Managing Corporate Social Responsibility

Managing Corporate Social Responsibility ND Sustainable Development

Managing Corporate Social Responsibility and Sustainable Development

Corporate Social Responsibility (CSR) is the program or initiative taken by a company to foster community growth and development and to protect the environment for posterity. These programs have to be taken voluntarily by the companies because the role of the Government in the business sector is shrinking due to financial and political problems. At the same time, the number of people who need help is ever-increasing and voluntary actions by the companies is the only solution to eradicate the numerous social ills facing out society today.

How does CSR work in companies?

Benefits of CSR

Shrinking role of the Government

Effects of the shrinking role of government on the corporate social responsibility of companies

Sustainability Development

Problems that come with CSR

Examples of CSR and Sustainability Development

Recommendation

Conclusion

References

Introduction

Corporate Social Responsibility is one of the most important initiatives taken by every company to boost its image in the eyes of its customers, investors, shareholders and the general public. It improves the standing of the company in the business circles and provides innumerable benefits to the company. Kotler and Lee (2005, p.3) have given the most appropriate definition for corporate social responsibility when they say, “Corporate social responsibility is a commitment to improve community well-being through discretionary business practices and contribution of corporate resources.” The most important element in this definition is the word discretionary that simply means that these initiatives are taken by the company voluntarily and out of their own free will instead of being mandated by any law.

How does CSR work in companies?

Numerous companies in the U.S. As well as in other parts of the world contribute to environmental protection and community development in many ways. Some common projects that they support include AIDS awareness, cancer research, safety programs to educate drivers on the road, education, food and shelter for the poor and the homeless, low-interest loans for economically challenged students, awareness about the environment, safe disposal of harmful chemicals and products, anti-discrimination, employment and so on. A lot of these initiatives come in the form of donations through cash or kind though some others come in the form of organizing events or providing the infrastructure and resources required to ensure the success of community-based programs.

The company’s first line of contribution is towards a societal ill that has arisen due to the company’s action. A common example is the environmental clean-up initiatives taken by companies that pollute rivers or air through their manufacturing and production processes. The need to provide solution to a problem that was created by the company is a strong motivation. Once this is taken care of, the company moves towards other problems provided they have the resources and the willingness to go on. Other actions revolve around providing a better health for its employees and to the community in which the company operates so that it can reach out to people who have been a part of the company for many years.

In general, contributions in the form of cash come from a separate foundation that is funded and administered by the company for easy accounting. It is also a good way to separate business from funding for community and environment. The idea of establishing a foundation also makes it easy when the company wants to partner with other companies or government agencies for implementing a community program.

Though some people consider political campaigning as a part of corporate social responsibility, this is not true because it does not fit the core idea of CSR. “On Jan. 21, 2010, the United States Supreme Court ruled 5-4 to overturn restrictions on corporate and union campaign contributions, effectively transforming the landscape of political financing. The majority, generally viewed to be the conservative wing of the court, found that restrictions on such expenditures are invalid.” (United States Country Review, 2011, p.204). This is another reason why political contributions are not a part of CSR.

Benefits of CSR

Every company stands to gain immensely by following a well-thought out corporate social responsibility plan. Firstly, the biggest gain for a company is a boost to its image in the eyes of the public. There will be an increased awareness of the products and services offered by the company and this can increase the sales of the company tremendously. Another advantage is customer loyalty. When people in a community see the initiatives taken by the company, they are subconsciously driven to continue buying these products and services and this can lead to a committed customer base for the company.

A company that makes a difference to the lives of others in a community will also be in a better position to attract the best talent. In this age of globalization and outsourcing, people are willing to transcend geographical boundaries to find the work of their choice. Companies that have a sound CSR policy can attract the right talent because of its brand image, customer loyalty and above everything its ever-increasing profit margin. A talented and diverse workforce will lead to higher productivity and this will further increase the company’s profitability.

A company engaging in pro-active CSR initiatives will be well-recognized by shareholders, investors and other who have a stake in the company. It can have an easier access to capital because of its outstanding image and brand loyalty and all this means a sustained high growth period for the company.

The CSR initiatives of the company will also benefit the community and the overall environment. It can result in a greater use of bio-degradable products and renewable resources and also a higher chance to recycle existing products into newer ones. This is better for the environment in every sense and can lead to a better and safer place for everyone to live. Community also benefits due to increased charitable contributions from the business sector. The number of homeless, unemployed, poor and uneducated people will diminish and this can create vibrant and safe communities that can in turn give back to the company in many ways. Overall, it is a win-win situation for everyone involved — company, community and the environment. These are some of the reasons for a company to have a sound and practical CSR program.

Shrinking role of the Government

The discretionary choice to use corporate social responsibility to improve the community and the environment assumes significant importance in the wake of the shrinking role of the Government in the business sector. In fact, this is one of the current issues facing the implementation of corporate social responsibility today. (BSD Global, 2011). Most Governments today including local, state and federal are facing severe financial crunch and they are looking to cut back on their resources. “Deep spending cuts by state and local governments pose a growing threat to an economy that is already grappling with high unemployment, depressed home prices and the surging cost of oil. Lawmakers at state capitols and city halls are slashing jobs and programs, arguing that some pain now is better than a lot more later. But the cuts are coming at a price — weaker growth at the national level.” (Associated Press, 2011).

These cuts are being implemented at all levels of Government and this has a profound impact on the control of the government in the business sector. When the government cuts spending, it has to lay off existing workers and these positions remain vacant. Unfortunately, the amount of resources available for the government is diminished and they no longer have the money or the man-power to implement public-private partnerships for environment and community growth and development. As a result, the private sector, which comprises of the numerous companies in the U.S., have to implement such programs out of their free will.

Another reason is the lack of trust in legislation and the U.S. Congress. The current bipartisan government is a good example of how bills get stalled and there is stale-mate in the U.S. Congress. This reduced amount of legislation from the Congress coupled with problems with implementation also contribute to the reduced role of government interference in the business sector. All this simply means that the corporates have to take their own initiative voluntarily without any kind of pressure or support from the government.

Effects of the shrinking role of government on the corporate social responsibility of companies

The shrinking role of the Government has a positive impact on the corporate social responsibility of companies because they strive to do more voluntarily rather than through a law. It also gives them the flexibility to choose the projects that is related to their company and can have an strong positive influence in the sales of the company. This is probably why the contributions of companies towards community building and environment has increased during the last ten years. “According to GivingUSA, charitable giving by for-profit corporations has risen from an estimated $9.6 billion in 1999 to $12.19 billion in 2002. Cone/Roper’s Executive Study in 2000, exploring cause initiatives from the corporate perspective, found that 69% of companies planned to increase future commitment to social issues.” (Kotler and Lee 2005, p.3). Since this study was published, the contributions have steadily increased making CSR an integral part of every major company today.

A report by Price Water Cooper House in 2010 shows that the CSR initiatives and reporting has increased despite the sagging economy and this points to a positive change in the mindset of the management of companies. “PWC explains that such reports have become critical to a company’s credibility, transparency and endurance.” (Business & the Environment 2010, p.5). The reduced role of the Government in business circles is only going to further increase this trend because companies feel they have an obligation to the society at large and they want to make this country a better place for living. All this is done out of their own interest and initiative rather than any force by any external institution. Also, many companies understand the significance of undertaking such initiatives to their company and so they want to continue doing it.

Sustainability Development

As companies are having a growing presence in communities due to their voluntary programs, it gives them greater confidence to make public their goals and aims for the future. More and more people belonging to different groups are following the reports, goals, news and other milestones of well-known companies that play a role in their life, directly or indirectly. This public attention, in turn, forces the company to set tangible and sustainable goals within a reasonable time period. These goals helps the company to have a focus and helps the management to formulate policies that will help them to reach these goals. According to (Wootliff 2010 as quoted in Business and the Environment, 2011, p.6), “There is no doubt that one of the most important advances in sustainability reporting has been the growing preparedness of corporations to publicly state what they aim to achieve. & #8230; Goals provide observable and measurable results that need to be achieved within a timeframe. & #8230; They provide a compass to managers who need clear, benchmarkable targets that can steer them in an agreed direction.” It can provide more meaning to the employees, managers and to all other people who have a stake in the company.

Sustainable development goals not only describe the goals of the company, but it also extends to how the environment can be preserved and the resources used for production can be renewed so that the natural world can be available for posterity. In the context of such an environment-friendly approach, these sustainable goals are an important step for every company. Sustainability development and CSR go hand in hand because a company can set goals only as part of its CSR campaign that aims to protect the environment as well as improve the community in which it operates.

Problems that come with CSR

Though the benefits of CSR and sustainability development are enormous, it becomes difficult to implement in practical terms and this can be attributed to numerous reasons. Firstly, the concept of CSR and community development is more prevalent in advanced economies than developing and under-developed economies due to the difference in the societies. As more and more countries are moving their operations to third-world countries, it becomes difficult to estimate the environmental damage. Many developing economies do not have stringent environmental laws and there is little accountability for the perpetrators, thereby making it difficult to hold anyone responsible for any environmental damage. In the light of this situation, the idea of corporate social responsibility becomes moot because the companies are focusing their attention primarily in the developed countries. These countries no longer have processing and manufacturing industries that pollute their environment and the people enjoy a greater standard of living when compared to those who live in abject poverty in under-developed and developing countries. In other words, the countries that need support from corporates as part of their CSR are not getting and so the money spent by the businesses is not really being used in the right direction.

Other problems arise in the implementation aspect of CSR. Many companies prefer to work with NGOs to ensure that their money reaches people who need them the most. but, these NGOs should be on the same wavelength of the company for successful implementation of any project. These NGOs evaluate and act as a watchdog for the CSR activities of the company and this can prove to be a major point of dissent.

Another common problem is when the company announces a big initiative and fails to follow it up with action due to a number of factors including lack of resources and external problems like recession. “In our view, CSR is a journey. You don’t need to solve anything. You perfect yourself and your community. There are so many companies failing to live up to their aspirations, so if you’re making progress, at least you are getting somewhere.” (Billington, 2008, p.2). A lot of companies think that they should either go full-throttle or not venture at all. Unfortunately, they fail to realize that their small contribution can make a big difference in someone’s life and this in turn, can also help their company in small, but significant ways. Lack of this attitude is another problem with implementing CSR initiatives.

Examples of CSR and Sustainability Development

Today, there are numerous companies that are involved in CSR and they are helping some communities to live better. “Business leaders and firms themselves are even responding to calls for enhanced corporate social responsibility. From mavens, such as the Body Shop’s Anita Roddick, to converts, such as British Petroleum’s John Browne, some business leaders are preaching — and at least trying to practice — an approach to business that affirms the broad contribution that companies can make to human welfare, beyond maximizing the wealth of shareholders.” (Margolis and Walsh, 2003, p.269).

A good example of CSR is the one taken by Chevron in the Niger Delta where it has a huge presence to explore and drill the oil resources of this region. It has created the Niger Delta Partnership Initiative Foundation in 2010 to help to address the socio-economic challenges facing this country. In 2011, it announced that it would contribute $50 million towards this fund. Some of its initiatives in this region include providing employment to more than 5,000 people through the Local Community Content Policy, establishing an advanced technology center, funding the biotechnology center of Yola university in northeastern Nigeria, fighting HIV / AIDS, creating mobile health services for people in the remote parts of the Niger delta and donating 11,000 books to Nigerian universities. (Chevron, 2011).

Another good example is that of Tyson Foods that uses its resources to alleviate hunger in the United States. It created the KNOW Hunger campaign in 2011 that urges people to know of the existence of hunger in their community and what they can do alleviate it. It has also contributed about 78 million pounds of protein to food banks across the U.S. And is actively involved with hunger fighting NGOs such as Lift Up America. (Tyson Hunger Relief, 2011).

Recommendation

These examples shown the voluntary nature of companies in uplifting their communities despite the lack of mandatory laws in this segment. With the reduced ability of the government to oversee such initiatives, it is important that the companies continue them of their own free will. They should also look at expanding their initiatives beyond their community to other parts of the world that need this support to remove many social problems like poverty, child labor and illiteracy.

Conclusion

In short, CSR is the primary means by which a company can contribute to the social development and environmental protection of the region in which it operates. It is a way of giving something back to the community that has helped it to grow and advance. In this troubled financial environment, the role of the government in enforcing these initiatives is shrinking and so its important that the companies take a voluntary stance to continue rebuilding these communities. Despite problems with implementation, the companies should persist for the greater good of the people and environment that are an integral part of its ability to make profits and sustain long-term growth and development.

References

Associated Press. 2011, February 25. State and Local Budget Cuts are slowing the U.S. Economy. Fox News. [Online] Available at: http://www.foxnews.com/us/2011/02/25/government-budget-cuts-pose-threat-recovery / [Accessed 27 March 2011]

No Author. 2011. Political Conditions. United States Country Review. 1(5). pp29-258.

Kotler, Philip; Lee, Nancy. 2005. Corporate Social Responsibility: Doing the most good for your company and your cause. New York: John Wiley and Sons.

BSD Global. 2011. Corporate Social Responsibility. International Institute for Sustainable Development. [Online]. Available at: http://www.iisd.org/business/issues/sr.aspx [Accessed 27 March 2011]

No author. Jan 2011. CSR Reporting: By the Numbers. Business & the Environment with ISO 14000 Updates. 22(1). p6-7

No author. Dec 2010. CSR Reporting Increases in spite of Economy. Business & the Environment with ISO 14000 Updates. 21(12). p5-6

Makaros, Ayelet; Zehavi, Tzion. 2008. Corporate Social Responsibility to the Community: A Process Oriented Model for Contractual Relations. Community Development. 39(4). p40-50.

Billing, Corey. May 2008. Corporate Social Responsibility Problems? IMD. org [Online]. Available at: http://www.imd.org/research/challenges/upload/TC046_08_corporate_social_responsability_problems.pdf [Accessed 27 March 2011]

Margolis, Joshua; Walsh, James. June 2003. Misery Loves Companies: Rethinking Social Initiatives by Business. Administrative Science Quarterly. 48(2). p268-305

Chevron (2011). Chevron in Niger Delta. Available at: http://www.chevron.com/documents/pdf/nigeriafactsheet.pdf. [Accessed 27 March 2011]

Tyson Hunger Relief. (2011). Tyson Hunger Program. Available at: http://www.tysonhungerrelief.com/. [Accessed 27 March 2011]

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