What is Corporate Social Responsibility and why is it on the Rise?

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Corporate social responsibility (CSR) is quickly gaining corporate mindshare-an increasing number of companies in almost every industry are adopting CSR principles and initiating CSR programs. The realization that companies should and can play an important role in their communities-and across the nation and around the world-while making a profit is quite a step up from the old belief that the sole purpose of companies is to increase value for shareholders. A positive approach to CSR can help a company to lower its operating costs, enhance its brand image, improve productivity, and increase the loyalty of customers, easy access to capital and to improve financial performance. When all of these potential business benefits, are taken into one account, the 'big picture' may look good. Though some of them may be intangible and difficult to measure in terms of money, each of them is significant, and can contribute to the bottom line that is improved financial performance.

Introduction

Corporate social responsibility is a term used to describe how a business organization voluntarily contributes to the betterment of the society and improve the environmental impact of their actions. Companies, which have involved and committed themselves for social initiatives, have automatically improved their shareholder value. Such business organizations, which put people before profit and care for sustainable development, can only create a niche for themselves in this era of cutthroat competition. This is why Birla Group believes in trusteeship concept of management and is committed to plough back a part of their funds to make a meaningful difference to people's lives. Corporate management will have,therefore, to consider these issues, which have a profound impact on the survival of the corporation while making strategic decisions. (www.alagse.com/strategy n.d.)`

Normally, it can easily seen how socially responsible companies benefit the communities and their employees. It can also be claimed that it has a positive impact on the environment. But the question here is what benefits do the companies get?

Impact of CSR

Actually, there are quite a few. Let's have a look at how CSR has its impact on each of these factors.

It may look contradictory to state that CSR can lower operating costs, but, in the long run, there are numerous reasons to support this. On environmental issues, a company who strives to minimize its carbon footprint will look at ways of minimizing its fuel consumption. There may be some initial investment in acquiring more energy efficient vehicles, it will finally lead to cost saving. Lesser the energy it uses lower will be its bill.

The most important business benefit of CSR is the positive impact on brand image and their customer loyalty. Any company that is known to have social responsibility and ethical value, and if it markets its image as such, then it can position itself well in a competitive market.

A company with an appreciable record of social responsibility can easily attract and retain the best employees. Employees of such companies tend to have high level of motivation in their jobs, as they get satisfied in knowing that they are part of an organization that does something good to the society and the planet at heart; and as they are treated well. If an employee is motivated, then he will be more productive.

A good CSR policy has more possibilities to attract investors who are no longer interested in investing in companies that do not bother about the environment CSR. This means that companies with social responsibility can have easy access to a larger capital base.

A socially responsible company takes responsibility for its own actions. It acts with minimum impact on environment. It deals fairly with its stakeholders and contributes to the common good of society through voluntary programs. If all these things happen genuinely, then the company will be able to build itself a reputation that will be strong enough to withstand any sort of crisis.

Why Corporate Social Responsibility occurs?

CSR occurs in a company for social, economic, and environmental bottom lines, to get ISO 14000 which involves a review on environmental impact, community pressure, to improve reputation, as a brand exercise, to have better community and public relations, to enable employees to enjoy new levels of responsibility, to improve employee satisfaction, morale and loyalty and to get fulfillment.

CSR as a business strategy

Greater focus has been paid towards social consequences but still performance is far from satisfactory. A common trait is that social concern is always seen as an independent component from that of business. As a result, companies lose focus on how to integrate social responsibility with the long term business. Companies across the world do not recognize the wide opportunity that contributing to social responsibility contributes to the long term sustainability. The ways for implementing CSR can be either of the following or a combination of the following:

CSR as Reactive strategy

CSR has been a reactive strategy to revitalize the sagging prospects of the company by winning the confidence of the society in which they operate. This happened with Shell, Nigeria and Nike in Asian countries. CSR is generally viewed by companies as an expense and obligation. This ideology prevents the business from identifying the real opportunity that CSR can give the company to their core business.

CSR as an Image building exercise

Efforts by the companies to make progress from the effects of skipping to discharge their social responsibility can be a damage control exercise when their image is considered. However, nowadays CSR is viewed as an opportunity to structure their corporate image. Companies go on announcing their plans for various kinds of philanthropic activities.

CSR for improving operating efficiency

Some companies care for environment because it not only helps in operating within the statutory environmental norms but also reducing the costs through their operating efficiency. Operating just within the norms is being in the conformity mode. As companies plan and move beyond the conformity mode, current time operational efficiency results in better environment that foster better living conditions in near future. This is a business necessity for improved profitability for industry and used by companies for foretelling a business case and showcasing the addition of CSR to their business outcomes.

CSR as a Source of competitive advantage

A clear understanding of the community and the company's impact on it must be given a deep thought to answer the question - How the strategy of social responsibility helps the community to develop qualitatively along with the business growth in the short as well as in the long term? The answer may not be clear but there are possibilities for an open debate among the chief executives and strategic managers to open up options, that may help in improvising the quality of life for the communities around in such a way that augments business prospect for future even if not for the current profitability.

Benefits of CSR

Companies that involves it in developing a comprehensive CSR strategy can anticipate benefits from different possible positive outcomes, including enhanced brand value and better corporate image, increased customer loyalty, reduction of risk, facilitating business in crucial times and development of a good work culture within the organisation and improves the level of employee satisfaction.

CSR has much broader implications for the whole nation. It reduces government dependency for social change. Most of the governmental programmes easily becomes embroiled by political manipulation, corruption, and bitter infighting. This led to a need for public-private partnership with well-defined set of controls and processes for the best use of resources. Social reforms driven by the community will bring people together, turn the attention of the masses that benefit society, and reinforce communal peace and harmony.

How companies respond?

A company newly entering a market will regard CSR as an image-building strategy to minimize the risk associated in an area or product line, and to apprehend a big part of the market. Often, it will highlight its CSR in its advertisements and try to align it with its social marketing activities. There are some businesses who have even collaborated with not-for profit organizations.

Companies who advertise that a part of the sales price of their products will go to charity fall under this category.

On the other side, there are companies that are already well established, but whose main objective is long term sustainability. Their chief concerns are security of production inputs and stability of the socio-political environment. The second concern is emphasized if the company is operating in an entirely new geography.

For instance, ITC Ltd's e-choupal initiative, which influences information technology to empower the farmer, a link in the company's supply chain. ITC takes a two hand advantage by making this social initiatives both as a philosophy and as a strategy Example:

Coca-Cola India, one of the largest beverage companies in India, felt that CSR had to be certainly made as an integral part of its corporate agenda.

Nevertheless, the company was severely criticised by environmental experts who condemned it stating that it depletes underground water source in the areas where its bottling plants were established, thereby disturbing the living of poor farmers, by dumping toxic and dangerous wastes and discharging waste water into the farming lands.

Notwithstanding the criticisms, the company continued to engage itself invarious initiatives such as rainwater harvesting, restoring groundwater resources, and sustainable packaging and recycling, and serving the community where it operated to safeguard its position.

Conclusion

To conclude, CSR is nowadays used more as a brand promotion strategy as it increase the reputation of the company and it increases the business's is used to create brand image .It is necessary to start such activities for the business to reach more customers.

CSR will not only increase the reputation, it gives more business opportunities. Then the company's image & goodwill will automatically go up. When the company grows, it is good for both the employer & employees and to the society even.

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