Ways in Which Organisations Are Able to Meet CSR Obligations - Coursework Example

BUSINESS ETHICS Student’s Name: Code + Course name Professor’s name University City, State Date Introduction The increasing significance of corporate social responsibility (CSR) has compelled corporate executives and investors to implement CSR initiatives. The modern-day customer has also exhibited preference to purchase products from firms that exhibit corporate social responsibility. Some of the CSR initiatives include being ethical, environmentally responsible, and sustainable. However, the singular objective of the traditional organisation is to make profits. Consequently, engaging in philanthropic activities elicits the question of whether the directive is would reduce the profitability of the firm by increasing its expenses or the organisation would witness an increase in its customers that would increase its profitability. The proud proclamation of CEOs is the fact that CRS initiatives present a “golden ticket” for the future growth of the organisation (Tran 2015). The objective of the essay is to discuss the ways in which organisations are able to meet CSR obligations while balancing the need to maintain profitability and meet stakeholder expectations. Ethical Responsibilities The ethical responsibilities of an organisation comprise of those standards, values, norms, and expectations that mirror a concern for what shareholders, employees, consumers, and the community perceive as being just, fair, as well as protecting and keeping the moral rights of stakeholders. In order to practice ethical responsibility in the organisation, the firm should engage in voluntary actions that pursue and promote social goals beyond performing their legal responsibilities (Carroll & Shabana 2010). The goals are important to different sections of the society or the entire society in general. However, promotion and pursuit of such goals exceeds the immediate financial interests of the corporation. The existence of an interest to measure the goals in relation to the performance of the organisation regarding the goals has acted as an incentive to implement the goals in organisations. In the quest to measure corporate performance in relation to its ability to meet social goals, the Kinder, Lydenburg, Domini social performance index also referred to as the KLD is the most common measure. The KLD index spans several aspects of corporate performance by measuring environmental, governance, and social issues. The index also measures controversial business issues. Some of the environmental issues measured by the index include products and services, operations, and management, and climate change. The social issues measured by the index include the community, employee relations, diversity, governance issues such as structure and reporting, products, human rights, and controversial business issues such as adult entertainment, abortion, firearms, contraceptives, alcohol, tobacco, nuclear power, military, and gambling (Carroll & Shabana 2010). Alternatively, organisations also follow the directives of the Global Reporting Initiative (GRI) in the quest to become ethically responsible. Besides focusing on environmental and economic indicators, as it is the case with the KLD index, the GRI identifies four types of the indicators of social performance. The categories include labour practices and decent work, product responsibility, society, and human rights (Carroll & Shabana 2010). Therefore, an organisation that intends to be ethically responsible endeavours to score highly on the KLD index as well as the GRI sustainability reporting. Adhering to the guidelines provided by both measures indicates the presence of stakeholder and societal concerns on the performance of the corporation in relation to the social goals. The increasing stakeholder and social concerns have also compelled organisations to implement appropriate responses aimed at being ethically responsible. The adoption of the “green” philosophy in product development and operations is one of the initiatives employed by firms to be environmentally responsible. The objective of implementing the “green” philosophy is to reduce the adverse impact of the operations of the organisation on the natural environment. Antalis, the British paper manufacturer was the first UK paper merchant to obtain certification under the Programme for the Endorsement of Forest Certification (PEFC) and the Forest Stewardship Council (FSC) following its decision to adopt the “green” philosophy. Moreover, the organisation supports suppliers that have adopted operational standards that surpass or meet the environmental standards outlined for compliance by international organisations that aim to improve the performance of the organisation on the aspect of environmental responsibility. The suppliers that enjoy Antalis’ support in consequence of their decision to embrace the “green” philosophy in their activities include the Eco-Management and Audit Scheme and the International Standards Organisation (Carroll & Shabana 2010). Even though the law did not mandate the “green” philosophy, Antalis found it appropriate and necessary to adopt the philosophy as a voluntary initiative that aims to portray it as an ethically responsible corporation. Starbucks corporation has also fulfilled the ethical responsibility through its participation in the Fairtrade coffee market. In order for coffee to be labelled as fair trade, it has to obtain certification from Trans-Fair USA for firms operating in the USA since the organisation is the USA branch for Fair Trade Labelling Organisations (FLA). In accordance with the policies of FLO, it is imperative that the organisation should provide farmers with credit and guarantee farmers a minimum amount of $1.26 per pound. In 2009, the corporation doubled its purchase of Fairtrade Coffee to 40 million pounds. The participation of Starbucks in Fairtrade started in April 2000 when the corporation signed its first contract with Trans-Fair USA to limit its sales to Fairtrade certified coffee in its approximately 2000 stores in the country (Carroll & Shabana 2010). Just like Antalis, Starbucks’ initiative is voluntary implying that the corporation decided to be ethically responsible without any legal mandate. Philanthropic Responsibilities As mentioned earlier, CSR activities also include the participation of the organisation in philanthropic activities. Philanthropic activities comprise of corporate actions that the organisation implements to respond to the expectations of the society that the business should be a good corporate citizen. A corporation has to exhibit active engagement in activities and acts that promote good will or human welfare. This includes making donations toward community development, education, culture, and arts. According to a study conducted on Fortune 100 companies by the Committee Encouraging Corporate Philanthropy (CECP), the median donations offered by the companies in 2007 was $46.31 million. From the results, it was evident that 71% of the companies gave out more donations than what they offered in the preceding year (Carroll & Shabana 2010). According to Bruch and Walter (2005), the amount of donations granted to non-profit organisations by leading publicly traded corporations in 2003 and 2004 was in excess of $1.6 billion. The amount was equivalent to approximately 1% of the pre-tax profits realised by the companies. The results indicate that corporate philanthropy is one of the latest moves or acts that organisations utilise in portraying their corporate social responsibility to the society. The other corporations that have taken part in corporate philanthropy in the form of donations include Merck, Walmart, Phillip Morris, Proctor & Gamble, and Kroger. Corporate philanthropy has also extended to other corporations across the globe (Carroll & Shabana 2010). One of the benefits of corporate philanthropy to the organisation is the fact that it creates a positive image of the corporation to the society thereby contributing towards increasing the customer network. Some of the philanthropic donations target foreign recipients such as donations made by Fortune 500 companies to South Asia, Kashmir, and the US. Acknowledging the scope of corporate philanthropy among organisations is instrumental towards understanding the importance of corporate philanthropy. Besides making direct donations, there are other forms of corporate philanthropy such as encouraging employees and customers to donate to the needy individuals in the society. To achieve this, corporations can form collaborations with their employees and customers using “Workplace Giving” campaigns. The campaign is an employer-sponsored program that grants employees the chance to make philanthropic donations through payroll deduction. JP Morgan Chase, Ashland Oil, and Microsoft are some of the companies that have implemented such programmes. The Global Impact is responsible for the coordination of the program. Global Impact is a global NGO that has dedicated its efforts to helping the most vulnerable individuals across the globe. A case example of the partnership between an organisation and its customers is the partnership between General Mills Inc. and its customers that aimed to raise funds for the Susan G. Komen Breast Cancer Foundation. For every pink-top Yoplait yoghurt that the company sold to its customers, it donated 10 cents (Carroll & Shabana 2010). Walmart also adopted a different form of partnership in specific locations to raise funds for the victims of the Iowa flood of 2008. The corporation collected donations in the form of money and supplies. The organisation used the collected money to purchase large quantities of necessary items needed by the victims of the flood. Corporate executives have also exhibited substantial interest in corporate philanthropy. In accordance with the CECP report, corporate CEOs have continued to attend CEO meetings held on an annual basis with the primary objective of supporting CECP’s mission. The mission statement indicates the endeavour of the organisation to be the forerunner of the business community in raising the quality and quantity of corporate philanthropy (Carroll & Shabana 2010). The attention that corporate philanthropy has received from CEOs indicates the substantial level of business interest in corporate philanthropy. Consequently, CEOs have to find a place for corporate philanthropy in their agenda. This is in response to the increasing social pressure that mandates firms to engage in corporate philanthropy through donations. CSR and Firm Profitability According to a study conducted by Comincioli et al. (2012) on CSR and firm performance, the study found a weak negative relationship between the firm profitability and CSR. However, the relationship was statistically insignificant. Even though it could appear that engaging in CSR activities does not increase the profitability of the organisation, the study strived to determine the influence of CSR on other firm-specific factors such as consumer orientation and market competition. CSR initiatives revealed a substantial positive effect on firms operating in advertising intensive industries as compared to their counterparts when Return on Assets (ROA) is the dependent variable. From the findings, it is evident that CSR has a positive impact on the performance of firms operating in advertising intensive industries but the effect is negative among firms operating in low advertising intensity industries. However, the benefits of CSR were evident following the introduction of another characteristic, market competition. In highly competitive markets, engaging in CSR activities could give corporations an upper hand as a differentiating factor in product selection since the price and quality differences between the products are insignificant (Comincioli et al. 2012). The findings indicate the significance of the involvement of a firm in CSR activities as a guarantee of competitive advantage and growth. Conclusion The increasing competitiveness of the market for products and services has compelled corporations to engage in CSR activities. It is acknowledged that CSR can greatly influence the behaviour of the customers. The implementation of CSR activities spans two main aspects: ethics and philanthropy. Corporations strive to be ethically responsible besides engaging in corporate philanthropy. Ethical responsibility is the implementation of voluntary activities that pursue and promote social goals. Corporate philanthropy entails the engagement of the organisation in donations aimed at catering for the needs of the vulnerable individuals in the society. The paper underscores the fact that CSR has varying influence on the performance of firms operating in diverse markets. For instance, in companies operating in low advertising intensity industries, CSR would not be very beneficial. In very competitive markets, engaging in CSR activities could give companies an upper hand as a differentiating factor. In summary, CSR is essential for the growth and competitiveness of a corporation. Therefore, the engaging in CSR activities would enable the firm to maintain profitability thereby enabling it to meet the interests of the society and shareholders. Reference List Bruch, F.W.H., 2005. The keys to rethinking corporate philanthropy. MIT Sloan Management Review, 47(1), p.49. Carroll, A.B. and Shabana, K.M., 2010. The business case for corporate social responsibility: A review of concepts, research and practice. International journal of management reviews, 12(1), pp.85-105. Comincioli, N., Poddi, L. and Vergalli, S., 2012. Corporate Social Responsibility and Firms’ Performance: A Stratigraphical Analysis. Tran, T., 2015. Corporate Social Responsibility and Profits: A Tradeoff or a Balance?. Read More