How Businesses Conform To Social And Corporate Responsibility Accounting Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Today, businesses are faced with on-going social responsibilities such as ecological sustainability and global warming from the effects of carbon pollution. The term corporate responsibility (CR) is now widely used by many businesses as opposed to using the term corporate social responsibility (CSR) which is open to much debate. The purpose of this paper is to examine how businesses conform to social responsibility and what the implications are from moving to the widely used term of CR. From this, this paper examines two articles that relate to current business regulations used in United States (U.S.) and the global move to a uniformed standard of CSR principals. By utilising the work of Simon, Powers and Gunnemann (1972) with regards to the 'moral minimum', negative and affirmative duties as well as assessing the approach of the Kew Gardens Principals (KGP) the implications for businesses becomes clear.

Friedman (1970) suggests that the narrow classical economic (NCE) view for the purpose of a business, under the duty of management, is to exploit and make profits for the welfare of their shareholders. From this, Friedman (1970) argues to do otherwise would destabilise the fundamentals of a free society. According to Quazi and O'Brien (2000) CSR is defined as a business's assurance to function in a socially, economically and environmentally sustainable manner while recognising the interest of its stakeholders. The article by Reich (2010) suggests that these behaviours entice businesses to neglect regulations which have contributed to ecological disasters such as oil spills [i] , coal-mine collapses [ii] and stock market downturns [iii] which have contributed to defy CSR. When such disasters occur, one needs to examine whether it is the business's fault of not following law and regulations or whether it is the fault of individuals within the organisation who ultimately make the decisions. A business is non-natural person who have artificial responsibilities where in contrast, individuals are natural adhering to social means (Friedman, 1970). Individuals would then be solely responsible for business decisions. Therefore, to suggest that a business has a CSR is alluding to the responsibilities of society, as a whole, whereas a more precise terminology for such responsibilities would be portrayed as CR (Friedman, 1970). Businesses conduct solely economic activity and should be judged on solely economic terms whereas social concerns should be left to other institutes such as governments (Friedman, 1970).

Unlike Friedman (1970), Simon, Powers and Gunnemann (1972) suggest CR has two concepts; a business's objective is to minimise social injury and to maximise revenue. Their analysis indicates both businesses and individuals should not scrutinize moral or social good as people would benefit society and go beyond the obligation to shun harming others. In the article by Roberts (2010), the United Nations (UN) and other activist groups are pushing to impose CSR through a uniformed internationalised approach. Roberts (2010) argues that CSR has moved into corrupt behaviours where businesses impose corrupt financial disbursements to foreign officials to persuade them to keep their business activities within the intended country. This would violate regulations domestically but would not necessarily violate regulations internationally as a uniformed CSR code of conduct has not been developed. Simon et. al (1972) suggests that affirmative duties relate to do something good whereas negative injunction refers not to do anything bad. The argument is that businesses are responsible for the wellbeing of its stakeholders (negative duties), these behaviours, although domestically illegal, may contribute socially to the prosperity of another country such as providing jobs (affirmative duties). Consumers would be able to access products or services at minimal costs. The assumption is that the 'moral minimum' is not to impose social injury. However, other businesses competing would be disadvantaging their stakeholders by not being able to compete. The implications to move from CSR to CR may neglect and cause harm to the greater society. The obligation not to cause harm involves taking active steps to prevent potentially harmful activities. The monitoring of these actions could be imposed by political representatives to oversee justice in a business environment (Quazi & O'Brien, 2000).

The Kew Garden Principals (KGP) (Simon et. al, 1972) suggests that social responsibility can be taught to businesses with a NCE view point on CSR. These principles recognise four steps to consider when choosing whether to help resolve an issue, even if the issue is not of the businesses doing. These four principals (Need, Proximity, Capability and Last Resort) could provide businesses with a framework to consider such grey circumstances to determine the obligations beyond the notion of the 'moral minimum' (Cronnin, 2004). While both articles suggest a need for tighter regulation (Reich, 2010) and improved international standards (Roberts, 2010) for CSR, business could develop mandatory education with regards to being more morally socially responsible. As Friedman (1972) argues, individuals ultimately make the decisions as opposed to businesses that are artificial. Therefore the individuals, with reference to management within a business context, need to be educated about CSR and adopt the KGP. In sum, businesses do not need to combat all of society's issues however the greater a need the greater their duty is to assist (Need). The closer a business is to a problem; the more they are expected to resolve it (Proximity). Where there are economic problems that a business can't fix they certainly could assist (Capability) and if there is no likely assistance from others, the greater duty for individuals is to act for the business to be socially responsible (Last Resort) (Simon et, al. (1972).

The broader socio-economic view (BSE) suggests that, while businesses main objective is to maximise profits for their stakeholders, a business has three additional duties (Bowie & Duska, 1990) which work in conjunction with affirmative duties and negative injunctions (Simon et. al, 1972). Firstly, a business must act in accordance with the law and justice to prevent harm (Affirmative duties). In the article by Reich (2010) the push for a standardised approach to CSR allows businesses to adhere to their CR of making a profit for stakeholders as long as it confines to law and justice. The U.N Global Compact (GC) was created to govern businesses to operate 'responsibly' by contributing to broad-based economic growth and supporting markets (Roberts, 2010). The objective of the U.N GC encourages 'profitable multinationals' to respect the 'moral minimum' (do no harm) by financially contributing to social responsible by way of education, health care and infrastructure building in embryonic nations (promoting good). Secondly, by following the first objective, businesses would cause no avoidable, unjustifiable harm (Bowie & Duska, 1990). Thirdly, these contributions would adhere to the 'moral minimum' and avoid social injury for the condition that the funds will be dispersed accordingly to benefit that country and their citizens (do good). For businesses to engage in this behaviour, for social responsibility, Bowie and Duska (2010) further argue that all stakeholders should be able to voice their opinions with regards to how the finances are to be used. Following these principals, the proposal for businesses to move from CSR to CR would indicate a duty of care; not only for stakeholders but also the greater community (not causing harm).

In the article (Roberts, 2010) the push for an international standard of CSR is alluding to some issues with the responsibility of who is going to administer this issue in the United States Standards and regulations are not produced by the federal government but are administered by the American National Standards Institutes (ANSI). When challenged by these new standards of CSR, ANSI decided to ignore the issues and passed it onto the American Society for Quality (ASQ). The underlying concern seems as though the issues, pertaining to the uniformed standards of CSR, are being neglected as nobody wants to take ownership. Moreover, the article indicates that the issue are now sitting with the Environmental Protection Agency (EPA). The problem is that the duties of these citizens to regulate and administer controls for CSR are not restricted (Simon et. al, 1972). Humans are multi-faceted individuals (De George, 2010), their ability to assess this situation maybe complex in terms of the outcome. For example, whoever decides to implement the new CSR approach may be responsible for any results. An individual (management) may see this as a grey issue and their decision to dump it on another regulatory body maybe an easier strategy to avoid the unforseen issues that may arise for such an implementation. De George states that businesses are formed for limited ends that are planned for certain purposes. With this in mind it is not clear which authority will be responsible. Businesses should aim to be accountable for some portion of social responsibility and to adhere to the 'moral minimum' and avoid social injury. In contrast, the first three objectives of the KGP may have been used to asses this situation. Where there is a requirement (Need) to implement a CSR standard, an authority assessing the situation may uncover that there are issues with not having a uniformed CSR approach (Proximity), while certain mentioned authorities may not have the capacity to enforce these standards they pass these concerns to another authority (Capability). The greatest obligation is to act when there is uncertainty about the availability of others (Last Resort).While the article (Roberts, 2010) is limited to provide information about the interaction of these authorities the principal of the last result is difficult to identify. While useful, the KGP may be limited as the hope that someone else will act may lead to the assumption that no one may act at all as evident in the article (Robert, 2010) (Simon et. al, 1972).

With regards to the BSE view, stakeholder theory suggests business relationships carry obligations, not only for stakeholders but also, for the community at large (Quazi & O'Brien, 2000). In Reich's (2010) article, Goldman Sachs performed well in terms of financial gain for its shareholders but at the expense of defrauding others. Their responsibility must go beyond just maximising profits. They did not adhere to the moral minimum (do no harm) causing an investigation into the accounting practices and harming the finances of those who were negatively affected (Simon et, al, 1972). This theory suggests that stakeholders appoint, by voting, who will manage the respected business. The issue here is that as individuals are multi-faceted and therefore it is difficult to gauge and balance their interests (De George, 2010). The implications to move from CSR to CR may neglect the businesses duties of being socially responsible to avoid, prevent and do no harm to society.

The broad maximal-view (BMV) of CSR suggests that the part of a business's duty is to provide support and help social problems (Quazi & O'Brien, 2000). This approach could portray a positive public relations image to the community and provide long-term profits for the business. This approach would see society and business working together to achieve to solve social problems and enhance the community, here affirmative duties would be present (do good) (Simon et. al, 1972).

In the article by Roberts (2010) an attempt by the U.S. to mandate a uniformed standard of CSR could be seen as socially responsible action to administer for the benefit of society and could contribute to world's best practice. As opposed to the Friedman's view (1972) of the 'free market' (invisible hand') this approach suggests that the community's interest is best served by legal regulation of business. This would discourage government regulation and reduce costs associated with implementing and imposing such regulations. While this approach sounds promising the article by Reich (2010) suggest otherwise. Regulations are set by relevant authorities who administers them and if broken punishments such as fines are enforced. The concern is that when businesses are punished and the moral minimum is broken the consequence of the punishment does not appear to be severe. The article suggests that governments are to blame, where budgets are consistently reducing the need for inspectors to complete their job. The BMV, to 'do good' and assist in solving social problems, needs to be implemented' by governments to enforce the 'moral minimum'. The move from CSR to CR can work however the implications may suggest that, beyond the businesses control, external entities such as government need to control regulations more efficiently to aid social responsibility.

In sum, business may appear to have more responsibilities than just to maximise profits as they need to take into account the environment and the greater society. This may mean that society needs to move away from the liberal capitalist society and become more considerate of others. Businesses must consider more than just their stakeholders in the decision making method. While stakeholder theory points towards the right direction of being more socially responsible the main objective of businesses to increasing profits and providing value to shareholders could be jeopardised.

If a unified CSR standard is transparent it may be probable to make an optimistic contribution to society as a whole. The move from CSR to CR would be justified as long as benchmark regulations are ethically enforced by authority bodies with the appropriate punishments, if broken. The need for businesses to develop educational programs would assist in making a better global business community that would be aware of their social responsibility and contribute to enhance the lives of society.