Corporate Social Responsibility

11/04/2020 1 By indiafreenotes

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.

To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment, instead of contributing negatively to them.

Corporate social responsibility is a broad concept that can take many forms depending on the company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands.

As important as CSR is for the community, it is equally valuable for a company. CSR activities can help forge a stronger bond between employees and corporations; boost morale; and help both employees and employers feel more connected with the world around them.

For a company to be socially responsible, it first needs to be accountable to itself and its shareholders. Often, companies that adopt CSR programs have grown their business to the point where they can give back to society. Thus, CSR is primarily a strategy of large corporations. Also, the more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry.

Example of Corporate Social Responsibility

Long before its initial public offering (IPO) in 1992, Starbucks was known for its keen sense of corporate social responsibility, and commitment to sustainability and community welfare. According to the company, Starbucks has achieved many of its CSR milestones since it opened its doors. As per its 2018 “Global Social Impact Report,” these milestones include “reaching 99% of ethically sourced coffee, creating a global network of farmers, pioneering green building throughout its stores, contributing millions of hours of community service, and creating a groundbreaking college program for its partner/employees.”

Starbucks’ goals for 2020 and beyond include hiring 10,000 refugees across 75 countries, reducing the environmental impact of its cups, and engaging its employees in environmental leadership. Today there are many socially responsible companies whose brands are known for their CSR programs, such as Ben & Jerry’s ice cream and Everlane, a clothing retailer.

Importance of Corporate Social Responsibility

The notion that discharging corporate social responsibility involves costs and, in turn, reduces profits has proved wrong without doubt. Rather, it has been well established that discharging social responsibility strengthens the corporation’s foundation to earn profit not just in the short-run but also in the long- run. Numerous such stories abound in the corporate world.

Johnson & Johnson presents one classical example of how a company puts public welfare ahead of its own interest (profit), especially when the company itself is a victim. 28 September 1982 was a tragic day for Chicago when Johnson & Johnson made Extra Strength Tylenol caused cyanide poisoning and killed many people.

Showing its utmost concern for social welfare, Johnson & Johnson not only cooperated with the efforts to investigate into the incident, but also announced a reward of $ 1, 00,000 for giving information about the culprit.

The Tylenol crisis cost Johnson & Johnson plenty some $ 50 million besides withdrawal of 31 million bottles from the market with a retail value of over $ 100 million. Potentially, the most devastating cost resulted from lost public confidence. Only six weeks after it had withdrawn all Tylenol capsules from the market, the company reintroduced the product in tamper-proof packages, as are used in all of today’s pharmaceutical products.

Amazingly, Johnson & Johnson regained 95 per cent of the market share it had before the Tylenol crisis (Waldholz 1982). Johnson & Johnson’s this vignette clearly exemplifies how concern for social welfare strengthens an organization’s foundation, better call it “Organizational Character” and, in turn, its profit earning capacity. Character is foundation for over all prosperity.

Maruti Udyog Limited (MUL) is another such example that kept social welfare ahead of its interest. In the year 1997, of all the cars sold between January and April, this responsible company recalled about 50,000 of their most popular product, the Maruti 800 passenger cars from the market, because they suspected them to be made of inferior steel. This became a newspaper headlines, as it was the biggest ever recall of cars from the Indian market place. What an excellent example of moral altruism (Singh 2003)?

The logic behind this positive relationship appears to be that social involvement of business provides a number of benefits to it that more than offset its costs. These benefits would include a positive consumer image, a more dedicated and motivated workforce, strong public confidence, social acceptance, and even less interference from regulating agencies.

One way to understand the relevance of corporate social responsibility lies in our ancient teaching of Propkaram Paramam Dharma, i.e., helping others, what the sociologists call, altruism, is the most sacred duty. Performing duty is “Dharma” and “Dharma” is truth.

Truth prevails in its own manifestations and lasts for long. Our past is witness that in all walks of life, at last satyamev jayate, i.e., ultimately truth alone prevails and wins. Cooperate social responsibility is a company’s ‘dharma’ that enables the company to survive and thrive for long.

Just as any untruth is short lived, so is an untruth or unethical business too. There are plethora of corporate examples like Arthur Anderson, Enron, Union Carbide, Harshad Mehta Stock Business and so on confirming that no business can exist and survive without the acceptance and sanction of the society in which it carries out its activities. Without social sanction, business is sure to flounder and perish.

Following are some more justifications in favour of why corporations should discharge social responsibility. Many of these (Mintzerg 1983) tend to be couched in terms of enlightened self- interest, i.e., the corporation takes on social responsibilities insofar as doing so promotes its own self-interest.

  1. Corporations perceived as being socially responsible might be rewarded with extra and/or more satisfied customers, whilst perceived irresponsibility may result in rejection or boycott by customers. Pepsi and Coca-Cola experienced such boycott from customers in India in 2007.
  2. Research reports that employees are attracted to and even become more committed to corporations that show socially responsible behaviour (Greening and Turban 2000).
  3. Corporations that voluntarily commit to social actions and programmes may also forestall legislation and ensure greater corporate independence from government.
  4. Making positive contribution through socially responsible behaviour to society might be regarded as a long-term investment in creating an improved and stable business context to do business.

In addition to above business justifications couched in favour of corporate social responsibility, following are some important moral justifications also in favour of Corporate Social Responsibility (CSR):

  1. Corporations through their actions cause some social problems like pollution, dirtiness, etc. and hence they have a moral responsibility to solve these problems caused by them and also make efforts to prevent such problems in future.
  2. Corporations as social actors use social resources which are often scarce. Hence, they should use these resources in responsible manner for the benefit of the society.
  3. Corporate activities of one type or other like providing products and services, employment to workers, and so on and so forth, have social impacts be positive or negative or neutral. Hence, corporations are responsible to own the responsibility of these impacts.

In reality, corporations rely not only on the contributions of shareholders but also of wide constituencies, or say, stakeholders in society such as consumers, suppliers, local communities, etc. Hence, corporations have a duty to take into account the interests and goals of shareholders as well as other stakeholders.

Given the range of justifications in favour of CSR, there has not been any doubt about the need for and significance of socially responsible behaviour exhibited by the corporations.