As defined by Maignan, "corporate social responsibility entails all activities undertaken by a corporation to fulfill commitments to corporate social responsibility and support social causes." Despite its significant dominance in the present business environment, the concept of social responsibility dates only a few decades. Precisely, the term corporate social responsibility came into use in 1970s after the formation of many multinational corporations. "In the present era of multinational corporations and globalization as well as increased media alert, the wider population is much conscious about the operations of corporate businesses" .In relation with this aspect, the issue of destructive and unethical practices which dominated the business sector is under keen focus in recent days.
1.1 Corporate Social Responsibility
As outlined by Spence "corporate social responsibility policy is aimed at to built-in self regulating mechanism that enables the business to monitor and ensure efficient compliance with the spirit of law, international norms and ethical standards." With the increased competition in the business sector in recent days, there has been every need for each business to comply with the expectations of its customers as well as that of the wider population. Based on this aspect, the main objectives and goal of corporate social responsibility is to enhance responsibility and accountability by the businesses for their actions and encourage positive and admirable impacts to the surrounding community.
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" With this in mind, corporate businesses have developed admirable consciousness regarding the welfare of the consumers, environment, employees, communities, and stakeholders alongside all members of the public sphere. With the development of corporate social responsibility, businesses proactively promote the public interest through the involvement in community development and growth."
Research carried on the practices of many multinational corporations as well as local businesses has shown that the concept of CSR is gaining momentum. Businesses deliberately and voluntarily include the public interests in their corporate decision making. In this regard, the concept of corporate social responsibility has not only been a favor to the public but is turning to be mandatory for the success of any business.
Criticisms against CSR
Even though CSR is gaining the attention that it needs still many economists who have gained interest in the field of CSR have expressed opposing view points regarding the relevance of CSR to the business For instance, Milton Friedman the profound American economists wrote in his famous 1970 New York Times Magazine " only social responsibility of businesses is to increase profit.' In relation with this phenomenon, corporate social responsibility has been perceived as a powerful and effective watchdog over the multinational corporations. When corporations are encouraged to focus their objectives into CSR they are diverging from their main goal and that is profit. Such a movement may not have a direct impact but in the long-term when corporations are concentrating on CSR they might impact the economy negatively as the profit generated is minimal thus the overall wealth of the economy is declining.
Corporate Social Responsibility Theories
Since the emergence of the concept of corporate social responsibility there have been many theories for and against the implementation of CSR. Theses theories include the following:
Corporate Citizenship theory: this concept refers to the corporation's roles and responsibilities towards the society. In a way it describes the corporate as citizens of the society that have obligations towards it. For example in 2003, the court case Nike v Kasky, "which Â revolved around Nike's public defense of its actions, through letters to the editor, press releases, and other public commentary, to claims it was using sweatshop labor."
Stakeholder Theory: "is a theory of organizational management andÂ business ethicsÂ that addresses morals and values in managing an organization." This theory constitutes that corporations not only operating for profit but also considering the environmental and social impact of their operations
Shareholders Value Theory: This concept constitutes that corporations have a fiduciary duty to maximize the profit and wealth of its shareholders. Such a theory has a negative impact as it does not consider other philanthropic factors and society's reactions towards such a corporation.
Factors Influencing Corporations Engaging in CSR
Always on Time
Marked to Standard
Based on research conducted by various scholars and researchers regarding the topic of corporate social responsibility, different businesses have been identified to have varied motives towards the issue. Basically, the need to position the business with reference to other business has been the most overlying factor. In this regard, research has shown that business practices corporate social responsibility so as to attract and retain more customers. With the present increase of competition in the global business, it has been noted that each business is making use of any available strategy so as to lure more customers. With the adoption of various CSR initiatives, businesses are able to lure public attention thus being able to improve their performance. Based on this insight, profit maximization has been a major motive which has enhanced businesses to undertake ethical and sustainable social practices
Reputation Enhancement; Lately, corporations have not only been focusing on trading their products and services but on their reputation and value.
For example Shell- "in 1995, as the spotlight turned on Shell. That year the company stood accused of complicity in the execution of Ken Saro Wiwa and eight other activists in Nigeria, as well as being hounded by Greenpeace over the decision to sink the Brent Spar oil platform. Shell temporarily lost the confidence of investors and the public"
Shell then spent 20 million on its PR in order to restore its image and reputation. Shell published a statement on its principles about values and integrity and the statement was supported by a report release in 1998 by the environmental consultancy Sustainability. This report was accompanied by global campaign ads that portrayed Shell focusing on environmental issues and also considering the community in its decisions. This move has successfully restored the Shell brand image.
PR and Marketing Purposes: A lot of corporations have been using CSR as their marketing strategy in order to alert the public about their operations and gain the attention of future consumers. When companies are being noticed by the public as a corporate socially responsible organization this would increase its future investments.
For example BP- BP acquired a solar company for a small percentage of its spending on oil expenditure in order to appear as an environmentalist's corporation and position itself as a corporately social responsible company.
Penetrating a New Market: If a company wants to enter a new market, it has a high risk of failing, in order for corporate to manage their risk having CSR means that the company is aware of the issues surrounding the environment and thus makes it easier for the company to penetrate the market.
Competition and Market positioning: Investing in CSR means that the company is a leader in the market as its operating according to the ethical regulations. Many multinational corporations as well as local businesses have involved in intensive CSR initiatives so as to gain a competitive advantage. This is evident through the numerous aids and donation given different companies to assist communities. In order to position itself Cadbury bought Green & Blacks conveying a message to the public about its ethical beliefs and also allowed it gain control of a niche market and increase profit.
For example: Body Shop- " a manufacturer and retailer of naturally inspired, ethically produced beauty and cosmetics products" The body shop aims at exemplifying their corporate social responsibility by engaging ethical trade programs to improve the working conditions of its employees. Recently they created a campaign "For Me, For You" Special Edition Shea Lip Care Duo which capitalized on its success as being known for its lip balm which aimed at stopping Home violence the funds raised were donated to non-charitable organizations to support woman and children." Body shop created a niche market through the image it portrayed to the public.
Donations: CSR has also been a way of sharing the accrued profits acquired by big corporations with the community. Research has shown that many multinational corporations are earning billions of money annually. This is in reference to the wider populations which are living in poverty situation. CSR initiatives are acts of charity which are aimed at improving the welfare of the people. For instance, research carried on the operations of multinational corporations in poor nations has shown that they involve in extravagance social projects. This phenomenon is basically aimed at improving the welfare of the people. On the other hand, businesses practice social and environmental developments so as to empower the people with the basic skills to develop themselves. In this perspective, research has shown that businesses undertaking social developments are aiming at improving the potentials of the people. In relation with this phenomenon, it has been realized that, the dependency of poor communities can only be achieved through ensuring sustainable developments.
1.2 Approaches for CSR- How to incorporate the CSR strategy
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There are various forms that corporations can engage in order to be perceived as socially responsible.
Community-based development approach involves the cooperation between organizations with the community with the aim of bettering their welfare. In this regard, corporations involve in various projects which are aimed at improving the welfare of the community. The corporations may establish various learning institutions, water projects, and other activities aimed at benefiting the public.
The issue of education has been outstanding with various corporations whereby they have been able to engage in training and empowering the public with skills and knowledge to help them in future. An example of this project has been identified in "Flower Valley under the initiative of Shell Foundation's. The practices of Mark and Spenser have also been admirable in their motives of building trade motives with the community. Enlightenment of the community on the issue of HIV/AIDs has also been dominant among many corporations as part of their social responsibility"
Philanthropy has also been an outstanding approach to corporate social responsibility among many corporations. This include financial donations and aid to the communities. In relation with this concept, multinational and local organizations give financial donations and aid to local organizations and communities in poor areas. Despite the benefits accumulated from this approach to the communities, it has gained a lot of criticism from different groups and scholars. "This is basically based on the fact that it only aids the community in short-term and fails to give the appropriate skills and knowledge to the people to assist in improving their situation. With continued adoption of philanthropy, communities will become dependent on aid and thus worsen the situation rather than help in solving their situation. Nevertheless, Philanthropy has been of great significance to the corporations in that it has helped in building its image among the public thus being able to meet its objectives."
As discussed earlier in support to shareholder value theory, with this approach which is based on the fact that, corporate success and social welfare is interdependent. The businesses have been liable to developing sustainable and worthy strategies thus are able to incorporate the community into the business interests. With regard to creating shared value, businesses involve in intensive development of educated workforce, sustainable resources, and healthy relationships so as to compete effectively.
When companies need to position themselves in the market they need to, emphasis on the costs and limitations in fulfilling with externally set social and environmental standards With reference to this approach, opportunities for competitive advantage are the main motive of the business in enhancing corporate strategy.
Benchmarking is also a widely adopted approach to corporate social responsibility. This approach has broadly been adopted by businesses to out compete their opponents in the industry thus enhancing their performance and profitability. "Basically, benchmarking entails analysis and review of competitor CRS initiatives alongside evaluation and measuring the impacts of the policies adopted by other businesses to the society and environment" . The perception of competitor CSR strategy has also been of magnificent consideration in the business sector in recent days. In relation with this phenomenon, businesses have been very conscious about the CSR initiatives of their opponents. "Research has shown that this approach to CSR has gain relevance in recent days due to its impacts to the corporate strategy. Businesses are able to draw a comparison between the CSR initiatives of their competitors and thus decide on the appropriate measures to undertake"
2.3 Reasons for the Rise of CSR
The present rise and development of ethical consumerism has been developed and enhanced by the issue of globalization and increase in technology. In recent days, the public is more aware of their rights and freedoms with respect to the corporate businesses. As contrasted to earlier years, people at present are more conscious about the impacts of business's actions to the environment and the society. Importantly, the increased competition among businesses has also led to opening of the consumers' knowledge on their rights as well as the businesses responsibilities. In regard to this phenomenon, competition in the business sector has enabled consumers not only to look at the issues of prices and quality but also the ethical consideration of the business. This has significantly influenced the development of corporate social responsibility.
The concept of globalization has also had significant influence on the global business and the issue of CSR. In this case, globalization has led to increased cooperation and interactions among global communities. With this in mind, each business has been put under pressure to ensure practice of ethical actions which are in correlation with societal norms and morals. This phenomenon has been widely demonstrated by foreign corporation operating in different countries. In this perspective, the businesses are entitled to stick to the practices followed by other businesses within the region of operation. Based on this insight it has been made clear that businesses adopt CSR initiatives due to influence and pressure from their opponents.
With regards to research, the media has been in the forefront in highlighting the unethical practices of businesses. This phenomenon has led businesses to change their actions and maintain social ethical practices. For instance the issue of pollution has been widely covered by most of the media thus bringing shame to the involved businesses. With regard to this phenomenon, businesses have been able to change their unethical and undesirable practices to comply with the expectations of the wider population
In addition, enhancements of corporate and business laws and regulations in present days have also influenced the extent to business involvement in CSR. In this case, businesses are made to comply with the set laws and regulations set by the states and institutions in their areas of operations. Governments are in the present conscious about the concept of corporate law and the issues ethics in the business. With regard to business laws and regulations, businesses are made to strictly operate to the expectations of the people as well as protecting the interests of all stakeholders. At present, the issue of pollution has been outstanding the globally thus calling fro urgent measures. In this case, businesses are made accountable for their impacts on the environment. For instance, businesses which have caused harm on the environment are forced to compensate fro the damages .
3.1 Growing importance of CSR
As indicated by Waddell (327), CSR is of great importance in the business and social arena. Research carried upon various groups regarding the concept of corporate social responsibility, has shown a positive attitude and perception of people towards the issue. This is so because; it has led to order and compliance of ethics in the business sector. With adherence to the concept of corporate social responsibility, businesses have significantly changed their behaviors and engaged in more admirable practices. For instance the issue of pollution to the environment has been efficiently countered.
3.2 Impact of Positive & Negative CSR on companies' performance
CSR has been an important strategy in reinforcing the performance of a business. This has been on the aspect of revenue whereby businesses have been able to double their sales from practicing efficient CSR initiatives. It is of great importance to note that, by practicing ethical businesses processes, a business is able to lure the attention of customers and the general public. With regard to this concept, consumers feel motivated to deal with companies which involve in ethical practices. In this case, the sales volumes and profitability of the different businesses are enhanced thus improving the overall performance of the business. Despite that CSR initiatives are costly in the short-run; they lead to handsome returns to the business in the long run. Through the establishment of loyal and trustworthy customers, the business is able to focus on sustainable sales projections and profits in future. Additionally, corporate social responsibility also leads to the establishment of sustainable relationship with the community.
Businesses have also experienced negative impacts from the concept of corporate social responsibility. To begin with, the whole process of undertaking CSR initiatives in costly strains the financial resources available to the corporations. This aspect has widely affected small and medium corporations which are not able to afford the high costs involved in undertaking the various activities involved in CSR. In regard to this situation, businesses have been made to operate on losses.
3.3 Detailed Analysis of corporate that implements CSR in Kuwait- NBK-ZAIN & EQUATE
Research carried on the corporate practice in Kuwait has shown a significance practice of corporate social responsibility. In this regard, the business competition in Kuwait has been very stiff in recent days thus leading to the advancement of CSR. Additionally, public awareness on the need for business to practice ethics has also contributed to CSR. To begin with, EQUATE is one of the most profound organization with have intensively operated to the aspect of CSR. An overview and in-depth analysis of the company structure and performance has shown a high sense of ethical performance. With reference to the corporate mission and vision of EQUATE, the need of establishing diverse and highly qualified workforce is outstanding. With this in mind, the corporation is aimed at meeting world-class standards in all its activities.
EQUATE has continuously been involved in establishment of safety programs all over the years. This has been mainly with the motive of ensuring that the welfare of the staff in all company's operations is safeguarded. From another perspective, the human resources management of EQUATE ha also been admirable in that it offers the best considerations of all members. In regard to the human resources management, EQUATE ensures that all staff are empowered with the necessary specialty services and competitive compensations thus being able to increase their level of motivation. Handsome packages to employees have also been prioritized by EQUATE thus ensuring that employees get the optimum compensation for their services.
Significantly, EQUATE has been categorized as the first company in Kuwait to offer full health insurance to its employees. This is a social development that has ensured the health of employees and their families. This issue of health is a key factor in the sustainability and continuity of the human society and ought to be enhanced. This has been effectively been shown by EQUATE. The company has been able to offer interesting jobs to the society thus ensuring that they are given an opportunity to improve their welfare. In addition, the concept of community empowerment and enlightenment on important life issues has also been fostered by EQUATE. Based on this phenomenon, the CSR initiatives undertaken by EQUATE has lead to significant improvement of its performance.
NBK has also been involved in admirable practices in the market which has led to its present position. To begin, NBK- has been involved in ethical business practices which have led to influence to other corporations within the banking industry in Kuwait and other parts of Asia. Apart from ethical business practices, NBK has involved itself in intensive sponsorship and donations to the poor communities. For instance, the corporation has started and funded many educational programs which had impacted positively on the people.
NBK has also been involved in different human resources development and considerations. For instance, "it has placed the support of the healthcare sector on its priority list, it has an NBK specialized Children's hospital that exceeded KD 4 million." . In 2008, it launched a public safety awareness campaign "Think Twice". This year long campaign involves distributing power saving light bulbs, and also collaborated with "Green Target Company" to initiate recycling in the country. to offer interesting jobs to the society thus ensuring that they are given an opportunity to improve their welfare. In addition, the concept of community empowerment and enlightenment on important life issues has also been fostered by NBK. On this phenomenon, the CSR initiatives undertaken by NBK have lead to significant improvement of its performance .
3.4 CSR Internationally- General Motors, BP, Coca-Cola
On the other hand, research and analysis carried on the globally has shown that multinational corporations involve in intensive CSR initiatives. Precisely analysis of multinationals like General Motors, and Coca Cola has shown significant sense of CSR. To begin with General motors has been involved in sponsorships and donations to the poor communities. In this case, General Motors has been very conscious about the welfare and interests of the populations of the regions of operation. Various community projects like schools, dams, hospitals among other social amenities have been established with the initiatives of general motors.
Coca-Cola has also been involved in intensive CSR initiatives which are aimed at improving the welfare of the general public. From another perspective, the human resources management of Coca-Cola is highly efficient in that it offers the best considerations of all members. In regard to the human resources management, Coca-Cola ensures that all staff is empowered with the necessary specialty services and competitive compensations thus being able to increase their level of motivation. Handsome packages to employees have also been prioritized by Coca-Cola thus ensuring that employees get the optimum compensation for their services. Coca-cola has also been involved in ethical business practices through proper pricing and quality.
On the other hand, Coca-cola has been participating in extravagant donations and sponsorships which are aimed at improving the welfare of the people. This has been effectively been shown by Coca-Cola. The company has been able to offer interesting jobs to the society thus ensuring that they are given an opportunity to improve their welfare.
3.5 Comparison between the corporate in Kuwait and Global corporate that implement the CSR
Based on the research and analysis of the CSR of Corporate in Kuwait and the Global corporate, significant differences and similarities have been identified. The CSR of Kuwait has been widely carried to enhance the business performance and meet the needs of the corporate members. For instance, EQUATE CSR initiatives a basically internally oriented aimed at ensuring the welfare of the employees is safeguarded. On the other hand, NBK CSR is to a wide extent internally oriented similar to that of EQUATE. Nevertheless, the corporate in Kuwait are also involved in extensive social developments and sponsorship which are aimed at improving the welfare of the communities around. On the other hand, Global corporate CSR initiatives are purely aimed at improving the welfare of the wider public. The aspect of internal issues of the business is not the major aspect of CSR as compared to that of Kuwait Corporate.
The entire above corporate have taken the initiative in trying to adapt CSR in their operations. But most of them have not been able to sustain the ideal CSR. Below are the requirements to have an efficient CSR which are hard to adapt and even though in Kuwait CSR concept is on the rise there's a lot of awareness that needs to be done.
Requirements for an Ideal Corporate Social Responsible Corporation
Operate under the Social Accountability International SA8000. It's very difficult for companies to be certified by SA8000 as an audit will have to analyze the company's operations and see if they meet the criteria.
Social Accountability Requirements:
Child Labor: This identifies what conditions and documents are required from the company that recruits young workers and what environments it should provide.
Forced and Compulsory Labor: Under this criterion it explains that a company shall not use force or power over its employees for them to work. Meaning that corporate are not allowed to withhold any part of the personnel's salaries or documents (passports).
Health & Safety: The Company is required to provide a safe working environment for its employees. If the company operates in a biohazards environment it should equip the employees with the necessary equipments and garments to insure safety.
Freedom of Association & Right to Collective Bargaining: All employees are allowed to form labor unions or any organized trade unions to bargain on their behalf.
Discrimination: The company shall not engage discrimination hiring e.g. against race, nationality, sexual orientation and gender. The company must not allow any behavior that's considered against abusive e.g the use of offensive gestures.
Disciplinary Practices: The Company must operate in a way that it does not use any indecent or punishments that are not respectful towards employees.
Working Hours: The Company shall comply with standards and laws of working hours and public holidays. If overtime is required then the employee must be compensated for it.
Remuneration: The company must provide a minimal wage to its works to ensure that it meets their basic need, and in the case of deductions it shall only be imposed for disciplinary actions.
Management Systems: The company must acknowledge in writing the company's policy for social accountability and labor conditions and they must display the SA8000 standards in a viewable place in the company where it can be revised.
All of the above criteria's are mentioned in the SA8000 which is a certified social accountability, and if the company is being certified by the SA8000 it indicated that they are operate in a corporate social responsible manner.
4.0 Recommendations to further the CSR awareness in Kuwait
With regard to the analysis of the situation of Kuwait and the concept of CSR, the following recommendations are made from the corporate businesses operating in the region. To begin with, the businesses should be more conscious about the wellbeing of the community around rather than basically concentrating on the internal issue of the organizations. For instance, the issues and interests of the wider population should be prioritized so as to ensure full social and environmental development. As demonstrated by Coca Cola and General Motors, corporate business in Kuwait should re-channel their focus to address the issue of the wider population. Additionally, the issue of ethics and morality should also be fully addressed by the businesses so as to ensure acceptability of the business operations. On the other hand, the concept of prioritizing of public interest should also be reflected in the budgetary
Ultimately the extensive and intensive research as well as analysis of the concept of CSR has shown that it is of profound significant to the business set ups. The main aim of implementing corporate social responsibility has been to position the business among the consumers and the general public. Based on research, it has been noted that, businesses involve in social projects so as to lure the attention of the consumers. In this regard, corporate social responsibility has been categorized as part of the marketing communication strategies of business which are aimed at positioning the business. Businesses which have profoundly adhered to the practice of corporate social responsibility have been able to effectively position themselves in the market thus being able to increase their sales and profitability. With this in mind, there is great need fro all business to change their practices and adopt the practice of CSR.