The Corporate Social Responsibility of Businesses - Coursework Example

The Corporate Social Responsibility of Businesses Introduction This essay is about the issue of corporate social responsibility (CSR) in business organisations. In the essay, three key questions about this issue are addressed. The first question is about what CSR actually entails. This is addressed by revisiting what has been developed in academic research as CSR. The second question is concerned with the reason as to why companies embrace CSR practices. Reasons that make the adoption of CSR practices a priority for companies are presented in this section. The third question is based on what the impact of CSR on companies is. Here, the different ways in which CSR practices affect business organisations are discussed. What is CSR? Researchers tend to agree that is very difficult to develop an accurate and comprehensive definition of the concept of CSR (Cheng, Ioannou & Serafeim 2014, p. 2; Matten & Moon 2008, p. 406; Sims 2003, p. 43). Cheng, Ioannou and Serafeim (2014, p. 2) note that there are different definitions of the notion of CSR and that every definition is premised on a specific aspect of the phenomenon which may not be necessarily captured by the other definitions. Further, Sims (2003, p. 42) observes that the definition of CSR has been evolving over the course of time. The same author also notes that changes in the way in which companies attempt to incorporate the concept of CSR in their operations have always led to changes in the academic definitions of what constitutes CSR. Hence, the difficulty of developing a comprehensive definition of the concept of CSR arises from the constant changes about what constitutes CSR activities that occur over the course of time and the existence of differences in opinions about the phenomenon. In spite of the fact that it is not easy to develop a comprehensive description of CSR, there are various definitions that have been developed over time. For example, CSR has been defined as the practice by which corporations attempt to integrate environmental, social and stakeholder concerns in their operations and practices (Cheng, Ioannou & Serafeim 2014, p. 2). What this means is that organisations tend to be concerned with the environmental and social issues that exist in the societies in which they operate. Because of this, the organisations take it as their responsibility to integrate these concerns in their operations. This is done as a way of benefiting not only the organisations in question, but also the society at large. On the other hand, Sims (2003, p. 43) sums up various definitions of CSR by observing that the definition of the concept assumes that corporations are obliged to help the societies in which they exist and that this approach helps corporations to meet their obligations to all their stakeholders. Hence, by being concerned with the environmental and social needs of the societies in which they operate, organisations can be seen to be fulfilling their economic, legal and social functions. These functions are related to all the different stakeholders of corporations and it is therefore the duty of corporations to take them into consideration. According to Dahlsrud (2003, p. 4), CSR can be understood in terms of environmental, social, stakeholder, economic and voluntary dimensions. These dimensions represent the main concerns that inform the need for companies to engage in specific practices. For example, the need to address the concerns of stakeholders while meeting the expectations of the society makes it necessary for corporations to engage in CSR activities. And in doing so, corporations address the needs of the society as well as those of their other stakeholders. The main reason as to why it is hard to develop one comprehensive explanation of CSR is because there are wide variations in the manner in which corporations view and attempt to implement CSR activities. For example, Matten and Moon (2008, p. 408) observe that the variation is common when one considers the history and level of popularity of CSR across the world. It is observed that more companies in the United States have historically been inclined to understanding what CSR is and attempting to put the concept into practice (Matten & Moon 2008, p. 408). It is also observed that although many companies in the different areas of the globe such as Africa and Asia have not been historically concerned with CSR, they are showing interest in the concept in the current times (Matten & Moon 2008, p. 408). The need for CSR There are several reasons as to why businesses engage in CSR activities. The first one is related to the need for business organisations to develop and maintain their reputation. It has been noted that many companies are concerned with how they are viewed by the general public (Osterman 2014, p. 26). In general, companies consider their image and reputation in the public as a factor that determines their overall success over time (Osterman 2014, p. 27). This implies that as much as companies seek to address the economic needs of their stakeholders which are related to operating profitably and maximising value, they are required to address the needs of the other stakeholders in the process. Chatterji, Levine and Toffel (2009, p. 126) give an example of how companies are concerned with their reputation and how this makes it necessary for them to engage in CSR activities. For instance, in 2006, Coca Cola was dropped from the list of companies that are considered environmentally responsible based on their scores of the KLD (Kinder, Lydenberg, Domini Research & Analytics) (Chatterji, Levine & Toffel 2009, p. 127). Following this development, the reputation of the company suffered as the general public criticised it for its perceived poor level of involvement in CSR activities. Hence, it can be seen that the need to develop and maintain a positive corporate image and reputation is one of the main reasons that inform the decision of business leaders to engage in CSR. The second reason as to why business organisations engage in CSR is related to the need to address the different concerns of various stakeholders. In general, businesses have different stakeholders who have different needs and interests (Horrigan 2010, p. 274). For example, government departments require that business organisations comply with the various rules and regulations that they develop (Mullerat 2010, p. 139). The rules and regulations may deal with a wide array of matters like the need for companies to operate in ways that do not compromise the sustainability of the physical environment and the need for organisations to address specific social issues in the societies in which they operate. The general public also forms an important stakeholder group for companies (Horrigan 2010, p. 274). The public is interested in understanding how well any business organisation operates such that the business does not compromise the wellbeing of the society. The shareholders of corporations are concerned with how well the company maximises the value of the investment that they made in it. What this means is that these complex relationships amongst the different stakeholders of organisations make it necessary for organisations to adopt CSR practices. By doing so, organisations are able to address the concerns of all their stakeholders, thus becoming sustainable over the course of time. The impact of CSR on companies There is a wide variation in the impact that CSR has on businesses. On one hand, CSR has a positive impact on business organisations. This positive impact is seen in different ways over time. For example, it has been argued that there exists a constructive correlation between CSR and companies’ financial performance (Cheng, Ioannou & Serafeim 2014, p. 5). The basis of this argument is said to be based on the fact that business organisations make profits by investing the resources that they have at their disposal (Cheng, Ioannou & Serafeim 2014, p. 7). Hence, the costs which organisations incur when implementing their CSR initiatives can be seen as investments. By investing in CSR and making this known to the general public, organisations are said to be able to build and develop trust within the investment community (Cheng, Ioannou & Serafeim 2014, p. 11). This makes it easy for the organisations to access financing and, in the end, perform better. Similarly, Chatterji, Lavine and Toffel (2009, p. 128) note that the linkage between CSR activities and firms’ financial performance exists in the form of the need for companies to show their shareholders that the companies are socially responsible in all their activities. Hence, it is clear that for companies in general, their financial performance in terms of access to finances is tied to how well they meet the requirements of their investors; and one of the main requirements of investors is that companies integrate CSR in their operations. As well, investing in CSR tends to improve the overall performance of companies. According to Korschun, Bhattacharya and Swain (2014, p. 5), when companies engage in CSR, they benefit in the form of increased performance by employees. How this effect is felt within an organisation is complex. It is argued that employees tend to develop a form of attachment to the organisations in which they work (Korschun, Bhattacharya & Swain 2014, p. 6). This attachment makes it necessary for employees to identify with their organisations. This identification occurs in the form of the employees seeking to implement the values and policies of the organisations for which they work. Similarly, when employees identify with their organisations in a positive manner, they tend to serve the customers of the organisation better (Korschun, Bhattacharya & Swain 2014, p. 13). Hence, when an organisation embraces CSR, its employees tend to view this as a positive development and this enhances their performance. On the other hand, CSR can have a negative impact on business organisations. For example, Karnani (2010) argues that the concept of CSR is, in its basic form, in contradiction to what is regarded as the most important concern of business organisations. It is argued that business organisations should be concerned with how to maximise the value of the investment of their shareholders rather than being concerned with addressing social issues (Karnani 2010). The same author points out that companies do not need to engage in CSR activities since doing so may not necessarily help them to achieve their key objectives of existing in the society. In the same vein, Devinney (2009, p. 47) observes that when companies engage in CSR practices, they do not achieve the benefits of increased performance and good public reputation that are associated with such practices. It is further argued that the effects of CSR initiatives by corporations hardly benefit all the members of the society (Devinney 2009, p. 50). Therefore, it can be seen that much as CSR can help companies to achieve specific objectives, engaging in the practice can also be associated with negative effects on companies and the society at large. Conclusion Three issues in relation to the subject of CSR in business organisations have been addressed in this essay. First, it has been shown that there is a consensus that it is practically not easy to construct a precise meaning of CSR. The definitions that have been developed so far attempt to factor in the different environmental, social and economic perspectives of the need for corporations to be involved in CSR practices. The second question is about the need for firms to participate in CSR. It has been argued that the need for companies to address the requirements of stakeholders is one of the main reasons that make CSR an important component of the operations of corporations. Lastly, it has been pointed out that much as CSR has a positive impact on organisations, it can also have a negative impact on the organisations. References Chatterji, AK, Levine, DI & Toffel, M. 2009, ‘How well do social ratings actually measure corporate social responsibility?’ Journal of Economics & Management Strategy, vol. 18, no. 1, pp. 125-169. Cheng, B, Ioannou, I & Serafeim, G 2014, ‘Corporate social responsibility and access to Dahlsrud, A 2008, ‘How corporate social responsibility is defined: an analysis of 37 definitions,’ Corporate Social Responsibility and Environmental Management, vol. 15, no. 1, pp. 1-13. Devinney, TM 2009, ‘Is the socially responsible corporation a myth? The good, the bad, and the ugly of corporate social responsibility,’ The Academy of Management Perspectives, vol. 23, no. 2, pp. 44-56. Finance,’ Strategic Management Journal, vol. 35, no. 1, pp. 1-23. Horrigan, B 2010, Corporate social responsibility in the 21st century: debates, models and practices across government, law and business, Edward Elgar, London. Karnani, A 2010, ‘The case against corporate social responsibility,’ Wall Street Journal, no. 23, pp. 1-5. Korschun, D, Bhattacharya, CB & Swain, SD 2014, ‘Corporate social responsibility, customer orientation, and the job performance of frontline employees,’ Journal of Marketing, vol. 78, no. 3, pp. 20-37. Matten, D & Moon, J 2008, ‘“Implicit” and “Explicit” CSR: a conceptual framework for a comparative understanding of corporate social responsibility,’ Academy of Management Review, vol. 33, no. 2, pp. 404-424. Mullerat, R 2010, International corporate social responsibility: the role of corporations in the economic order of the 21st century, Kluwer Law International, New York. Osterman, C 2014, Why companies engage in CSR, Bachelor thesis, University of Lund, Lund, viewed 19 May 2016, . Sims, RR 2003, Ethics and corporate social responsibility: why giants fail, Greenwood, London. Read More