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Corporate Social Responsibility

Essay by   •  July 16, 2011  •  2,032 Words (9 Pages)  •  1,160 Views

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Introduction:

The belief of Sir Mark Moody up until the 1960’s was “that if a company ran an efficient operation with sound staff development, employment, did not bribe anyone, and paid taxes in the country were the money was earned” then they were operating responsibly and doing what was expected of them in society. His view has since changed much like the majority of the world, and now incorporates the need for good Corporate Social Responsibility within firms.

Jonker and de Witte (2006) believe the world is very much in a transitional period and because of this there are new unforeseen demands placed on businesses and governments. Because of the new risks (environmental and social) there is a changing relationship between business and society and so the term Corporate Social Responsibility has been created, acting as an umbrella term for many aspects of business operations including human rights, health, renewable energy etc.

Corporate Social Responsibility (CSR) stems from a belief that firms operating in an economy need to give back what they have taken out. That idea could be misinterpreted to be purely concerned with injecting money and capital into the economy, but CSR is much more than that. It encompasses the need for the development of society with emphasis on infrastructure, education, equity and sustainability. Hopkins (2007) highlights the change in definition of the word “development” that occurred in the late 1960’s. It was up until then that development simply meant strong economic growth until Dudley Seers “broke the fetishism of development theory” thereby moving it away from the tradition that firms needed to be built on foundations that would enable rapid exponential growth, wealth and prosperity. Where the belief at the time was вЂ?the only business of business is to do business’, thereby exempting firms corporations from all other responsibility. This old definition puts no importance on the need for sustainability, leaving it purely up to the public sector, therefore putting great strain on their already scarce resources.

Firms and their Objectives:

It must be said in that the primary objective of any private sector firm (including charities) is to derive the highest possible income and net takings for the firm. For charities, the more they earn and the more donations they receive, the more that will go towards their cause. For private sector firms, it involves making the most money for the firm’s stakeholders from the products and services they produce.

As mentioned by Jonker and de Witte (2006), there are two words that continue to pop up in the relatively new discussion of CSR, them being sustainability and responsibility. Although firms are initially concerned with deriving income, the key words sustainability and responsibility are now at the forefront of executives’ minds, because they are now a fundamental part of a firm’s business plan and the key to future profits.

The need for sustainability first came to light around 1970’s when the Club of Rome published its first paper titled “The Limits to Growth”. It showed great insight by revealing the impact that man-kind was having on the earth. The shock of this report led to great advances in managerial and technological disciplines that fell under the newly devised term “eco-efficiency”. Although there were many conscientious people that adopted eco-efficiency as part of their business plan, governments were and are still needed to create laws and regulations to ensure all firms strive for this goal. Eco-efficiency and sustainability both refer to the tangible and intangible resources that a firm occupies. Tangible items being; fossil fuels, raw materials, where these items are used scarcely, carefully and recycled if possible to ensure they will not run out. Jonker and de Witte (2006) highlight the need to “strategically maintain” the intangible assets (know-how, competencies, and qualifications) in a company and the importance of them in a well structured business plan. So corporations are now challenged to move past the economic viewpoint and look towards environmental and social responsibility.

Defining CSR:

A clear, concise definition for CSR does not exist, but there are many different interpretations that ultimately conclude the same thing. For believers of good CSR, it is the management of the total impact that an organisation has on both its immediate stakeholders and also the society that in inhabits. Therefore good CSR would be to; honestly, ethically and legally control the negative externalities associated with operation of the organisation as well as ensuring a sustainable future through development. There is a consensus in the business world that without a credible CSR measurement tool, it will become obsolete, fading out of the business world and become no more than a PR exercise for corporations.

These corporations have grown in recent years to become large multinational enterprises and shown to be formidable powers in local and international economies. Because of this substantial growth vast amounts of resources have been consumed and much has been taken from society. As these corporations grow a serious question looms asking what these corporations owe to the society from which they took so much.

Past Performances of Firms:

Certainly on a sustainability viewpoint, large firms should be at the forefront, because without a balanced economy and functioning society there will be less demand for their product and less need for what they offer. It is therefore in the corporation’s best interests to help maintain and improve the economy while aid in the stabilization of society as a whole.

A most compelling case of poor CSR is seen in wealthy oil-rich environments. Around the Gulf, the deep south of the USA and many other areas, where the wealth and prosperity shown by oil tycoons is not reflective of the towns in which the oil is pumped from. This is the typical case of poor CSR where there have been few attempts to help remove the inequity in their society and even with government intervention, little seems to be helping.

Another case representing poor CSR, but from a different perspective, was the building of a hospital in Somalia by the Coca-Cola Corporation. Although they were giving back an extraordinary amount to underprivileged people and people in need, they did not fully think the

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