Corporate Social Responsibility (CRS) is a concept applied in companies with the aim of improving society and at the same time adding significant value to the company. This way, the company ethically conducts its business, paying attention to human rights, social, economic, and environmental impact. There are several benefits accrued to the adoption of the CRS in a company, and among them is the achievement of competitive advantage. However, this advantage has raised discussion with some economist arguing in favour and others against.
In any competitive business environment, a company's imagery is very significant. The image of the company is primarily the mental perception of the company that people have. According to Kathambi (2015), corporations will involve themselves in socially responsible activities not necessarily to please the society but to mold a good image to the public and at the same time establish rapport with the stakeholders. As such, companies will tend to undertake CRS to boost their image which eventually leads to more legitimacy to stakeholders. For example; Furthermore, the corporate image created through the CRS accords a company a definite media attraction, credible and more distinctive appeal to customer's psychological and social needs, which are an added advantage to the corporation against its potential competitors.
Dealers with the same product compete to satisfy their customers and maintain their loyalty to the brand. Customer satisfaction is the emotional reaction after interaction with a corporation's product, while loyalty the adherence to a company's brand. Customer satisfaction is very fundamental in any competitive market and can be enhanced by the adoption of the CRS activities (Maksimovic et al. 2012). For example; in the production of edibles, a company like Delmonte won the loyalty of its customers since they are known to use natural raw materials in the preparation of their juice which is high quality. Customers feel safe taking the drink as they know it has no chemical additives. As such, undertaking CRS initiatives in production and marketing will influence customer satisfaction and ultimately loyalty that will reflect in increased sales.
Furthermore, for any company to be successful, it must win the loyalty of the employees. This is meant to ensure the maintenance of highly skilled labour within the organization essential in the continuous production of the quality products. The employment of CSR initiatives such as labour principles will improve a corporation's economic productivity. Some labour principles such as; freedom of association, elimination of forced labour and elimination of discrimination will play a significant role in motivating the employees. If the employees are motivated, they will be more productive, which is an added advantage to the company.
Additionally, a company with strong CSR programmes will win favour in the eyes of the regulatory authorities and will not be scrutinized as those without the CSR programs. The perception and feelings could explain the leniency of the regulatory bodies that they have about the company. They believe that the company must be applying the CSR programmes since it has the support from other firms and society. As a result, the company will more often than not receive beneficial regulations from the authorities than any other corporation. For example, the company can forego much paperwork that is required to set up any project that they think is beneficial to society with less scrutiny and questioning.
The adoption of the CSR programs not only builds a company a good reputation but also attracts capital flow from various sources for the company. This is because, the image is very significant in attracting investors who invest heavily in the business since they have the surety of getting profits (Ksiezak, 2016). The benefits are mutual since the company will, also receive a massive boost regarding capital. If for instance, the investors are from abroad, the company generates much valuable foreign exchange for the country, extending its popularity to the government which will be very willing to invest in the company. If the company has a constant inflow of capital from the government and investors, it will be at a better position than any other corporation hence its subsequent success.
Furthermore, the Corporative Social responsibilities concerning the environment focus on reducing waste and emissions and reducing resources use. This are beneficial to the environment and at the same time to the company in that; they help to reduce the cost of production. This is by reducing utility bills and improving the amount of savings (Nibusiness, 2018). Furthermore, investing in the environmental CSR program enables the company to give the community a clean environment by reducing the hazardous effects of its operations and also provides the company with an opportunity to produce and use the renewable sources of energy. These sources of energy save the company expenses on purchasing fossil fuels and electricity. The lesser the expenses that the company undergoes, the higher the profitability: advantage over other companies.
According to Ksiezak (2016), implementation of the CSR policy enables the company to regulate and set standards that the employees must abide with. The long-term advantage of the policy, in this case, will be the risk mitigation. This happens if the company employs the international CSR standards which require the company to identify and access any exposures to danger and controls them in time. A company that has reduced risks and uncertainties is at a better competitive edge than a corporation that is prone to risks.
Additionally, the CRS rules require a corporation to produce high-quality products and services. As such, the company will struggle to ensure that all the stages of production are well managed to eliminate any possible errors, to meet the set standards. Eventually, when these products and services are released to the market, they fetch higher popularity among the customers and yield massive profits after and also cater for the cost of production. In the long run, the company is more likely to grow exceeding any other competitor in the market. As such, the employment of CSR policies acts as a strategy for the company.
Adoption of the CSR policies also has some sort run benefits to the company. For instance, it helps in strategy development and everyday managerial decision making. The policies act as guidelines to the company to strategic ways that they can employ to create more value for the company. Furthermore, abiding by the rules of the CSR maintains the company within certain restrictions and away from those of the government that would be harsher. If the company does not face strict external regulations, it is in a better position to work more freely and at a higher competitive edge than those facing restriction.
However, there are cases in which the adoption of the Corporative Social Responsibility activities would not necessarily yield a competitive advantage. For instance, most CRS activities increase the expenditure due to their demanding nature, and therefore they increase the cost of production (Timane, 2012). The company absorbs this cost if it is large enough or they are forced to raise the cost of the products to cover up the cost. The hiking of prices will make the consumers shun to products of the same type but cheaper. As such, economic productivity will be lowered.
Nonetheless, the company is more mindful of its reputation and may cause inconveniences to the consumers. As a result, the consumers may lose trust in the company, and hence the sales may go down. For instance, if a car manufacturing plant realises a mistake in their model and decides to call back their vehicles in large numbers for correction, the customers' frustrations may cause lesser sales in the future.
The company may also be susceptible to shifts in the profit-making objective. An economist, Milton Friedman, argued that whenever a corporation becomes committed to the adopted CSR programmes, it tends to shift its initial focus on profit-making, which was the aim of its establishment. The company thereof spends funds on the community welfare which lowers the amount of the profits that it achieves. As such, the company will be at the lower competitive edge compared to other companies in the market.
Additionally, in efforts to attain the societal CSR policies, the company may misinterpret the customer's values or the community where it wants to set up the project. For example, it can happen to an international company which has established a company in a new place, with an entirely different race of people that have different cultural and religious beliefs. If this company sets up a project that is beneficial to the community according to their way of thinking, the community may perceive it differently, making their strategy very hard to succeed. As such, the productivity of the company will be lowered since the customers who are mostly the immediate community.
Additionally, the ethical requirements of the CSR policies limit the company in partaking activities that easily profit yielding. For instance, the hiking of prices of products in the monopolistic companies. The companies that do not practice the policies will gain more profit than those limited by the policies, hence higher economic productivity. Furthermore, according to Geethamani (2017), the adoption of the policies offers additional bureaucracy, which means higher cost of observance.
According to the above discussion, the adoption of the Corporative Social Responsibility in a company has several benefits and costs to the company. These advantages include the provision of a competitive advantage to the company which puts the company at a better position overall to compete with its rivals as well as increases its profitability. However, adoption of the policies has several benefits that propel the company to a better competitive edge than other companies in the market. These benefits focus on both the company and the society since both are very relevant in the success of the company at large. On the other hand, the negative impact of the policies is the company centred. They show how the cost of production and the reduction of the profits land the company in the lower competitive edge.
Geethamani, s, (2017), 'Advantages and disadvantages of corporate social responsibility,' International Journal of Applied Research 3(3): 372-374
Kathambi, F, F, 2015, 'Effect of corporate social responsibility on the competitive advantage at Airtel networks in Kenya Limited,' December, p 13-14, Viewed 20 November 2018,<http://erepository.uonbi.ac.ke/bitstream/handle/11295/102725/Fridah%20Kathambi%20Festus%20Project-8th%20Dec%202017.pdf?sequence=1&isAllowed=y>.
Ksiezak, P, (2016), 'The Benefits from CSR for a Company and Society,' Journal of Corporate Responsibility and Leadership, Vol, 3, pp 54-59 <doi: http://dx.doi.org/10.12775/JCRL.2016.023>
Maksimovic, N, Ljubojevic G, & Ljubojevic C, 2012, 'SOCIAL RESPONSIBILITY AND COMPETITIVE ADVANTAGE OF THE COMPANIES IN SERBIA,' 22 November, P 561, Viewed 20 November 2018, <www.fm-kp.si/zalozba/ISBN/978-961-266-201-1/papers/MIC4206.pdf>.
Nibusiness, (2018), "Business benefits of Corporate Social Responsibility," Viewed 21 November 2018,< https://www.nibusinessinfo.co.uk/content/business-benefits-corporate-social-responsibility>
Timane, R. (2012). Business Advantages of Corporate Social Responsibility: Cases from India. SSRN Electronic Journal. doi:10.2139/ssrn.2180500
Sivaranjini, P, Rheka, T, & Nisha, T, S, (2018), 'Issues and Challenges Faced By Corporate Social Responsibility In Communi...
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