IntroductionCorporate Social Responsibility (CSR) is how firms combine social, environmental and economic concerns in the firm’s values, culture, decision making, strategy and operations in an open and responsible manner. This creates better practices in the firm, wealth and enhances development of the society (Aaker, 1996). The characteristics of the triangular relationship between companies have changed in the previous two decades; the nation and the society have changed. CSR has increasingly become prominent because organizations have discovered that in addition to growing their businesses it is crucial to build reliable and sustainable relationships with the whole community.
Elements of Corporate Branding (Kohli & Thakor, 1997)Engagement of Corporate Social Responsibility has numerous benefits to a corporation which have been discussed below. Fiscal growth Linking social performance (CSR) to financial performance has been of done in most empirical studies which mainly concentrated on demonstrating on the majority of the studies claiming to have revealed a systematic link between the two (Schmitt, 1999). The positive contributions of the Corporate Social Responsibility to market value are that it enables managers to invest in Corporate Social Responsibility where they obtain competitive advantages and reap more financial benefits.
Specifically studies have shown that for “a typical company having a mean market value of approximately $48 billion, approximately $17 million profits on average in subsequent years for a one unit increase would result in Corporate Social Responsibility ratings (Chahal & Sharma, 2006). Reputational risk exposure reductionA corporate reputation often takes a long time to build, but can be destroyed in a second through fraud scandals or environmental accidents. Reputational breakdowns may be illustrated by Indian Union Carbide and US Big Tobacco.
These reputational risks can be offset by being engaged in Corporate Social Responsibility (William, 1998). Brand image improvement and corporate reputation through positive Public relationDue to Corporate Social Responsibility positive media coverage improves the brand and corporate reputation. Philanthropy and other social activities (excluding cause-related) have “a high position impact on relationship and social measures of performance” it has been found that the “rate of charitable giving against profit is found to respond positively to public visibility. ” This study suggests that corporations with high visibility (often consumer brands) are more likely than corporate with low visibility taking part in philanthropy to improve their corporate reputation in the eyes of society (Yoo & Donthu, 2001). Corporate Social Responsibility assists in building differentiation from competitors.
The Body Shop can best illustrate this benefit. By companies concentrating on Corporate Social Responsibility they can maintain enduring relationships with stakeholders and convey a strong brand image and competitive advantage, which is difficult to imitate (Gary, R, & Rui, 2000). Enrichment of Customer devotionCurrently Customer’s accessibility to information has increased thus this increases the risk of companies being found out for unethical practices.
For example, in the 1990s criticisms of Nike’s operations in Asia forced the company to vary its manufacturing processes. Nike altered most of its labor; environmental and reporting practices, to enable it redeem its strong customer loyalty, and frequently insist on independent inspections of local subcontractors. It has been established that Corporate Social Responsibility which increases customer satisfaction which in turn leads to positive financial returns. It has been suggested that building satisfaction of customers which is a significant intermediate action in converting Corporate Social Responsibility into financial gains (Scott & David, 1991).