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One of the key reasons behind company's socially responsible activities is confliction between companies and stakeholders can have cost implications for the company. Asongu, J.J. (2007) Companies Social Responsibility can be defined in variety of ways. Basically it is founded on good corporate citizenship and its wider influences on society for the benefit of the company and society as a whole. Companies Social Responsibility requires corporate leaders to understand whatever company does has some flow-on effect either inside the company or outside of company, their effect on society can be divided into three sections as follows-
Social: - This involves social response such as education, society, life style, Charity trusts.
Economic: - This involves issues relating to jobs, product value, ethical trading standards
Environment:- This involves use of energy, product life cycle and sustainable development
(Diagram from Google)
Their relationship with community is different. In business, Economic and environmental issues are largely addressed and implemented. Business's capacity to respond to social pressures is totally dependent on corporate social responsibility. Several have noted that charitable contributions should be involved for corporate social responsibility to be effective.
History of CSR
InÂ 1924Â Oliver Sheldon introduced the concept ofÂ corporateÂ social responsibilityÂ (CSR). In the early 1970, CSR came in to common use, after many multinational corporations formed. Corporate social responsibility is related to business ethics but not identical with .The nature of corporate social responsibility has changed over time. Relatively CSR is a new concept but the phrase has only been in use since 1960.Corporate social responsibility (CSR) comes into controversial subject to attract a lot of attention from those who debate that the whole issue is irrelevant to Business (Freeman and Liedtka, 1991), through those who find the relevance, but think it is not a good idea for business (Friedman, 1962), but CSR is of strategic importance to business. While debate for CSR in business is not only crucial, but also interesting.
Tracing the history of the term 'company' is sufficient here because as the words 'corporate,' 'social,' and 'responsibility' rightly suggest, CSR addresses the responsibilities that companies or corporations have to the societies where they belong and operate. From a practical perspective, CSR involves a business which identifies its stakeholder groups and incorporating their needs and values along with strategies and day to-day decision-making process (University of Miami, 2007).
The company or corporation, and even business cannot be separated from society. However, a society' where business operates, which states the number of stakeholders to which the organization has a 'responsibility' is relative. The society may be wide, for example multinational oil companies have to be careful of its impact on global environmental conditions, or narrow for small grocery store. It is for this reason that the concept may be seen as undefined, and why various definitions of the term are exists. The World Business Council for Sustainable growth defines CSR as "the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large" (SDU, 2007). This definition has been generally accepted by many CSR practitioners and advocates and many program or activity engaged by a corporation that does not give direct profit and at the same time creates real and unreal benefits for both the clients and corporation.
McDonald plays important part in CSR as Ronald McDonald House is an independent charitable foundation which is free lodging for parents and relatives of children confined in nearby hospitals across the globe. McDonald's does not own or operate this house but donates the equipment and materials needed to build and maintain the houses. The Ronald McDonald House is a nonprofit organization and is working on donations collected from the public. The corporation provides the name to the charitable institutions that is the principal sponsors are essentially non-performers in the point. They do not count to profits and not included in financial statements.
They are independently registered organizations and have their own accounts removed from their principal sponsors. These organizations are managed by a group and this group work for charity. Corporations work on community projects with amounts allocated to music and arts. Corporations work with employees on community work increasing goodwill and brand values. CSR from charity point of view is an approach to strategic perspective. Charity is a legitimate aspect of CSR as long as it is approached from a strategic perspective. Stakeholders are taken in account to their environment in decision making process which implies to balancing stakeholders for profit.
Ways in which Company might be socially responsible:- Social Responsibility is not just making environment green or putting waste in bin being and switching off the gas every time there's also a human element. In corporate social responsibility there are different obligations in addition to pursuing profits.
Appreciate staff for voluntary work: - There are many companies who allow staff to volunteer for work with its main charity. Most of companies encourage staffs to work for one of the charities.
Look after employee health:- Employees health also matters in corporate world. This can play better role in success of organization and if company cares for employees and their health then it will be helpful as social responsibility.
Sponsoring Campaign: - It is obvious that without industry support many campaign and events could not happen. Campaign can be helpful in many ways like awareness for health, education, and environment. Campaign plays an important role society as well as organizations.
Donation to charity: - Companies support local communities and charitable causes. Most of companies give some amount from their profit to local communities and charitable trusts.
Plantation: - Plantation plays an important role in decreasing a carbon level and making pollution less environment. Many industries support plantation for social responsibilities to decrease pollution level from environment.
Office material recycling: - Baxter Storey ensures that cups and packaging used by the business are 100% of all disposable and can easily be recycled. All waste paper is recycled and, at the end of 2006, many company denied purchasing virgin paper to 100% recycled paper thus that helped in saving 2.4 tones of CO2 in 2007. Many companies encouraged the Staffs to print office paperwork on both sides of a sheet so that paper can be recycled afterwards.
Helping people with disabilities: - Many organizations help people with disabilities.
Aptech Limited, a leading education player in Information Technology, has an impact on encouraging education throughout the country. Being a global player with solutions-providing capability, Aptech has a contribution in community activities. It conducts training and education awareness-camps, in association with leading NGOs, also provides computers at schools.
Aptech students also contribute in social life by donating part of their art work to NGOs. Aptech has tie-ups with leading NGOs throughout the country to provide education to the society throughout the country, especially the underprivileged. The company says distributing education among underprivileged children is an integral part of the country's social works towards supporting basic education.
Benefits a business might experience in adopting a more socially responsible position
Changing Expectation may satisfy stakeholders
Stakeholders and the general public have more expectations from business. Increasingly, they believe in the private sector to help social and economic issues. According to the Globe Scan 2003 CSR Monitor, there are very few people in world who have on trust in large companies and in the UK more than one industry does not care to its responsibilities.
Activist groups are also planning to become convoluted in aiming corporations they think as not being socially responsible, thus actions such as campaign media , public demonstrations, resolutions of shareholders, lobbying and political pressure and 'denial of service' attacks on company websites. In 2000, a survey by media, declared that 42% of respondents thought a company's CSR record would rapidly affect share prices. People related to company like customers, investors, society groups, environment activists, trading partners and others ask companies for detailed information about their social activities.
Leadership companies are providing a variety of information and/or common audits that explain their social performance on one or several extents. Part of this, to reach greater disclosure, many companies are showing detailed information about their environmental and social - even though it is negative onto their websites. Hamilton, J.T. (2003) business leaders disclosed that a part of them issue a public statement committed to corporate social responsibility issues. Further 14% of answerers say that they are planning to take forward steps in the future.
Growing investor pressure Satisfaction
The growth of socially responsibility has an impact on investors which makes companies take part on social issues. According toÂ US Social Investment Forum, in professional organization, $2.14 trillion was invested in publicly screened portfolios in 2003. In result growth was 7% since 2001 - there was a time when professionally managed portfolio of the universe was reduced to 4 %. In 2001, the European Stock Exchange and CSR Europe found that one third part of 302 fund managers and financial analysts offered socially responsible investment (SRI) products. In Europe, CSR estimates that the European SRI Trade market has value of worth 12.2 billion Euros. Corporate responsibility trend tends to create fluctuations towards preferences shareholders and institutional investors. According to CSR in Europe, more than 50% of UK fund managers and analysts believe that estimating social and environmental performance can be part of mainstream investment decisions soon.
Most of social and environmental risk management believes that they will have an affirmative impact on market value. Survey indicates that one in five individual shareholders sold shares just because of companies' social and environmental performance (Globe Scan 2003 Global CSR Monitor). The shareholder resolution process used by investors to change the policies and increase disclosure depending on CSR issues, including environmental responsibility, policies, involvement of community, human rights, principled decision-making and business power. Since July 2000, it has been declared how UK pension funds integrate social and environmental factors in investment decisions. According to theÂ Journal European Affairs, "this minor change to pension fund rules has pressed pension funds to engage corporations in a dialogue on social and environmental issues"
Activist groups buy shares from targeted companies and provide them access to annual meetings and resolution process of the shareholder. It is also proven that companies who addressed ethical, environmental and social responsibilities have capital that might not have been available. FTSE4Good introducedÂ by Financial Times In 2001. The FTSE4Good has been planned to calculate the performance of companies that meet corporate responsibility standards, and to invest in those companies. Management who works transparently and criteria with the FTSE brand make FTSE4Good the choice for the production of Socially Responsible Investment.
Improved sales and customer loyalty
In 1999 The Millennium Poll' conducted by Environics International surveyed 25,000 citizens in 24 countries about corporate social responsibility. It revealed that
In survey 90% people around the world want companies to focus on CSR more than profit
60% of respondents believed that they are more interested to figure an impression of a business based on its social responsibility
40% responded negatively and believed companies that perceived as not being socially responsible.
17% people around the world believed that they had avoided the products as companies not being socially responsible.
Several studies stated that people prefer to buy products from companies who are socially responsible. In 2003, Social Market Foundation study revealed that four-fifths of customers prefer to buy products from environmentally and socially responsible companies and the trend is rising. MORI reports revealed that proportion of degree of social responsible companies is up from 24% to 44% in 2002. Many organizations help consumers and businesses with their guidance for purchasing decisions by rating companies and products and also issue lists of products to look for or avoid. Common lists are basically based on social things, such as a company's environmental performance, labor practices record.
As stakeholders have a rising interest in company social responsibility, many companies are finding that they are not only responsible for their own CSR performance, but for suppliers as well as its clients and even its client's clients. The outcome is that some companies are doing codes of conduct on both their suppliers as well as customers to ensure that other companies' policies do not reflect harshly on them. This has positive effect on the entire supply chain and cheering suppliers to accept socially responsible business practices.
Improved financial performance
Question is always there with Business and investment communities whether there is a link between positive economic performance and socially responsible industry practices. The Co-operative Bank maintains its social record accounts for 20% of company profits.
Evidence from the US includes:
A Harvard University found that companies balanced by stakeholder showed four times the development rate and eight times the service growth compared to companies that are focused by shareholder.
"A University of Southwestern Louisiana entitled "The Effect of Published Reports of Unethical Conduct on Stock Prices" showed that publicity about unethical corporate behavior lowers stock prices for a minimum of six months".
From September 2002 and September 2003, the Index of Dow Jones Sustainability rose by 23% against 21% for the world index.
Concentrated operating costs
Senior European business people believe that 76% say that CSR can promote innovation and creativity and 78% of integrating responsible practice makes companies more competitive. CSR initiatives, principally environmentally-oriented and costs can be reduced dramatically by cutting inefficiencies or improving productivity in workplace initiatives. Any initiatives designed at falling emissions of gases that provide contribution to global climate change also raise energy efficiency, thus reducing utility bills. Companies focus on work life orientation programmes focusing on productivity to implement lower cost in the human resource sector towards their key aspects of hiring and training funds which portraits diminishing values of absentism and raise in retention among employees within the organization.
Infosys is actively involved in various community development programs. Infosys promoted, in 1996, the Infosys Foundation is a non-profit trust and its contribution is up to 1%PAT every year. Additionally, the Education and Research Department (E&R) at Infosys also encourages employees to work as volunteers for community development projects. Infosys leadership and has involved itself actively in key national bodies and has examples in the area of corporate citizenship. They believe to be one step ahead to take initiatives in the areas of Research and Education, Rural Reach Programme, Community Service Employment, Welfare activities undertaken by the Infosys Foundation, Healthcare for the poor, Education and Arts & Culture.
Economic Cost associated with Social Responsibility
Obesity taken as a social issue through medical research, national health organizations and medical professionals lead to research results which proved to be associated with type 2 diabetes and heart disease causing unnecessary deaths. In the coming years if increased obesity prevails society expenditure towards medications, cure and treatment patterns would rise. Past years reports show an estimate of $100 billion spent on medical aspects of obesity. United states show the highest rate of obesity and higher rates of medical approach for treatment procedures to be adopted. Various researches towards treatment involves high amount of investment from society.
In 2003, the U.S. Food and Drug Administration (FDA) announced a program for food and nutritional supplement for companies to give more correct information on labels.Â But In the same year, also President Bush declares an initiative to the Healthier U.S. that encourages and helps Americans people to improve personal health and fitness. US government had launched The President's website called (http://www.presidentschallenge.org/), which used to promote health and nutrition information and awards for scholarships and grants for people involved with promoting more active and healthy lifestyles among the U.S. population.
The response had also been provided to food service companies by government and societies to make change for healthier habits. Business model with short term duration focuses on pricing and product differentiation formulae. Result showed increased costs to be passed on to customers. The resulting base or overall economic value reflects the differences between sales and value. A record step in the process of social change is also obtained. Especially derived demand markets and labor, take the social changing process to next level.
Survey reveals that 64 percent US adults are either overweight or obese and 15 percent children's under age 19 are overweight. By providing nutritional information on labels offer customers healthier eating choices. Subway is one of the fast food restaurants to revisit its business model and offer additional choices. Subway started its Jared Fogle campaign showing the health benefits of having Subway's products and their "7 subs less than 6 grams of fat" campaign. Subway sales rose 19 percent with the help of their campaign in first year.
Freeman, R.E. and Liedtka, J. (1991). "Corporate social responsibility: A critical approach - Corporate social responsibility no longer a useful concept."Business Horizons, July-August, 1991.
Friedman, M. (1962). Capitalism and Freedom, Chicago: University of Chicago Press.
Hamilton, J.T. (2003). "Media coverage of corporate social responsibility." The Joan
Shorenstein Center on the Press, Politics and Public Policy, Working Paper Series. Harvard: Kennedy School of Government.
Asongu, J.J. (2007). "Sustainable Development as a Business Responsibility." Journal of Business and Public Policy, Volume 1, Number 1, winter 2007.