Benefits of Incorporating Corporate Social Responsibility (CSR) in Business Organizations

One of the most prominent, widely discussed issues of today’s business management is Corporate Social Responsibility (CSR), which was a highly observable business fact that has been overlooked in the earlier stages (Crowther and Capaldi, eds. 2008). It has long been argued that businesses have no other responsibility apart from providing goods and services in return for maximizing profit and thereby have no societal commitment whatsoever (Friedman, 1962 and Hayek, 1969 cited in Marinetto, 1998). However, modern business practices negate the orthodox viewpoint providing businesses’ responsibility and obligation to the society to a large and significant extent apart from profit making (Quazi and O’Brien, 2000).

Corporate social responsibility is an evolving issue, which takes different forms with the passage of time (Carroll, 1999). An early definition of Social Responsibilities of Businessmen is provided by Bowen (1953 cited in Carroll, 1999, p. 270) where he states that

It refers to the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.

The modern definition of CSR provided by European Commission (n.d.) indicates that corporate social responsibility is the sum total of various societal and environmental issues that organizations need to be taken into account deliberately besides their daily planned operations in conjunction with internal and external stakeholders as a means of achieving sustainable development and competitiveness. Similar perspective is held by Marinetto (1998) who points out that the intention behind social responsibility is to serve societal interests through incorporating various interests groups acting within and outside the organizations.

It is pointed out by Kolk et al. (1999) that corporate social responsibility takes place at three levels – social, organizational and individual levels, which are associated with certain principles – the principle of legitimacy, the principle of public responsibility and the principle of managerial discretion. Wood (1991) provides a comprehensive picture of these three principles. According to the author, the notion behind the principle of legitimacy is that organizations have wider obligations to the society and the relationships between them count on to what extent organizations legitimately exercise the business practices and behave in a responsible way towards those obligations. The principle of public responsibility indicates the degree to which organizations act and behave responsibly towards the outcomes that are the results of their business doings and overall business concentration. This indicates the issues relating to environmental impacts and how organizations watch these issues. The principle of managerial discretion provides a view on managers’ perspectives, that is, how they use their discretionary power and to what extent they use them to bring in socially desirable behaviour for ensuring social responsibility.

Corporate social responsibility is not a trendy advertisement that organizations are using for achieving and maintaining sustainable development rather it is a significantly useful and an indispensable tool gradually instilling in the corporate behaviour as a powerful management theory, which helps organizations to ensure their long term sustainability in the volatile business environment (Gil Estallo et al., 2007). According to Chauhan (2008 cited in Harrington, 2008), it is pointed out that CSR is barely thought an approach to adopt rather in contemporary business world, CSR has received an intense attention for its prominent roles that have a strong impact on businesses’ long-term success.

One of the key reasons for business organizations integrating corporate social responsibility is the bottom line effect that it brings to the organizations (Hancock, 2004). Visser et al. (2008, p. 128) point out that a survey carried out by PricewaterhouseCoopers in 2002 on organizations’ sustainability shows the bottom line effects of incorporating corporate social responsibility – enhanced reputation, competitive advantage, cost savings, industry trends, CEO/ Board commitment, customer demand, SRI demand, top line growth, shareholder demand, access to capital whereas the survey conducted by Business for Social Responsibility shows that adopting CSR gives organizations several advantages, which are increased sales and market share, strengthened brand positioning, decreased operating costs, increased appeal to investors and financial analysts, enhanced corporate image and clout (Kotler and Lee, 2005). According to them, besides these pros, one of the most significant aspects of incorporating corporate social responsibility is that it empowers organizations with an enhance capacity to attract employee segment, motivate existing and new employees, and helps organizations retain them to pursue a prolonged career in the organization. An article, CSR research: Make a Difference, published in HR Magazine by Harrington (2008) advocates the above statement. According to the article, the most considerable benefits of CSR in workplace are staff retention, staff attraction and staff motivation respectively. As Koggel et al. (2006) point out that companies with good CSR policies deal with issues like increasing employees’ knowledge and proficiency, working environment, health and safety matters and other financial and non financial incentives. Kotler and Lee (2005) point out that more than 50% MBA students (a survey conducted by Net Impact on 2100 MBA student) would not mind working with a lower salary than expected for a company that act responsibly towards the society.

According to CIPD (2008), organizations having good CSR policies seem to better treat their employees, which is motivating as Johnson et al. (2006) point out that in order to be a socially responsible organization, businesses should be rational enough when designing jobs, that is, focusing on flexible working practices rather than only on financial competence as this is a significant basis through which employees can be motivated.

Another important aspect of corporate social responsibility is that it enhances the corporate image of the companies, which is noteworthy to employee satisfaction (Smith, 2007). According to him, organizations’ CSR activities produce a positive impact in public, which is a source of employee motivation and satisfaction. This above statement is supported by Sharma et al. (2009), who indicates that CSR is an influential instrument to create employee satisfaction for the reason that it adds value to the brand image of the organization and therefore, becomes a trademark for the company as Miles (1987 cited in Riordan et al. 1997) points out that corporate image can be worked out by gauging to what extent organizations are devoted enough to social performance and social performance of an organization can be determined by working out the attitudes and behaviour of its employees, which in turn shows how corporate image has an impact on how employees will act and perform, which is a source of their satisfaction (Riordan et al. 1997).

The importance of incorporating CSR in business policies is, therefore, immense. An organization must understand how CSR policies impact on employees’ motivation and thereby create satisfaction or dissatisfaction, which is translated into their performance.

 

References:

• Carroll. A. B. (1999), “Corporate Social Responsibility: Evolution of a Definitional Construct”, Business & Society, Vol. 38 No. 3, pp. 268-295.
• CIPD (2008), Corporate Social Responsibility, Chartered Institute of Personnel and Development [Online], Available: http://www.cipd.co.uk/subjects/corpstrtgy/corpsocres/csrfact.htm?IsSrchRes=1
• Crowther, D. and Capaldi, N. (eds) (2008), The Ashgate Research Companion To Corporate Social Responsibility, Aldershot, England.
• European Commission (n.d.), Enterprise and Industry, European Commission, [Online], Available: http://ec.europa.eu/enterprise/csr/index_en.htm
• Gil Estallo, M. d. A., de-la Fuente, F. G. and Gríful-Miquela, C. (2007), “The Importance of Corporate Social Responsibility and Its Limits”, International Atlantic Economic Society, Vol. 13, No. 3, pp. 379-388.
• Hancock, J. (2004), Investing in Corporate Social Responsibility: a guide to best practice, business planning and UK’s leading companies, Kogan Page, London.
• Harrington, S. (2008), CSR research: Make a Difference, HR Magazine [Online], Available: http://www.hrmagazine.co.uk/news/774913/
• Johnson, G., Scholes, K., and Whittington, R. (2006), Exploring Corporate Strategy, 7th edn, Prentice Hall, Harlow, England.
• Kogel, J. E., Trivedi, N. C., Barker, J. M. and Krukowski, S. T. (2006), Industrial Minerals & Rocks: Commodities, Markets, and Uses, Society for Mining, Metallurgy, and Exploration, U.S.
• Kolk, A., van Tudler, R. and Welters, C. (1999), “International Codes of Conduct and Corporate Social Responsibility: Can Transnational Corporations Regulate Themselves?”, Transnational Corporations, Vol. 8, No 1, pp. 143-180.
• Kotler, P. and Lee, N. (2005), Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause, John Wiley and Sons, Chichester.
• Marinetto, M. (1998), Corporate Social Involvement: Social, Political and Environmental Issues in Britain and Italy, Ashgate Publishing Ltd., Aldershot, England.
• Quazi, A. M. and O’Brien, D. (2000), “An Empirical Test of a Cross-national Model of Corporate Social Responsibility”, Journal of Business Ethics, Vol. 25, No. 1, pp. 33–51.
• Riordan, C. M., Gatewood, R. D. and Bill, J. B. (1997), “Corporate Image: Employee Reactions and Implications for Managing Corporate Social Performance”, Journal of Business Ethics, Vol. 16, pp. 401–412.
• Sharma, S., Sharma, J. and Devi, A. (2009), “Corporate Social Responsibility: The Key Role of Human Resource Management”, Business Intelligence Journal, Vol.2, No.1, pp. 206-213.
• Smith, A. D. (2007), “Making the Case for the Competitive Advantage of Corporate Social Responsibility”, Business Strategy Series, VOL. 8, NO. 3, pp.186-195.
• Visser, W., Matten, D., Pohl, M. and Tolhurst, N. (2008), The A to Z of corporate social responsibility: a complete reference guide to concepts, codes and organizations, John Wiley and Sons, Chichester.
• Wood, D. J. (1991), “Corporate Social Performance Revisited”, Academy of Management Review, Vol. 16, No. 4, pp. 691–718.


 

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