Corporate Social Responsibility: History, Benefits and Types

Corporate Social Responsibilityis know by many other names. These include corporate responsibility, corporate ethics, coporate accountability and corporate citizenship just to name a few. A key point to note is that Corporate Social Responsibility or CSR has no universal definition; however, it generally refers to clear business practices with respect to ethical values, compliance with Legal requirements and respect for economic values. CSR goes beyond making profits, companies and stakeholders are responsible for their impact on people and planet. Increasingly, stake holders should expect that companies should be more responsible both socially and environmentally in their conduct of their business. The World Business Council for Sustainable Development has described CSR as the business contribution to sustainable economic development.

A Brief History of Corporate Social Responsibility

The history of CSR dates back many years and in one instance can even be traced back 5000 years in Ancient Mesopotamia around 1700 BC, King Hammurabi introduced a code in which builders, innkeepers orfarmers were put to death if their negligence caused the deaths of others, or major inconvenience to local citizens. In Ancient Rome senators grumbled about the failure of businesses to contribute sufficient taxes to fund their military campaigns, while in 1622 disgruntled shareholders in the Dutch East India Company started issuing pamphlets complaining about management secrecy and “self enrichment”. With industrialisation, the impacts of business on society and the environment assumed an entirely new dimension. The “corporate paternalists” of the late nineteenth and early twentieth centuries used some of their wealth to support philanthropic ventures. By the 1920s discussions about the social responsibilities of business had evolved into what we can recognise as the beginnings of the “modern” CSR movement. “The phrase Corporate Social Responsibility was coined in 1953 with the publication of Bowen’s Social Responsibility of Businessmen” (Corporate watch report, 2006). The evolution of CSR is as old as trade and business for any of corporation. Industrialization and impact of businesses on the society led to a complete new vision. By 80’s and 90’s CSR was taken into discussion, the first company to implement CSR was Shell in 1998. (Corporate watch report, 2006) With well informed and educated general people it has become a threat to the corporate and CSR is the solution to it. In 1990 CSR was standard in the industry with companies like Price Waterhouse Copper and KPMG. CSR evolved beyond code of conduct and reporting, eventually it started taking initiative in NGO’s, multi stake holder, ethical trading. (Corporate watch report, 2006).

Implementing Corporate Social Responsibility

There are no generic CSR methods, each method is based on the individual firms needs and circumstances. Each method will vary in its attentiveness of CSR issues and how much work needs to be done with respect to the approach. CSR can be utilized integrated into a firm’s core decision making, management processes, strategy and activities, be it over a period of time or systematically. Most companies already possess policies with respect to the handling customers, community, employees and the environment. These can be perfect starting points for firm-wide CSR approaches.

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What follows below is a framework for the development and implementation of a CSR approach that builds on current existing policies as well as experience and knowledge of other fields, such as economic and environmental. The broad framework follows a familiar “plan, do, check and improve” model. This framework has been designed with the intention to be flexible so that firms would be able to mold and adapt it as appropriate for their organization.

Implementation Framework

When?

(Conceptual phase)

What?

(Task delineation)

How?

(Checkpoints on the journey)

Plan

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1.Conduct a CSR assessment

• Assemble a CSR leadership team
• Develop a working definition of CSR
• Review corporate documents, processes and activities
• Identify and engage key stakeholders

2. Develop a CSR strategy

• Build support with senior managment and employees
• Research what others are doing
• prepare a matrix of proposed CSR actions
• Develop ideas for proceeding and the business case for them
• Decide on direction, approach and focus areas

Do

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3. Develop CSR commitments

• Do a scan of CSR commitments
• Hold discussions with major stakeholders
• Create a working group to develop the commitments
• Prepare a preliminary draft
• Consult with affected stakeholders

4. Implement CSR commitments

• Develop an integrated CSR decision-making structure
• Prepare and implement a CSR business plan
• Set measurable targets and identify performance measures
• Engage employees and others to whom CSR commitments apply
• Design and conduct CSR training
• Establish mechanisms for addressing problematic behaviour
• Create internal and external communications plans

Check

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5. Verify and report on progress

• Measure and verify performance
• Engage stakeholders
• Report on performance

Improve

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6. Evaluate and improve

• Evaluate performance
• Identify opportunities for imporvement
• Engage stakeholders
• return arrowCross-check: One cycle completed
• Return to plan and start the next cycle

Benefits of corporate social responsibility

CSR offers many benefits both externally and internally to companies.

Externally, the benefits are greatly positive amongst the people for its company and their peers. It can create short term employment opportunities by taking various community projects like construction or maintenance of local parks and sporting complexes, etc. Working with keeping in view the interests of local community bring a wide range of business benefits. Businesses also have an impact on the environment. Plantation and cultivation activities taken up by many companies are highly respected programs, as well as recycling used products. This also acts as a step towards minimizing wastes.

Internally, the benefit are mostly but not only felt by its employees, the attraction and retention of qualified and skilled employees as well as employee loyalty, increased productivity, quality, sales and financial improvement for all. Most importantly, it also serves as a diversion from the routine workplace practices and gives a feeling of purpose and meaning to the entire work force. Apart from this, companies also benefit from CSR in areas such as business sustainability; competitive advantage; easier compliance with regulatory requirement.

CSR and BRANDS

Brands are basically the identification in which a company’s product is identified by the consumer. The sales and revenue of the company are widely dependent on the brand they give to their product.

Here are some CSR traits that positively / negatively affect the brand

Positive Marketing/ Brand Building – Times of India (kalingatimes.com)

Brand insurance – NIKE (Corporate Social Responsibility, 2003)

Crisis management- Pepsi (wikipedia.org)

CSR and Globalization

As companies expend through globalization, many challenges have waited for them from Government regulations to the varying standards of what is deemed to be labor exploitation, these challenges have the potential to cost companies millions of dollars. Some companies are of the view that these policies are merely a cost hindrance, while other companies use CSR tactics as a strategy to gain public support for the presence in the global market.

CSR and Human resources

A CSR program can be an aid to hire and retain staff particularly within the competitive graduate student market. Potential recruits often inquire about a firm’s CSR policy, and having a comprehensive policy can give an advantage. CSR can also add value in the perception of a company among its staff, particularly when staff can become involved through fundraising activities or community volunteering. Also CSR can be driven by employees’ personal values, in addition to the more obvious economic and governmental drivers.

CSR and Risk Management

Managing risk is a central part of many corporate strategies. No matter how hard a company tried their reputations which took decades to build up can be questioned in a matter of minutes through incidents such as corruption or environmental accidents. These can also draw unwanted attention from courts, governments and media. Building and promoting great CSR policies can sometimes offset the risks.

CSR and Government Policies

Government politics have tremendously shaped the regulation of businesses in several ways.

First, government business policies insist that organizations operations shall bring no harm to society or the environment. Businesses shall be friendly to society and vice versa, to ensure that businesses follow these policies, the government enacts laws to monitor both the conduct and operations of a business. In addition, to these laws violators also face punishment if they are not followed.

Secondly, governments provide businesses with various grants and incentives provided that they comply with those government regulations and policies. Studies show that a very high percentage of businesses have reported more benefits than expected from complying with the government policies.

Finally, governments regulate businesses in the interest of protecting stakeholders and shareholders. With the absence of proper business regulation societies can be misled, manipulated and exploited, therefore the government needs to be responsible and regulate businesses in order to provide a level playing field where all business have the opportunity to operate and expand. Governmental policies have been designed and put in place to assist not only consumers both organizations as well, by protecting consumers from unfair business practices as well as protecting the organizations from public misconduct and interference.

Criticisms and concerns

Critics of CSR debates a number of concerns, these include CSR’s relationship to the fundamental nature of business and questionable motives for engaging in CSR, including concerns about insincerity and hypocrisy.

Conclusion

I believe that the above problems are not inherent flaws in CSR, but rather that they result from both a disingenuous commitment to CSR on the part of many business managers as well as an uninformed public opinion on many CSR issues. It is important to expose and confront CSR abuses not so that the CSR movement could be turned back, but rather to protect the kind of CSR that genuinely promotes social advancement. Nobody would be opposed to business practices that benefit both individual firms and society at large. In an ideal world, competent managers would always conduct business in a matter that translates productive relationships into real value for society. After all, the economy is not a self-serving machine: it is a purposeful system for organizing everybody’s interests in such a way that people can engage in mutually beneficial exchange. I agree with the notion espoused by CSR advocates that profits should not be the sole motivator in business decisions. Although the profit motive is the driving force for both firms and the macro economy, there is a point at which it degenerates into “greed:” breeding microeconomic ethical dilemmas that, when can collectively threaten the economy’s health and ought to be curbed by a proper concept of social responsibility. CSR becomes less of an outside pressure and more of a genuine business principle. It is the responsibility of an informed public to be able to separate reasonable CSR from harmful CSR. All too often, people support counter-productive initiatives out of romanticized views of social justice, environmentalism, or nationalism, not realizing that ideas are not as appealing in the real market as they may appear in the public imagination. It seems to me that a root cause of CSR abuses is a conflict of interests between firms’ three main stakeholders: shareholders, employees, and management. For individual managers, the best course of action may be to engage in as much CSR as possible. Managers who receive positive press for their leadership initiatives become eminent in their fields, and therefore more valuable. For this reason, managers have an intense focus on expanding companies and investing in high profile projects that earn them the public’s attention, and may make uninformed decisions in the process. This differs substantially from the interests of shareholders. A shareholder is uninterested with a manager’s popularity but very interested with the return that the manager is able to deliver on the shareholder’s investment. Unless a corporation can justify CSR practices in very clear terms, i.e. revenue and cost, shareholders will be unhappy with the result. Likewise, workers in a company benefit greatly from responsible CSR policies. Companies that deal honestly will build trust within their workforce. Managers that earn obscene salaries while simultaneously throwing millions of dollars into charitable causes and announcing layoff plans can only blame themselves when workers become more dissatisfied and less productive, or when the public places less faith in their product (consider the slow death of the American auto industry). Like shareholders, employees are unwilling to support frivolous practices that jeopardize the company’s financial strength: they are most concerned about their long-term employment security, an interest that managers should take into account as well.