Paper Example on Corporate Social Responsibility (CSR): Is It A Necessity?

Critically assess the concept of corporate social responsibility (CSR)and whether companies should subscribe to CSR codes. Support your response with reference to ethical theory. You should illustrate your case with examples from real life of companies which do (or do not) have codes of Corporate Social Responsibility

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Introduction

The business world encounters the concept of corporate social responsibility (CSR)at all levels and is encouraged to be socially responsible. There is, however, no certain definition of CSR both in the academic and corporate world. There are numerous definitions which Villadsen, 2019) says are biased due to certain interests preventing implementation and development of CSR concept. There is, however, no empirical evidence to support the bias claims. The contending definitions with deviating biases hinder productive engagement on CSR as people have different views. Coming up with unbiased definition is, however, challenging due to the lack of a methodology to verify if it is biased or not.

If unbiased definitions come up, they would still need to be applied by people practicing CSR to solve this confusion. Research carried out to analyze CSR definitions shows that nearly all the definitions include five dimensions, namely environmental, societal, economic, stakeholders, and voluntariness (Bailey, 2019). According to the World business council, CSR is a business's continuous commitment to participate in economic development and portray ethical behavior while enhancing their employees' living standards alongside their families, local community, and the entire society (World Business Council for Sustainable development, 2000). This essay will focus on whether it is necessary for organizations to practice CSR or not.

Definition of corporations

In the eyes of the law, a corporation is viewed as artificial persons. Shareholders own them, but directors and managers bear the fiduciary responsibility of protecting shareholders' investments. The contentious issue regarding CSR is whether or not a corporation can have social responsibility. Milton Friedman argues against CSR based on three points. Firstly, he says it is only human beings who should be morally responsible for their actions. Secondly, he says that it is only managers who have the sole responsibility to act on behalf of shareholders. Thirdly, Friedman argues that social problems and issues are proper state province and not the corporate managers.

Does this mean that a corporation is not morally accountable for its actions? It is a debate that has been ongoing for a long time, and literature support has revealed the extent of accountability that is accredited to corporations. According to Fuol (1979), each organization bears a corporate an inner decision structure that acts as a guideline to decision-making processes as per the predetermined goals. Further literature reviews that every organization displays a system of beliefs and values which display the actions that the corporation either regards as right or wrong (Moore,1999). It shows that corporations have a moral responsibility.

Models of corporate social responsibility

There are various models of social responsibility. Carroll's model, for instance, is a representation of a pyramid divided into four parts. At the base is economic responsibilities, the foundation on which all others are built. It is a social requirement for every corporation to be profitable. The second part is the legal responsibility as every society has coded rules of rights and wrongs; hence the corporations should adhere to the rules and regulations. The third part is on ethical responsibilities that require the corporations to avoid harm by doing what is just, fair and right. At the apex of the pyramid is philanthropic responsibilities as the society desires that any corporation working within it should give some of its resources towards helping to enhance the value of the life of the community ( Reiner, 2018). Apart from the pyramid model, there are also concentric circles as well as intersecting circles. The first figure below shows the difference between the pyramid, concentric, and intersecting circle models in their explanation of CSR, while the second one shows Carroll's four-part model.

CSR Pyramid Intersecting Circles Concentric Circles

General Description Hierarchy of separate responsibilities Nonhierarchical set of intersecting responsibilities Integration of responsibilities; all sharing a central core

Theoretical Assumptions

Nature of CSR Normative restraints of responsiveness Classification framework; no normative guidance Incurred obligation to work for social betterment

Scope of Responsibilities Narrow split Wide

Total CSR Conjunction Disjunction Integration

Order of importance Hierarchy; Economic responsibility first No prima facie order Inclusion system; economic circle at the core

Role of Philanthropy "Icing on the cake." Subsumed under economic/ethical responsibilities An integral part of CSR

Research Implications

Operationalization Constantsum method CSR portraits A representative range of measures

CSR-CFP relationship Positive Positive, Negative, or Neutral Nonlinear

International Practice and/or Refrain of CSR

CSR is famous in the United States, and there has been a spread of its influence across the world. There are many companies in the U.S. that practice CSR with Johnson& Johnson being an excellent example since, for the past 30 years, the Company has reduced its impact on the planet by providing the community with safe water and using renewable energy sources. The second example is Google, which is trusted for being environmentally friendly, has a CEO, is vocal on social issues, and has also committed over one billion dollars to renewable energy projects. Coca-Cola also has subscribed to CSR by changing their supply chain practices reducing their carbon print by 25% by 2020. Ford Motor Company has adhered to CSR and aims to reduce emissions of greenhouse gases via the EcoBoost engine that increases fuel efficiency. The Company also has a goal of introducing 40 hybrid and electric vehicles by 2022 besides relying on solar P.V. wind sail systems to reduce electricity usage. Starbucks company has promised to hire approximately 25,000 veterans by 2025 as the fulfillment of social responsibility. They are aimed at hiring young people to enhance their careers (Spence, 2019). The Company also partnered with the U.N. Refugee Agency intending to hire 10,000 refugees by 2022.

Explicit vs. Implicit CSR best explains why and how CSR changes and differs among nations (Kumar et al., 2019). For instance, a comparative study between the United States and Europe revealed remarkable differences in the companies. 53% of the companies in the U.S. mentioned CSR explicitly on Company's websites, with 29% and 25% of companies in French and Dutch doing it, respectively (Patel, 2019.). Regional differences, therefore, exist concerning the four CSR levels. For instance, in the economic responsibility level, United States Focus on shareholders, India, on the other hand, invests in the local community while France has wide responsibility towards employees.

Though most of the companies have adhered to CSR, some companies do not adhere to it. For Example, the most famous recent CSR scandal was Volkswagen Company, which has been reluctant in adhering to CSR. The organization deliberately circumvented emissions control to unfairly gain an advantage of being the best car maker over its competitors. Though it presented its cars as environmentally friendly, it greatly poisoned the planet. Due to these actions, Volkswagen not only severely tarnished its renowned brand name but also lost millions of euros.

Advantages and Disadvantages of CSR strategy

Strategic CSR involves companies taking an approach that determines the activities that they have enough resources to commit towards social responsibility; they have the freedom to choose activities that enhance their competitive advantage. Incorporating CSR in the Company's plans helps the organization in ensuring that the rise in shareholder value and profits does not overshadow ethical responsibility towards the stakeholders. Other benefits of adopting CSR strategies include enhancing Company's ability to balance societal value with economic creation, management of stakeholders relationships particularly the ones with competitive values, identification and response of opportunities and threats that faces their stakeholders development of sustainable business practices as well as right decision making on Company's capability of philanthropic activities. CSR strategy can, therefore, be developed using various ways, as explained below.

Firstly, a company can build its strategy around its core competencies. There are various areas that a company can support, but if it is not in line with its core competencies, then the CSR is less effective. CSR is more effective if a company supports an area that is established in terms of knowledge, research and strengths because it is an advantage to community partners as well as a company due to new revenue streams and customer visibility. CSR can, therefore, be an opportunity-seeking avenue as well as a risk mitigation strategy; hence organizations should look out for the intersection between social and economic returns.

The second strategy is recognizing the issues that are crucial to your customers as most clients want to deal with companies that are CSR complaints (Gurlek, Duzgun, and Meydan Uygur, 2017). For instance, a CSR study carried out by Cone Communications revealed that 87% of the customers preferred purchasing products from companies that support environmental or social issues. Consumers are therefore rewarding socially responsible organizations via brand loyalty, contributing towards the Company's charity programs, and buy products designed with social benefits. Besides, consumers do not fear to punish harmful companies and irresponsibility via negative campaigns all over social media and boycotts.

The fourth strategy is measuring the Return on Investment of CSR efforts for both investors and the C-suite. It is overwhelming to measure CSR programs, especially when the initiative involves numerous departments like marketing, human resource, sustainability, and compliance. The easier way to inform investors and C-suite that CSR efforts are affecting the performance of the Company is by inventing an organized reporting framework that is linked to strategic business priorities. Socially conscious efforts that have a direct impact on the Company should be quantified. An example of these efforts includes new customer acquisition, brand awareness, and cost savings.

Apart from the advantages, the CSR has shortcomings too. The first disadvantage is that it is an added bureaucracy that increases cost observance. There are extra funds needed to service CSR once adopted. Secondly, CSR's cost of operation may increase than the required amount that would be profitable and sustainable. Lastly, the CSR does not have a standardized reporting criterion. The reporting rules vary across sectors, companies, and countries and are continually evolving.

Reasons Companies should subscribe to CSR

Just like the explanation of CSR, the association between CSR and financial performance has been a contentious issue over some time. Those who argue against CSR state that companies incur costs from CSR actions and end up economically disadvantaged as opposed to their competitors who are less responsible (Carroll et al., 1985). Those of a contrasting opinion argues that there are minimal explicit costs incurred through CSR, and the companies are likely to have more...