The nature of conducting business has radically evolved over the years with more and more businesses trying to influence or change the public perception that their mere existence is only profit-driven. By employing strategic tools, businesses are promoting the image of an enterprise whose interests are not restricted to profit-making but also include environmental and social concerns. This approach, called Corporate Social Responsibility (CSR), is aimed at improving business accountability and ensuring sustainable development. The idea is to adopt business practices that adequately meet the needs of an enterprise and its stakeholders presently while securing the resources (both human and natural) that will be needed in the future. Though some business experts are critical of this approach, there is evidence, though unquantifiable, to suggest that there are potential social and business benefits of a CSR approach to sustainability and development. This research paper shall present the argument that the benefits of CSR far outweigh its negatives and as such is vital to sustainable business development.
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Firstly, one of the most important benefits of Corporate Social Responsibility is that corporations are able to effectively manage risk and ensure legal compliance. In an article titled The Benefits of Corporate Social Responsibility, Levine (2008) points out that "corporations implement programs in order to avoid being sanctioned." According to the author, this means "not being subjected to investigation, litigation, prosecution, litigation or legislation." He adds that Corporate Social Responsibility programs serve as a 'prophylactic measure' for corporations and prevents the exposure to certain risks such as:
lawsuits and related class-action litigation, government investigation, project finance or investment contract issues and the receipt of shareholder resolutions on labor, human rights, supply chain and sustainability issues, among others (Levine, 2008).
More importantly, corporations are likely to face a backlash if they are perceived to be socially and environmentally irresponsible. For example, British Petroleum (BP) had to struggle to rebrand its image after the Gulf oil spill and Nike had to contend with allegations of child labor in developing countries. Therefore, it is safe to assume that corporations are able to avoid or minimize the risk or fallout of doing business by building a legitimate culture of doing the right thing (Kytle and Ruggie, 2005).
Secondly, Corporate Social Responsibility ensures that corporations are able to effectively reduce operating costs. According to Jobber (2010, p.199), "better environmental management systems can improve efficiency by reducing waste, increasing energy efficiency and, in some cases, selling recycled materials." Corporations have come to recognize the benefits of implementing sound managerial practices that are environmentally sustainable, and that reducing resource use, waste and emissions not only helps the environment but it also saves a great deal of money. For example, Ryerson Inc, a North American distributor and processor of metals was effectively able to reduce its operating costs by updating its facility and improving the work environment for its employees. According to Jeff Pipiras, Ryerson operations manager, "the company was using poorly designed, inefficient rack lighting lined with metal halide lights that provided dim work areas and required costly maintenance, in addition to rising energy costs" (Reliable plant, n.d.). To solve this problem, Ryerson invested in upgrading these rack lighting to more energy-efficient, and installed motion sensors and foot lighting to control lights throughout their plant. As a result, Ryerson Inc. enjoyed annual savings of more than $20,800 including a further $43,310 tax break as a result of the 2005 Energy Policy Act.
Thirdly, Corporate Social Responsibility strengthens an organizations' ability to attract, engage and retain employees. Corporations tend to be viewed in a more favorable light, especially among potential employees, if they actively involved in social issues. With the right CSR approach, corporations can encourage employees to devote more time to charitable works at the company's expense, targeted towards fulfilling employee needs. According to a survey conducted by Price Waterhouse Coopers in 2004, Microsoft, BP, General Electric, Toyota, IBM, Royal Dutch/Shell, McDonalds, Johnson and Johnson and Wal-Mart were among top ten companies that best demonstrated their commitment to CSR initiatives. Of these ten companies, five were found to be among the most respected in the world (Clark and Kent, n.d.). It is, therefore, evident that CSR initiatives help attract, retain and motivate employees, as well as, help build a strong employer brand.
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Furthermore, Corporate Social Responsibility improves access to capital for business organizations. Jobber (2010, p.200) indicates that:
organizations that are committed to CSR have access to socially responsible investment (SRI), whereby investors take into account considerations such as a company's environmental and socially responsible activities (Jobber, 2010, p.200).
Moreover, businesses tend to generate and receive positive media coverage if they are seen to be actively involved in their social environment. For example, most oil companies have in recent decades been actively engaged in the advocacy of green energy as a result of the detrimental effects of global warming. More specifically, Chevron has engaged in a massive media campaign blitz, voicing its support for renewable energy and boasting millions of dollars in investments in solar and bio-fuel technology to make the shift from dependence on non-renewable energy to green energy possible. Initiatives like this not only ensure that business organizations receive positive media coverage but the public perception of their corporate image is improved. This makes it a lot easier for an organization to perform its business within the community since it already has a good working relationship with society as a whole and the authorities. Business organizations that have such a strong reputation within the community are able to build a strong bond with members of the community based on values that promote mutual respect and trust in the relationship between business organizations, their consumers, the community and the government as a whole. The need for business organizations to greatly enhance their corporate brand increasingly drives them to adapt and be more actively involved in Corporate Social Responsibilities.
In addition, Corporate Social Responsibility provides business organizations with the opportunity to differentiate them from other businesses especially in a very competitive market. This is known as brand differentiation and it puts companies in the unique position of being able to competitively standout in the eyes of consumers. Brand differentiation also provides new marketing opportunities for corporations. According to Jobber (2010, p.199), "environmental and social responsibility has created new markets for business-business and consumer goods and services." He cites the example of General Electric whose market expanded to include 'clean' technological products to companies. He further argues that new segments are created within the market as a result of a corporations 'green credentials' which provide 'targeting opportunities'. He identifies two segments that have arisen as a result of corporations needs to be environmentally and socially responsible. The first is called 'ethical hardcores or dark greens', and the second 'ethical lites or light greens'. The former put in a lot of effort into researching the companies they do business with before procuring their products and the latter are willing to engage in environmentally friendly practices, as long as they don't have to pay a premium price.
Lastly, one vital benefit of Corporate Social Responsibility to business organizations is sustainability. Business organizations that acknowledge they have an important role to play in the community and society as a whole and to positively impact the people with which they are involved. This is essential for sustainability and is indicative of a long-term business plan which means that the company product must directly or indirectly positively benefit the society. In developing countries, multinational corporations are increasingly taking on the role of contributing to sustainable development in economically, socially and environmentally responsible ways. In Nigeria, for example, Shell has formulated a sustainable business development program to ensure that it delivers the benefits of its portfolio and products while reducing the economic, social and environmental impact of its drilling operations (Shell Nigeria, n.d.).
Despite the benefits of Corporate Social Responsibility such as the ones discussed above, opponents of this approach argue that businesses, especially those that are mainly profit-oriented, should not undertake CSR programs. Their contentious position lies primarily in the notion that Corporate Social Responsibility is misguided.
Milton Friedman published a seminal article in 1970 (Friedman, 1970, cited in Jobber, 2010, p.198) to support this argument. He contended that for businesses to act in any other way that was contrary to the sole purpose of making profits for their shareholders was a "betrayal of that special responsibility" to all stakeholders. Therefore, he thought it misguided for corporations to spend money belonging to others on CSR initiatives they perceived to have some kind of social benefit. In addition, he argued that corporations should have no obligations to the society and should refrain from addressing social problems as this was the primary responsibility of governments.
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Though this argument may be sound, it stands to reason that there is an intertwining relationship between corporations and governments. Governments provide the legal framework that allows corporations to perform effectively in strict accordance to legal codes while requiring large sums of money in the form of taxes. On the other hand, corporations put in a lot of time and effort to seek to influence public policies that have a bearing on their interests in one way or another by lobbying governments. There is no way a business could remain sustainable if it was only concerned with preventing legislation that served to benefit the society in the interest of making profits in the short term. The mere fact that corporations are involved in lobbying governments is evidence that they have a role to play in the society whether or not they like it. Thus, the argument that Corporate Social Responsibility is misguided is refutable because corporations are not only concerned with profit making but also have an interest in managing the demand and expectations of customers, shareholders, local communities and governments. They are also concerned with managing risk and reputation, and investing in community resources upon which they can later depend on and this guarantees sustainability.
Another rebuttal by opponents of Corporate Social Responsibility is that it encourages consumer cynicism. The idea is that consumers are more than likely to perceive CSR initiatives as a mere public relations exercise intended to influence the community to form positive opinions about a corporation. After all, the principal concern for corporations is to maximize profits, they argue, and businesses would only engage in CSR initiatives that according to Jobber (2010, p.199), "place the company in an acceptable light among its stakeholders without necessarily embracing the ideas and ideals associated with those values." The flaw with this argument is that irrespective of how consumers view a corporation's public relations exercise, there is little doubt of the effect CSR has on corporations in the sense that it has the potential to enhance a company's corporate image and reputation. Corporations that equally dedicate their time and resources by investing in initiatives seen as environmentally and socially responsible can easily build the trust within the community they operate in and boost the public image of their brand. Hence, it is inadequate to suggest the notion that CSR encourages consumer cynicism.
In conclusion, companies that implement a CSR program are likely to be more successful at managing risks and ensuring legal compliance. More importantly, businesses have the potential to strategically position themselves in a competitive market by implementing a CSR program that is geared towards building strong ties to customers and ensuring customer loyalty based on distinctive ethical values. In addition, the risk of sudden damage to the corporate image or reputation of a business is greatly reduced even as market competitiveness is improved. Businesses stand to gain far more, especially financially, by implementing a CSR model that not only ensures sustainable growth and development of the business, but also improves public perception and benefits the business and the society which is, after all, vital to sustainability. Although opponents of CSR initiatives challenge the notion itself with concerns that it is misguided and incites consumer cynicism, the benefits significantly outweigh these concerns. As such, it is therefore crucial that businesses embrace Corporate Social Responsibility.