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It all started in the eighteen century, with a Scottish philosopher of political economics, Adam Smith, who expressed that the free interaction of organisations and the public would meet the needs and desires of society. This responsibility was then termed Corporate Social Responsibility (CSR) and started an evolution from the 1950's and further expanded during the 1970's. The evolution and expansion of CSR is a direct result of ever growing economies.
Corporate Social Responsibility is a model for incorporating ethical business regulations into the business model. This model provides corporations a framework to embrace a responsibility towards the community, employees, environment and other service users. The three areas of main accounting are as follows;
Financial success or profit
Contributions to livable environment
Contribution to solving social problems.
A corporation incorporated each area into their business model and culture, generating growth for all three areas using their framework. An initial financial profit setback will be met when applying the framework, an exception being if the businesses have a direct business involvement with social issues.
Regardless of whether business or government, leaders in all sectors have an opportunity to improve current issues and solve business problems. Community needs can be opportunities to utilise business technology and provide collaborative efforts to serve community needs. The Internet revolution has provided the public the chance to empower themselves and with this in mind customers, empowered by the internet, are researching corporate citizenship. The times of word-of-mouth and traditional media sources, such as television, is being surpassed by the number of growing search engines, and the number of customers using the Internet to research companies through independent sources is growing. Corporations should look for new ways to inform consumers about their social responsible actions and should realise that a great number of consumers will be sceptical and will check up on any claims. A company with good CSR policies, which demands that commercial success, be gained through positive practices that aim to promote general welfare, such as more jobs, better salaries, environmentally responsible activity and local interaction, tend to do a lot better then companies who do not. Success, after all, is not only measured in monetary terms but also the corporation's impact on the community, on its customers and on the environment.
There are a number of valid reasons for this question, including that CSR is a good business Ethics. Business ethics regards what is morally right and wrong with a company's activities and behaviours. The likelihood of company to transact without creating some sort of environmental or social impact is very small, might this be of positive or negative impact. A key point of CSR is that it recognises the responsibility that companies have to take into account of those impacts. CSR is a framework for thinking about business ethics, making ethical decisions and working within the law, it says a company responsibilities reach further than just making a profit. Another reason is that CSR means engaging with Stakeholders (people whose lives and livelihoods are impacted by the company's activities). CSR in this case means that a company will make a decision with society (the Stakeholders are a broad and varied group) expectations in mind. Furthermore, the corporation will recognise not only the opinions but also the values that are important to the Stakeholders and will actively engage with its Stakeholders to understand their aspirations, goals and concerns.
There are many different ways a corporation can support a social initiative and still make profits. A good example is the Marriott Corporation (ref), who was motivated by a desire to help the community while still helping the bottom line, by training and hiring 6000 persons on welfare. Marriott was still able to cut costs and increase productivity. It can be in a company's best interest to provide a needed service within a low income area. By incorporating a service that improves the resources and infrastructure of a community, it can offer an economic return for the organisation through recognition or direct community investments. In this sense, a business has an obligation to both profit and serve the community, for all stakeholders involved. This shows that when a company practice in good CSR, it gains better reputation and brand image meaning an extension of better sales, more investors and customer loyalty plate form. This is supported by the survey done by Hill & Knowlton/Harris (2001) showed that 91 % of all customer survey said that they would switch to other companies, if the corporation had a negative image.
How does CSR work?
Corporation Social Responsibility must first be sold as a developing a value proposition to its own board, as it plays an important role in helping to shape and develop the value proposition. A value proposition being the corporeal results a customer gets from using the company's products or services. Aligned with social dimension, this helps provide guidance and direction to utilise the energy and enthusiasm for CSR. By identifying where companies can be socially responsible while continue to pursuit long term competitiveness of its business, companies can utilise the wider community with its own set of expertise. This framework should whilst reinforcing its core business strategies also attempt to transform value chain activities. This is important as local customers are an important source of sales and improving a company's reputation, the company itself will find it easier to recruit workforce and lead a better local authority relation. The best way to assess whether CSR is working and related to the corporation is to set CSR measurability and performance metric (differ for every company). An example of CSR metric are Key Performance indicators (KPIs) using a balance score card to measure factors such as environmental performance and benchmarking against other companies in the same industry spectrum.
Advantages and Disadvantages
Corporations, although are enterprises with purpose of commercial pursuits, are powerful and influential institutions. However, one must not forget that their processes have a very public impact and affect many lives through their actions and behaviours. For this reason, it is very important that they act and behave responsibly and CRS policies should be there to guide corporation to Ethical path. More importantly for corporation, this responsibility can make a worthwhile contribution to society as irresponsible business can be harmful in equal measure. Companies without regard for their responsibilities and act/behave in an unethical ways that is damming to the world's natural resources, will earn bad reputation which could not only loss profit or even destroy the company in their home ground but also the impact could be greater for international companies as their restriction could expand to many countries across the world.
As more and more Stakeholders are demanding accountability CSR now involves more complex decision making. This makes the companies grow from the single dimensional thinking of maximising financial profit and concern more about the economic, social and environmental aspects of corporation impacts. For this to continue to be possible a firmed knowledge of CSR is critical, as learning about CSR means learning to manage CSR initiatives and engage with Stakeholders enabling managers to kept CSR alive within the company. Another reason for learning about CSR is so that ethical misconduct within the workplace can be recognised by employees, managers and Stakeholders, as this is far too common. This recognition could open a gateway to taking action to address the misconduct. Everyone can benefit from Corporate Social Responsibility giving compelling reasons for customer, supplies and community to learn about CSR so as to protect and promote their interest in relation to corporate activities.
Although, many organisations such as United Nations (UN) are all attempting to regulate Corporate Social Responsibility through their framework, it is still voluntary corporation action and goes beyond regulations and laws. This unfortunately means that CSR lack of formal regulation and is not standardised and therefore often not possible to compare CSR performance in detail. Appallingly CSR is misused as a market ploy and reveals facts such as some company, whose very existence is considered to be socially irresponsible, such as British American Tobacco Corporation, are being recognised for performing some socially responsible acts. This is due to companies being given the right to shape and define CSR increasing the risk of abuse of power.
Although, Corporation Social Responsibility can come across as an idealistic idea, especially as it is voluntary process and lack regulation and therefore subjected to abuse of power by decision making companies in the social domain, it actually produces favourable results if applied positively. Corporations and governments are powerful and influential institutes and can therefore make a significant difference to society. This difference whether these institutes impacts positively or negatively, will depend on the contribution to better thinking about what is Ethically right or wrong. This knowledge can produce decisions and behaviours that are recognised by stakeholders as unethical and help managers assess the changes needed to manage CSR. A good CSR framework aligns community efforts and charitable efforts with core business strategy, expertise and market needs. This in turn helps build up a company's social capital and is likely to bring returns including financial returns.