Bowen states that CSR definition as the obligations of business to pursue those policies, to make those decisions or to follow those lines of action which are desirable in terms of the objectives and values of our society. At the same time, Frederick (2006) point out that "the actual meaning of CSR has dogged the debate from the beginning." and "The moral underpinnings of CSR are neither clear nor agreed upon."
General definition of CSR in modern generation is the management concept that company combined social and environment together and not only concern about their profit but also their stakeholders. A company that achieves a balance of economic, environmental and social imperatives which is known as Triple-Bottom-Line-Approach and satisfying shareholder's and stakeholder's expectations is commonly understood as CSR. It can be business management concept or charity when viewing from different perspective. The latter can also make a great contribution to society which will raise the reputation of a company and also its brand. (UNIDO 2013)
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Economic, legal, ethical, voluntary and philanthropic are the key features of CSR. Economic responsibility of a company is being profitable and provides rewards or interest to owners and shareholders, create new job for society to improve the employment rate and produce goods and services to community. Searching efficiency ways to carry on business operations and create innovative products that increase the business profit also consider as a part of economically responsible. (Ferrell et al, 2011)
Legal responsibility is a must to every corporation and it is a need to ensure that the business operation is under legitimate. A company's consumers are protected by regulation and to be truthful about the products and also investors. Company that carried illegal practices will be penalized or shut down.
Ethical of business is become serious issue around the world. It is include of managing waste, recycling and consumption. Company always can go further than the law regulation that helps to protect environment for next generations. Implement a minimum wages for employee and provide safety working environment for them to comfort employees also consider as ethical responsibility of a company consequently lead to improvement of production.
Promoting human welfare and spreading goodwill is a part of corporation's philanthropic responsibility (Ferrell et al, 2011). There is an example from Xerox (2013) make a contribution up to one thousand dollars for their employees' continuing the higher education institutions. To lend a hand for fight hunger in "vulnerable communities around the globe", PepsoCo Foundation has committed over two million dollars to World Food Program USA.
There are 3 main aspects of CSR which are economic aspects, social aspects and environmental and ecological aspects. Understanding the economic influence by company's operations is the economic aspects of CSR. It is over expected in the discussion on corporate social responsibility and assumed to be well managed for so many years but in reality it is the least understood by society. Financial problems are always misunderstood by the public that is same meaning with the economic aspects of CSR which is become the reason that it is easier to enforce than the other two aspects. Unfortunately, responsibility of economic of a company is not only showing their annual financial report to the public but also concern about the economic impacts of the organization's operation that bring for community and stakeholders.
According to Cambridge University Press (2013), the meaning of stakeholders is 'a person such as an employee, customer orÂ citizenÂ who is involved with an organization, society, etc. and therefore has responsibilities towards it and an interest in its success.' The business operations have bringing multiplier effect to their stakeholders which included direct and indirect influences. An organization with good financial standing has enough capital and ability to expand their business operations in long term and develop potential employees that beneficial to company. The employees of company with high salaries would use the income to get goods and services for daily life yet also paying their taxes. Consequently, the local economics will pump up by these activities and this is called as multiplier effect.
Many companies consider paying corporate tax is a cost to their business and looking for any legal loophole to avoid paying it and maximize their profit. The local tax base that used to improve the welfare of the society is mostly contributed by those companies that working around. When there is a company that carries out tax avoidance, the welfare of the community around it will deprive. Beyond that, organizations need to avoid actions that harm trust from public such as tax avoidance, corruption, and emphasize few individuals' interest in company only instead of equitable among the stakeholders.
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Among the three main aspect of CSR, social responsibility is the latest and getting more attention than before it ever had. It is implemented increasingly by many companies nowadays and being responsible for the society even indirectly that includes their stakeholder. It refers to business responsible to make operating decisions that will bring to the welfare of society and also the organization. There are three main aspects in responsibility of society: responsibility towards customers, employees and society.
Being responsible to customers always bring a direct positive effect on company's profits. However, the responsibility towards customers become broader that include other issues such as after sales service, quality of products, effectiveness of handle customer's complaint, and clearly mentioned terms and conditions of products to customers. Employees are the main asset of an organization therefore the responsibility towards employees is playing a big role in the CSR. Companies need to take care about their employees that provide welfare and safety at working environment, training and development for skills, and motivation of works. Further than that, fair treatment and equal opportunities should provide for all employees without discrimination. Most of the company's staff and customers come from the surroundings areas hence these companies are depend on the communities that around. Reputation, image and brand of a company have bringing certain influence to the competitors at its location. Numerous of companies are actively involving in responsibility towards community such as sponsorship for local events and matches, donations to charitable organization and recruiting person with a disability.
Environmental and ecological aspect is a main part of CSR and has been a crucial topic of discussion for the longest time amongst other aspects. It is the first real understanding of the environmental impacts of business in 1970's. Activities that carry out by business organization have many different types of impacts on environment but it is mostly refers to negative effects happening in the natural environment surrounding. Activities that bring such effects example like deforestation, pollution, overuse of non-renewable resources and so on. Measuring environmental impact and environmental managements are use to comply the environmental aspects in CSR. Furthermore, by reducing the material cost that can lower down the operating expenses that bring beneficial effects on the company. It may attract more customers when the company reveals other sides like material loss and vies as a responsible public image. This is not only good for environment but also the profitability of the organization. (Uddin, 2008, pp.207)
There are many advantages that occurred when a company getting start with CSR activities and bring positive impacts to its employees. When a company that actively involved in CSR programs may attract new employees due to employees nowadays are willing to work for them compare with other company that only focus on business profit. Consequently, it makes the recruitment of staff become easier and they will feel great that working in company that helping with community activities and as a result their working performance improved. It is also help in retention of employees and some company will mention to their CSR activities in recruitment adverts.
Companies that join in CSR programmes have increase rapidly around the world in this few years because the growing of significance of reputation and brand of organisation. Being involved in CSR programmes, it creates many opportunities for an organization to reach their stakeholder with important information. Reputation Management taking a big role in business management and involve in CSR activities is always the essential way of managing its risk. CSR also may affect to companies that have many rivals in their markets which means customers probably will switch to another supplier easily. Some companies use their CSR programmes to help them retain their consumer's interest.
To increase the reputation of a company in society, a good project are always needed for the business to be associated with, therefore can raise the public's awareness. The results are always showing in the logos of both organisations being linked together when the goodwill towards the organization increases.
A business should always take care and concerns about their employees, customers, suppliers and partners. Stakeholders can determine themselves the acceptable behaviour that carry out by the organization and they have rights to buy substitute products anywhere if they are dissatisfied. This enhances the essential for the reputation of a business to show its own responsibility. Giving a helpful hand in culture building for community work and assistance it may affect the perceived reputation of a company with its stakeholder. It may involve corporate sponsorship or philanthropy for the society that needed help.
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Seeking of new customers and retention of current customers are always important for a business to increase their profit. By involving CSR programs, it provides ways to the company introducing its products and services to the community. Product itself also can be the reason of customers to buy it with reasonable price and availability when it is used to demonstrate the obligation of organization in business practice. Hence, it helps the improvement of consumer loyalty.
There are direct business and financial benefits when a business involves themselves in CSR activities. When the organization decide to reduce the direct costs of business operations, it will increase the effectiveness and reduce the materials cost but also make the company become more socially responsible. It is change to a greener organization when it reduces expenditure but profitability and growth rate increase potentially at the same time.
When an organisation is building good relationships with key stakeholders and confidence of authorities in the business, it may influence others' behaviours by carrying CSR programs if the others support it. If the organization is considered to be very responsible, it is even possible that it can change the overall direction of legislation and public debate. Socially responsible behaviour may increase the confidence of authorities and consumers and enhance the opportunity of business to get access to finance and expanding their company. (Nigel 2013)
Everything must have a negative side, so do CSR. The most common criticisms of CSR are the conflict between the objective of doing business and the concept of CSR (Smallbiz 2013). To quote from Friedman (2006), "There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game". The only true purpose of doing business is to make profit for the benefit of shareholders. It is considered as undermines this fundamental business principle if carrying other than this purpose. (Smallbiz 2013)
The responsibility of a company to its shareholders is to make as much as revenue as possible, they cannot simply invest or putting capital on CSR projects or making decision which may bringing back negative effect to the bottom line. This argument against with CSR remains correct until stakeholders start to expect a business should acting in a proper way. (Smallbiz 2013)
Another criticism to CSR is cause competitive disadvantages to a business. There is no conclusive research that shows CSR is effective to the business or society and it has become the most common arguments that company make when figuring set back to CSR policies is the negative effect it causes against company that do not. Some companies argue that they will fall behind by investing money into CSR activities while others in the market are not. (Friedman 2006)
Apart from that, the other disadvantage of corporate social responsibility is growing consumer cynicism. Consumers nowadays think that many organizations have simply use CSR as public relations in disguise (Smallbiz 2013). They use CSR to build up loyalty of customers toward brand and make a good relationship with customers. Many charity activities that carry out by corporate has make it gain the access to target markets and the implement of the charity produce greater power of company's information. Further than that, CSR helps in the greenwashing of company's image and cover up the negative effects of the company by using the positive images that involvement in CSR activities. (Corporate Watch, 2013)
The challenge of winning over customers is even occurred to the company that sincere in their compliance to CSR activities. Consumers are suspicious about the actual objective behind CSR and not easily believe that a company is doing their best for the community and environment. They are view this marketing strategy of the business and neglect what have said by company as you just simply trying to agitate for good public relations. When a company has making profits through some irresponsible business activities along many years and expect the consumers praise them when they suddenly start making some little changes, the scenario that mentioned just now will obviously appear.
The last weakness is cost. Being involved in CSR programs may lead a company facing a negative effect of business profit margins and there is no way for a business to invest on the projects that provide no profit returns. There is of course have an alternate way to find CSR projects that can earn some profits but it is consider as deprave the true motivation of doing CSR (Smallbiz 2013).
The practical example of company that involved in CSR programs is Shell Malaysia. Multi-choice of energy products and services are provided by Shell Malaysia to their stakeholders to achieve the economic requirements and prevent pollution of environment Activities and socially activities that carry out by Shell Malaysia do not cause any negative effect to environment yet enhance the economy of country and being beneficial to society. Apart from that, they are creating a goal in the industry which is developing a great future for present and also next generation.
Furthermore, Shell Malaysia is putting their effort to form a learning and innovation culture for their employees to bring out the potentials for reach their targets. To bring a higher standard of living for Malaysian, they are investing capital continuously in research and development of technology for reaching the goal (Shell Malaysia, 2011).
There is always arguments between CSR can satisfy both profit and social needs and obligation at same time. The answer is equivocal which is means it can be positive and also negative when view from different perspectives. In positive answer, a company that involving CSR activities can increase the reputation and brand of company yet raise the public awareness and goodwill towards company (Nigel 2013). It is also easy to recruit higher education employees and extract a premium for its products. This is the reason when most of the business say can satisfy both.
Some companies deny because not sustainable in the long run and probably labelling as unscrupulous firm. As social and moral issues is not economically feasible and dilutes the primary aim of firm looking profit first.
There are many controversies amongst CSR. At the very beginning, CSR is considered as a burden for a business and become a conflict with the main purpose of doing business, which is making profit to benefit the owners and shareholders. The situation starting to change when people are realise that investing in CSR programs is not only doing the business in the ethical way but also bring a lot of potential benefits to company such as enhance reputation of company, recruitment of staff, direct business benefits and so on. Many organizations start to use CSR activities as their marketing ploy to promote themselves to conduct higher revenue which is corrupt the actual motivation of CSR. There is a necessarily for government implement regulations that prevent company taking advantage of CSR programs for their personal interest.