The Challenges Of Corporate Social Responsbility Business Essay

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Corporate Social Responsibility (CSR) in the future will not be only concerned with the environment as other factors such as social and financial aspects come into play.

Also, this paper agrees with the notion that CSR is primarily about making more profit for international business based on the theories and cases of certain corporations which will be discussed further.

There is much debate concerning CSR activities adopted by organizations. It touches upon issues relevant to the phenomena of the modern economy and their effects for societies and organizations (Beurden.and Gossling, 2008). To some, it is seen as a tool of corporate greenwash and a cynical marketing ploy.

CSR occurs when organizations seek to exceed its minimum obligations to stakeholders by considering the greater good of the widest possible community (Clegg, Kornberger & Pitses, 2008). As such, not everyone is convinced that businesses should be concerned about social responsibility as they are about profits. Moreover, it is logical to state that organizations need profitable finances and enough resources to undertake CSR activities.

2) Theoretical Background

A philosophical view by neo-classical economist, Milton Friedman (1970), is still widely accepted today. He stated "there is one and only one social responsibility of business-to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud".

Friedman (1970) argued that the primary responsibility of business is to make profits while conforming to the basic rules of society. According to this view, actions of businesses in free markets will, from a utilitarian aspect, lead to positive outcomes for the society.

In contrast, some would argue that business is part of the larger community and it has other responsibilities than merely increasing profits. This will be explained in Potter and Kramer model of competitive advantage.

3) CSR in the future

CSR in the future for business organizations will not be primarily concerned with only the environmental. Based on the survey on the future of CSR conducted by CSR Asia, it showed that climate change, corporate transparency and labour relations will be among the top three CSR issues over the next decade (CSR Asia, 2009). Also, most businesses adopt triple bottom line reporting for measuring organizational success. It takes into account the environmental, social and financial performance of the organization.

Governments, activists and the public media have pressured organizations to account for the impacts of their activities. In today's world, organizations are ranked according to the performance of their CSR performance which will positively attract wide publicity (Porter and Kramer, 2002). Barnett and Salomon (2006) mentioned that an increasing numbers of investors are not just looking at the financial performance of corporations, but are also valuing the way corporations meet their social responsibilities. As a result, CSR has emerged as a priority for business leaders internationally (Porter and Kramer, 2002). Sample related case story of British Petroleum will be discussed to justify an example of such corporation that do not undertake primary concern on environment even though publicly marketing otherwise.

4) Case of British Petroleum

British Petroleum (BP) is an example of an organization that misuse the term of CSR.

Former chief executive of BP, Lord Browne vowed to address the issue of social responsibility by contributing to global warming. It spent the past decade on misleading advertisements to promote itself as a green company. He put this environmental issue at the heart of corporate concerns but the company had failed to live up to its responsibilities. He then left his position amid reports of accidents caused by serious lapse of in health and safety standards. Critics feel that Browne's dedication to environmental responsibility was little more than public relations gimmick and that BP is just another careless environment polluter concerned only in maximising profits (Marketing Week, 2007).

This case is further justified when the recent explosion of a BP oil rig in the Gulf of Mexico that killed 11 workers, was regarded currently as the largest oil spill in Gulf history. It was later found out that the firm neglected safety and fought regulation in order to increase profits (Beck, 2010).

It is similar to high profile case such as energy corporation, Enron, where a firm's actions are not match by its words which caused its collapse. Back then, it donated millions to local charities and winning awards for its CSR work. It can be said that CSR is deemed irrelevant if the intended business practice of a corporation is dishonest (Smale, 2006). Indeed, "integrating business and social needs takes more than good intentions and strong leadership" (Porter and Kramer, 2002).

5) Tobacco industry in doing CSR activities

The tobacco industry had also entered the CSR debate. Tobacco companies such as Gallaher, British American Tobacco (BAT) and Phillip Morris that undertake CSR efforts had been heavily criticised by anti-tobacco activists. World Health Organization had even questioned the possibility of social responsibility in the tobacco industry.

The tobacco industry is different from other industries for particularly two reasons. Firstly, the product it sells is harmful and hazardous to one's health. Secondly, it is linked to the behaviour of the industry's staffs. Their strategy of manipulation information had resulted with distrust with the public (Palazzo and Richter, 2005).

From tobacco firms' viewpoint, they claimed that undertake CSR policies very seriously. An example is Gallaher, the world's fifth largest cigarette manufacturer. Its CSR policy ensures that it will not purchase tobacco from any developing world producers that exploit child labour and implemented strict policies on the prevention to its product sales to minors (Smale, 2006). Nonetheless, this issue remains controversial. It could point out that CSR activities produce other benefits gained equally in this case, the public marketing of the corporation.

Palazzo and Richter (2005) concludes "CSR efforts will hardly contribute to legitimize tobacco companies". The authors emphasized that tobacco companies are not in the CSR business as the product that could kill active and passive smokers is contradictory to the good nature of CSR.

6) CSR in making more profits for International Business

Profits for international business are essential for expansion. It will lead to the creation of more jobs which will lead to increased savings and better economic growth for the corporation. It is widely accepted that CSR is seen only as a strategic tool to achieve economic success for the organization. This is termed as instrumental theory which is categorised into three groups namely maximization of shareholder value, achieving competitive advantage and cause-related marketing (Garriga and Mele, 2004).

Maximization of shareholder value

Organizations must respond to a variety of shareholders' needs and demands. From this perspective, the organization has primary obligations to the economic mandates to its shareholders (Weiss, 2009). Thus, CSR efforts of firms that maximises its shareholder value are worth investing.

"It may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill …or have other worthwhile effects" (Friedman, 1970). This statement takes the maximization of shareholder value as the ultimate reference for corporate decision making.

Achieving Competitive Advantage

It focuses on the strategic goal of achieving competitive advantage which would create long term profits for international business.

Porter and Kramer (2002) argued that socially responsible strategies should be carried out as they provide a basis of gaining competitive advantage:"The essential …is not whether a cause is worthy but whether it presents an opportunity to create shared value - that is, a meaningful benefit for society that is also valuable to the business". The authors elaborated that investing in philanthropic improve the context of competitive advantage of the corporation as it has the knowledge and resources to tackle problems related to its business operations. This would create win-win situations to optimise economic returns on CSR efforts.

An example is helping reduce carbon emissions is an added business opportunity for car manufacturers such as Toyota. Also, fighting the AIDS pandemic in Africa is not only seen as good works for a pharmaceutical company or a mining company, it is central to their own interests (Porter and Kramer, 2002).

Cause-related Marketing

Cause-related marketing activities make good business sense as it enhanced the company image and increased customer loyalty. Examples of such activities include sporting events and charitable causes. These are forms of enlightened self-interest approaches as both the organization and the marketed activities receive benefits which will ultimately increase profits.

An example is, a global software services company adopts its CSR policy of 1% each of its profits, employees' time and equity to charities to aid tsunami reliefs. As a result, other areas benefit equally as the company attracted and retain the best employees (Smale, 2006).

7) Role of Government

"Corporations are not responsible for all the world's problems...Each company can identify the particular set of societal problems that it is best equipped to help resolve and from which it can gain the greatest competitive benefit" (Porter and Kramer, 2002).

CSR is indeed a selective strategic option. Large corporations such as BP and ExxonMobil are often criticised by activists and public media for many social and environmental problems caused. Questions arise on who should be responsible on the environmental issues and impacts in the near future if most businesses desire its CSR activities to fine-tune with its financial performance.

Thus, the governments play a crucial role in monitoring the behaviour of corporations.

Regulations and legislation set by the government that are well intended and adhered to can create a possible framework for firms and communities to work together to address social and environmental issues and problems (Oketch, 2005). Madsen Pirie, president of the free market economics, Adam Smith Institute said "CSR should not be a firm's role. Instead, it should be determined by society as whole through the rules and laws set by government." (Smale, 2006).

8) Conclusion

Many would agree that "The Social Responsibility of Business is to Increase its Profits" (Friedman, 1970). Most businesses depend on economic growth as its main priority. CSR efforts, to a certain extent need to be assessed in terms of maximizing shareholder value so as to influence corporate decision making.

As highlighted in the case of BP, words do not match the actions in undertaking its social responsibilities rightfully in protecting the environment. Also, the mere possibility of tobacco companies doing CSR is hardly acceptable by the public. It can be concluded by such cases that these firms are reaping other benefits such as increased profits and positive public relations. All in all, CSR is primarily about making more profits for international business.