more than just making a profit; you're also in
business to make the world a better place.
Conclusion
Corporate social
responsibility (CSR) is an important component of modern business operations
that is gaining more and more attention today. Businesses that embrace
CSR will increase their income and efficiency while helping those in need
throughout the world and staying relevant to younger generations. By applying
the CSR approach correctly, people can manage to improve their business and
satisfy the demands of their consumers. Identifying what is the business's
primary goal and purpose will also help in the success of a business.
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