Corporate Social Responsibility

Although there has been many studies produced on the topic of Corporate Social Responsibility (CSR), the empirical data is scattered and provides no definitive conclusions on the relationship between CSR and the positive or negative gains it may impart on a corporation. CSR remains controversial because of its impact on the profits of an organisation. Critics of CSR, accuse that it takes capital from corporations and their shareholders, but proponents of CSR argue that it helps to attract customers and can enhance public relations. After decades of debate, corporate social responsibility is becoming a clear priority for many businesses. Over six-thousand companies in 135 countries have now adopted the United Nations’ Global Compact, agreeing to align their organisational processes and procedures with ten principles relating to human rights, labour, environment and corruption. However, this may be more to do with consumer pressure than a real interest in ethics. According to an IBM study undertaken in 2008, of 250 executives globally:

  • 16% of executives said they make serious efforts to engage and collaborate with their customers on CSR activities
  • 68% of companies viewed CSR as a potential source of revenue growth rather than a regulatory or philanthropic issue
  • Over 50% said CSR initiatives give their companies a competitive advantage due to the favourable response such initiatives elicit from customers
  • 76% said while they saw meeting customer expectations as the key benefit of a CSR program, they admitted they don’t really understand why their customers care about CSR

The 2008 International Business Report results emphasize that the adoption of ethical business practices is still purely for selfish rather than purely ethical purposes. Of the survey respondents:

  • 65% believed that the main factor driving corporate responsibility is the need for privately held businesses to attract and retain high quality staff to meet current and future demands
  • 63% believed that cost management was an important driver of CSR, reflecting the acknowledgment that controlling costs is good for business and the environment
  • 56% cited public attitudes and building brand as an important driver

It can be determined that business has social responsibilities beyond profit maximization because corporations are a part of society and contribute to social life. In their role in the economy, corporations thrive in an environment conducive to decentralised coordination of economic actions, which requires social cooperation for mutual success. A productive workforce needs good education, health care and equal employment opportunity. Ensuring safe products attracts new customers and safe working environments reduce costs associated with preventable accidents. Business is more productive when land, water, energy and raw materials are used efficiently. A working government, legislation and property rights are required for innovation and robust regulatory standards are required to safeguard consumers and producers. In order to function well, organisations need a society that is healthy and runs smoothly. As society’s needs are met and wants increase, the demand for business also grows.  Organisations which pursue profit at the expense of the immediate society will eventually have difficulty maintaining a profitable position. In light of this, it is not productive for corporations to oppose CSR against the market economy system. Therefore, the requirement of CSR is about the conditions for social cooperation for mutual advantage, so it is not the question of whether corporations should engage in CSR, but in what areas and where the limits of their responsibilities lie.

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Image:  Green Leaves by harvest breeding

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