Bps Challenge In Corporate Social Responsibility Commerce Essay

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The latest corporation with extensive news coverage is the energy giant, BP, for the massive oil leak in the Gulf of Mexico. Prior to the Gulf fiasco, Wall Street giants were plastered in the media for accepting government bailouts and subsequently using the money for large compensation packages and bonus payouts with taxpayers hard earned dollars. The purpose of this paper is to take a more positive look at American corporations and highlight things that companies large and small are doing "good". What is considered good? Good can have many names, but we are going to take a closer look into what is commonly referred to as Corporate Social Responsibility. Corporate Social Responsibility is not a new concept; however, it is becoming more recognized in business practices in the United States as well as internationally. Scholars, authors and researchers have offered many definitions for corporate social responsibility, but the following definition best summarizes the idea:

Corporate Social Responsibility is a commitment to improve community well-being through discretionary business practices and contributions of business resources (Kotler, & Lee, 2005).

In every society, there are social issues whether related to community, health, education, basic human needs or the environment. Who is responsible for improving social conditions? The government? Non-Government Organizations (NGO's)? Philanthropists? Businesses? Or, is every citizen of a society responsible? Not one organization or group can solve all of society's problems alone. However, through Corporate Social Responsibility, also called Corporate Citizenship, many businesses are giving back to their stakeholders in an effort to improve social issues, which may have a direct impact on the company or its employees.

Historical Progression of Corporate Social Responsibility

The legacy and the idea of the corporate social responsibility theory can be seen throughout history. It can be seen as far back as 5000 years ago in the Ancient Mesopotamia era under King Hammurabi. The King introduced codes punishable by death of the owners if their businesses caused a death or a major inconvenience to the local populous. (Asongu, 2007). Corporate social responsibility was not defined at this point but it is easy to see that the theory of corporate citizenship is not a new one. The twentieth century marked the time when corporate social responsibility took shape and became more entrenched with how businesses operated.

The brief history of what many believe helped shape to be the modern concept of corporate social responsibility dates back to the late 1800s at the time of the Industrial Revolution. During this time, corporations were mostly interested in maximizing the profits of the company. The majority of the regulations businesses imposed on themselves were to make employees more productive and thus the company more profitable. During this time, corporate giving was seen in a negative manner because it was seen as giving away profits of the shareholders without their consent. There were glimpses of corporate social responsibility from companies but it was very hard to delineate what the companies were doing for selfish reasons and when corporate social responsibility started to materialize (Crane, Matten, & McWilliams, 2008).

As the Industrial Revolution progressed into the earlier 1900s, a few elite monopolistic businesses held a great deal of power. These large corporations fed a rich and powerful ruling class that dictated many of the political and social issues of the time. This fortune and unchecked power of the ruling class led to one of the darkest periods of American History, The Great Depression. This time was shaped by tremendous unemployment and business failures, which helped usher in the next stage in the growth of corporate social responsibility. This is best described by a quote of Nicholas Eberstadt a political economist and scholar, "indeed, business might never have turned back toward responsibility and accountability if the culmination of corporate irresponsibility had not been the collapse of the economic system" (Eberstadt, 1973). This period of corporate social responsibility history is described as the Profit Maximizing Management phase.

The next phase of corporate social responsibility history has been categorized as the Trustee-ship Management phase due to the changes taking place in both business and society (Gray, & Hay, 1974). During the 1930s, the managers of business were taking on the responsibility of not only maximizing shareholder worth but also began to try and balance the effect on employees, customers and the community. Corporate giving was legalized during this period as long as the giving was focused on World War I and the newly formed United Way Foundation. By the 1940s, companies had become viewed as institutions, much like state and the federal government that had social obligations that they had to meet. Fueled by the Anti-Communist views of the era during World War II, many businesses saw giving as their patriotic duty so the theory of corporate social responsibility continued to move forward (Crane, Matten, & McWilliams, 2008).

During the 1950s, a landmark book on the subject was written by what many consider the "Father of Corporate Social Responsibility", Howard Bowen. In his book, Bowen discussed the evolution of what he referred to as Social Responsibility and was the first to define the concept. He set forth the groundwork for many businesses to get comfortable with discussing the topic of corporate social responsibility and pressing the obligation of business to support the society in which it operates. Philanthropy, or corporate giving, was coming more into fashion but done more on the impulse of an executive or when a qualifying agency made a request (Bowen, 1953).

In the next couple of decades, American society as a whole went through a large cultural shift and so did businesses. Not only did business continue their philanthropy efforts but also began engaging in other areas of social problems such as civil rights, minority hiring, the environment, and urban renewal to name a few. This was a major shift in the concept of corporate social responsibility and it appeared that the concept permanently engrained into everyday business. Businesses for the first time began doing more than just writing checks to deem themselves socially responsible and became actively involved in political policies of the time (Crane, Matten, & McWilliams, 2008).

Over the next several years, corporate social responsibility became more entrenched in our society, as business truly had become institutions of global reach and influence. The first research began on examining the correlation between social responsibility and financial performance and thus the sustainability of the theory. Many companies began to use their corporate social responsibility contributions in their marketing campaigns. Additionally, companies began encouraging their employees to volunteer for social projects and would provide paid time off from work to do so. In addition, many businesses began hiring positions within their organizations with corporate social responsibility responsibilities as a part of their duties such as Community/Public Affairs Officers and Corporate Ethics Officers. To solidify this point, in 1992 the first business organization called the Business for Social Responsibility was formed to represent the issues and the initiatives of a professional having the responsibility of corporate social responsibility for their companies (Crane, Matten, & McWilliams, 2008).

By the turn of the century, contributions to corporate social responsibility were no longer just a theory. Researchers were diving into many splintering topics such as business ethics, stakeholder theory, sustainability and corporate citizenship. The information derived from the continued research helps to push the envelope of corporate social responsibility and its many subtopics to new heights. Some of the research was also looking into best practices so that they could assist other companies with their corporate social responsibility efforts. These peer pressures along with regulations from the government have help drive corporate compliance in day-to-day business practices of today.

Is Corporate Social Responsibility Good for Business?

This has been a decade of numerous large scale business scandals, a global economic recession and a large number of environmental disasters. These events have eroded the trust of business by their stakeholders (employees, investors, communities and consumers). Companies who practice and make

corporate social responsibility a reflection of their business strategy and core values have been better able to withstand the downward trend of the economy and are perceived more positively and trusted than those organizations who have not embraced corporate social responsibility. Some enlightened organizations see corporate social responsibility not just a way to survive the economic turndown but as a way to differentiate and bring a competitive advantage to their business and help solve larger social issues (Quelch, 2009). Corporate social responsibility practices benefit the business in numerous areas. They can affect every aspect of the organization. Some of these areas include:

Accountability and Transparency - Companies large and small are including their corporate social responsibility metrics and programs on their websites and in their annual reports. They are publishing company information that was formerly considered to be too sensitive. An example of this accountability and transparency is seen in Gap Inc.'s 2004 social responsibility report outlining their approach to create a lasting industry wide change in improving conditions in the world's garment factories. They recognize that they are just one small fraction of the overall garment production worldwide and the problems are varied and complex. They are working on a more collaborative integrated approach with partners from a variety of sectors such as government, trade unions, and civil society to develop broad solutions that will stand the test of time and improve poor working conditions (Gap Inc. 2004).

Build Brand Equity - Cone Inc.'s (a strategy and communication agency that works to build brand trust) 2010 Shared Responsibility Study showed that consumers want to be more engaged in companies' social and environmental efforts. If they are more engaged they would be more likely to buy its products and services, have a greater sense of loyalty to the company and would be more likely to recommend the company which could lead to bottom line benefits. The study also showed that Americans have high expectations for a company's approach to solving social and environmental issues and they hold companies accountable for a range of global issues that may impact their business (Cone Inc. 2010). Stakeholder Relationships - Stakeholders are demanding information on the corporation's social

performance. Strengthening these relations may also help prevent stakeholder retaliation, and improve investor confidence and relationships (Gillis & Spring, 2001). ecruiting, Engagement and Retention of Employees - While the economic recession has temporarily eased some of the concerns regarding the upcoming labor shortage, companies still face the challenge of recruiting qualified candidates. Corporate social responsibility can help position companies competitively in tight labor markets to attract top candidates, find those who are a better cultural fit, engage existing employees, raise productivity, and improve employee retention. These firms are viewed by employees as having higher

integrity and stronger leadership which creates higher job satisfaction and a sense of pride which can be a driver of morale and overall business results (Smith, 2007).

In a 2008 interview with Towers Perrin Managing Director, Julie Gebauer outlined some key findings in Towers Perrin's (now Towers Watson) 2008 Global Workforce Study regarding employee engagement. The study showed only 21% of employees in the sample as engaged and another 38% are either wholly or partially disengaged, leading to huge implications for a company's financial performance. When asked What Can Companies Do about This? Ms. Grueber answered "What we learned is that driving engagement depends on creating corporate culture that aligns with the company's unique strategy, and that emphasizes leadership, learning, empowerment and corporate social responsibility."

These examples are just a few of the reasons why corporate social responsibility is a benefit to business. Other benefits include: new product development, creation of new markets or expansion of current markets, opportunities to increase sales, innovation, cost savings, impact on communities, educational reform and the environment.

In 2003 Ingrid Van Den Hoogen Senior Vice President, Brand, Global Communications and Integrated Marketing shared with Sun's Executive Boardroom readers how they define corporate social

responsibility and its importance to transparency, accountability to society, the planet and a company's bottom line.

"We believe that what's good for the planet is also good for business. For us, corporate social responsibility is a strategy that integrates with business objectives to create positive social change, minimize environmental impact, and generate business value. It involves an ongoing commitment to behave ethically and contribute to economic development while improving the quality of life of our

workforce, community, and society at large. Our corporate social responsibility strategy centers around three key pillars - innovate, act and share" (Van Den Hoogen 2003).

Is Corporate Social Responsibility Worth It/Profitable? Critics of corporate social responsibility would argue that businesses have a responsibility to its

shareholders to maximize profits, which would exclude donating to a charitable organization or strategizing around a social issue. On the contrary, many surveys, research and studies have proven that corporate social responsibility initiatives are profitable and benefit the bottom line. According to the 2007 Grant Thorton survey of U.S. business leaders, seventy-seven percent of executives said that corporate social responsibility programs enhance profitability (Tonn, 2008). To take it a step further, Corporate Responsibility Officer magazine has analyzed the largest U.S. public corporations (based on the Russell 1000 index) to produce its tenth annual 100 Best Corporate Citizens list. Over the last decade, the companies on the list during the first nine years outperformed the remaining businesses on the Russell 1000 in three-year total returns by 26% (Forbes.com, LaMotta, 2009). The analyses indicate that companies can strategically engage in socially responsible initiatives to increase profits. As the shareholders may value the company's efforts, the corporation can obtain additional benefits from these activities, including: improving their reputation and enhancing brand image, increasing sales by differentiating its product, improving customer loyalty in support of the corporate social responsibility activities, and strengthening the ability to attract more highly qualified personnel (Tonn, 2008).

Corporate Social Responsibility and Cause-Related Marketing

In the past, corporate social responsibility used to be an activity for the sake of giving back to the community. Now, however, corporate social responsibility is being integrated into the marketing strategies so that they are in unison with the overall goals of the company. The shift has been necessary due to the increasing number of new products and services that are being introduced in the market. With the highly competitive market we experience today, corporate social responsibility gives a worthy selling point for the company which can be the differentiator. The use of marketing to promote corporate social responsibility is crucial. Marketing experts have the knowledge and skills to conduct meaningful campaigns and to tract their effort's return on investment. Additionally, involving marketing in consumer research and analysis enables them to coordinate how a corporate responsibility program is presented to the target audience (Bhattacharya, 2009). Many businesses claim their successes and involvement in corporate social responsibility, but few capitalize on ways to strengthen their brand identities by promoting their initiatives. As corporate social responsibility continues to increase the influence of companies' public images, ignoring the advantages of effective marketing becomes increasingly risky. Many of the largest corporations in the United States - Microsoft, General Electric, IBM, Citigroup, Hershey, Mary Kay, to name a few - realize this and have incorporated links on their websites as well as created products to communicate and promote the many areas of contribution to the community and social programs. For example, Mary Kay Cosmetics has launched a line of lipsticks, Beauty That Counts® Mary Kay® Creme Lipstick, to support efforts to end domestic violence in the U.S. and "Kiss Away Domestic Violence and Make a Beautiful Difference" (MaryKay.com, 2010).

The practice of promoting corporate social responsibility in marketing activities is commonly known as cause-related marketing, which is defined as "the process of formulating and implementing marketing activities that are characterized by contributing a specific amount to a designated nonprofit effort that, in turn, causes customers to engage in revenue providing exchanges" (Mullen, 1997). Cause-related marketing is the latest buzz-word for marketers who have come to realize that the association of companies with charities can potentially result in increased market shares and customer loyalty (Stewart, 1998). The expected alteration in a company's image because of cause-related marketing campaigns appears to depend a great deal upon how customers perceive the reasons for a company's involvement in social programs and the amount given to the cause through a company's involvement (Webb and Mohr, 1998) appears to depend a great deal upon how customers perceive the reasons for a company's involvement in social programs and the amount given to the cause through a company's involvement (Webb and Mohr, 1998).

Is Corporate Social Resonsibility Ethical?

In order to answer this question, an ethical analysis using the five theories of ethics will be beneficial. First, the Free Market theory is that the overall goal for any business is profitability (Halbert & Ingulli, 2009, 2006). As aforementioned, there are vast amounts of research and data that supports that corporate social responsibility increases company's overall profits. It is however difficult to assign the true dollar amount of profits related to the corporate social responsibility efforts. A second ethical approach is the Utilitarianism theory that suggests that ethical behavior is determined by the effect that the consequences will have on ALL that are affected (Halbert & Ingulli, 2009, 2006). In other words, is corporate social responsibility the best decision for the shareholders as well as all the other stakeholders of the company? The answer is an absolute affirmative. Another theory of ethics, Deontology, is "the notion that there are certain moral rights and duties that every human being possesses, that ethical choices derive from universal principals based on those rights and duties" (Halbert & Ingulli, 2009, 2006). Corporate social responsibility answers the calling from the inner core of human beings to help others in need. It is the moral right and duty of corporations to give back to the community that supports their business. The fourth ethical premise, Virtue Ethics, suggests that "our moral abilities (virtues) are a matter of good habits, developed through training and repetition, within communities" (Halbert & Ingulli, 2009, 2006). Based on this premise, corporate social responsibility is considered an ethical act according to our society and the growing trend of corporate citizenship. The final ethics test for corporate social responsibility is Ethic of Care. This approach "assumes that people are deeply connected to one another in webs of relationships and that the ethical decisions cannot be made outside the context of those relationships. It is based on caring for others" (Halbert & Ingulli, 2009, 2006). Without a doubt, the Ethic of Care theory supports corporate social responsibility as the idea is of supporting and caring for the well-being of the community.

An Example of Corporate Social Responsibilty Sustainability - The Hershey Corporation

As discovered on the Hersheys.com, The Hershey Corporation and its history is a perfect example of the sustainability of corporate social responsibility. When Milton S. Hershey started his business in 1894, he envisioned a company that not only would be successful but one that would be an example of how business should be done ethically and with integrity. Today, we know this business as The Hershey

Corporation. Hershey is a global leader in snack foods and the nation's leading manufacturer of chocolate and non-chocolate snacks that are exported to over 90 different countries around the world. The company tries to do its best everyday to continue the vision that Mr. Hershey had over a hundred years ago and the core values that he established are still at the very root of the business today (The Hersey Corporation).

As mentioned, during the Industrial Revolution many business where exploring ways to make their employees more productive and thus the company more profitable. The theory was that if employees were treated fairly and lived in a pleasant and comfortable community, they would become better and loyal workers. Mr. Hershey took this theory to the next level by creating a town around his factory that would take care of the welfare of his workers. To do this, he built an infrastructure that supported the workers at his factory and their families. He had a model community drawn from scratch that included housing for workers both executive and line workers, schools, parks, churches, recreation facilities and a trolley system. He broke ground in 1903 and this area would later become known as Hershey, Pennsylvania.

Mr. Hershey's social and humanitarian efforts did not stop with his employees. As he and his wife could not have children of their own, they decided to build a school funded by him and his corporation that would train orphan boys in useful trades. Before his death, Mr. Hershey transferred the

bulk of his wealth including his ownership in Hershey to the Hershey Trust that benefited his school. The school, which was founded in 1909, is named the Milton Hershey School and is still the main benefactor of The Hershey Corporation. Today, the school has over 2000 children from less fortunate families in grades kindergarten through high school.

Additionally, the company recognizes the significance of a global community and is implementing strategies to make a difference in the countries where it does business. The company collaborates with many global organizations to try to improve the overall welfare of the supply chain and the environment. The values that established a community in Hersey, PA are being implemented globally as the company tries to improve the communities of the farmers and workers that supply the company with cocoa, nuts, and other ingredients for their products.

Today, the philanthropy and humanitarian works of Mr. Hershey are engrained in the core values of Hershey and the company is still striving to meet the vision set out by him over a century ago. One has to look no further than the Making a Difference section of the company's core values which states "We are making a difference by leading with integrity and determination to have a positive impact on everything we do." The motivated and loyal workers of Hershey have grown the small company from Hershey, PA into a global icon because the values of the company were drawn from the theory we know today as corporate social responsibility.


It is apparent that the responsibility of improving social conditions lies with all entities including governments, religious institutions, profit and non-profit organizations, as well as citizens. When companies accept taxpayer bailouts, citizens expect reciprocal gestures from them in the form of in-kind remunerations to help solve societal and the environmental issues. However, a larger burden of this social responsibility rests on the shoulders of businesses and corporations. Many corporate entities incorporate corporate social responsibility into their mission statements, values and even budget for how much should be spent on helping the needy in the communities they operate.

During the 1960s and 70s, the political and social environment led some organizations to start hiring minorities and others became cognizant of environmental concerns as global warming and the "green movement" gained traction in the body politic. This demonstrates how the five theories of Ethics have influenced the universal outlook of good corporate citizenship. The Hershey Corporation for instance, practices the Ethics of Care by establishing a town where their employees live, work and enjoy a healthy way of life. Ford Motor Company on the other hand used the Utilitarian approach to develop the Ford Pinto in the 1970s. They ignored the value of human lives, and concentrated on profits that was not

rewarding in the end. Other companies favor Free Market, Deontology and Virtue Ethics but in the end, being good neighbors by supporting communities trump all other theories.

History teaches us through lessons learned that when companies shirk their social responsibilities and concentrate on the interests of shareholders they eventually spell their own demise. Irresponsible corporate citizenship is ill-advised and needs to be discouraged. Hershey Corporation is a wonderful example of the benefits that happen when an employer invests in corporate social responsibility.