In the modern day business environment, corporate social responsibility (CSR) is an important factor for business success. Business entities interact with society and depend on a healthy society for their success (Porter and Kramer, 2006). CSR is a concept that indicates that a company embraces values such as concern for people and the environment, quality, transparency, ethical practice, and corporate citizenship (Bhattacharya & Sen, 2004; Porter & Kramer, 2004). Such values and supporting actions make companies very appealing to the society in which they operate. However, not all companies have consistent CSR programs; different companies have different degrees of commitment to CSR. Beginning with a brief description of CSR, this paper argues that it is important that businesses develop a committed attitude towards CSR and integrate it into their policies.
Definition of CSR
There are many definitions of CSR. CSR is defined as “a commitment to improve community well-being through discretionary business practices and contributions of corporate resources” (Carroll & Shabana, 2010, page 90). This commitment is demonstrated by not harming the communities in which the business operates and by providing social benefits that are not required of the company by law. Bhattacharya & Sen (2004) describe CSR as an organizational philosophy that drives companies to prevent or else minimize negative societal impacts from their activities. Some companies also adopt CSR as way to improve their image and gain competitive advantage, thereby using CSR as a marketing strategy (Porter and Kramer, 2006).
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Due to the differing philosophies behind CSR adoption, four models of CSR have emerged: ethical, philanthropic, legal, economic. The ethical model of CSR is based on adopting norms and standards that show that the company cares for its employees, the community, and other stakeholders. It can also involve pursuing social goals that are not required by law (Carroll & Shabana, 2010). The philanthropic CSR model involves taking action to be a good corporate citizen. In such cases, the company does projects that promote goodwill in society and enhance community welfare such as programs in health, education, community development, arts, and so on (Carroll & Shabana, 2010). In the economic model of CSR, the company considers business success its top priority and responsibility to the society. If the company is economically successful, then it can help the society (Porter and Kramer, 2006). The legal model involves the company adhering to the legal obligations imposed by the government or any regulatory bodies (Carroll & Shabana, 2010).
Importance of CSR
CSR is necessary in the modern business economy due to a variety of reasons including demands for accountability and greater disclosure, increased customer interest or social consciousness, and the shrinking role of government in service delivery.
Increased Social and Environmental Awareness
There is increased awareness about social and environmental issues among people. People are aware of the need to protect the environment, or the need for companies to develop products and services that are not harmful to the environment or to people. There is greater advocacy for products such as green products and advocacy against products and services that are seen to be harmful. This increased awareness makes it necessary that companies become socially responsible in their operations (Ahearne, Bhattacharya & Gruen, 2005; Bhattacharya & Sen, 2004).
Demands for Accountability
Customers are now demanding increasing accountability from businesses with regards to their operations and products. Accountability is a state of being liable or answerable. It involves caring for all stakeholders as well as the mandate to report the company’s performance on a regular basis. The concept of accountability includes corporate transparency, reporting and effective communication. It can also include activities such as pricing, ethical marketing, and fair (Jeppersen et al, 2012). Companies are expected to be ethical by voluntarily disclosing the contents or constituents in their products, as well as their financial performance (Jeppersen et al, 2012).
Legal and Ethical Operation
There are legal requirements expected of companies. When companies fulfil such obligations in the context of social responsibility, then they are adopting the legal model of CSR. In some cases, disclosures are mandated by the law, and companies have no choice than to abide by the law or face the consequences. Other ethical activities include considering the ethical impacts of their operations on people, the environment, adopting codes of conduct, and social responsibility planning. By being ethical in their operations, companies have an equitable basis for decision-making and also avoid trouble with the government and workers unions or lawsuits for harming people or the environment (Porter and Kramer, 2006). Being ethical also helps companies to fulfil legal obligations such as human rights or workers’ rights.
Increased Customer Interest
Consumers have a strong interest in companies that work on issues in which they are interested in, leading to customer-company identification (Ahearne, Bhattacharya & Gruen, 2005). Organizational identification is a psychological variable that is described as a sense of connection between the consumer and the organization. It represents the extent to which customers see themselves as having the same values as the organization (Ahearne, Bhattacharya & Gruen, 2005). A company that is involved in philanthropic activities for instance, can contribute to their customers’ self-esteem because the customers want to be associated with an entity that is socially responsible. Where a company has a CSR focus that aligns with the interest of the community, it leads to greater loyalty and commitment to the company. A company can thus, gain positive image and attractiveness from its CSR activities (Ahearne, Bhattacharya & Gruen, 2005).
Increasing Investor Interests
Investors are increasingly tying in their interests with the CSR. International standards in social responsibility reporting highlight milestones in CSR engagement that investors expect from corporations that they do business with. In assessing the performance of companies, investors now look at the ethical aspects of the companies. According to the Social Investment Forum, $2 trillion worth of assets invested in the US in 1999 were invested in portfolios that were linked to social and environmental responsibility (Verma, 2015). Foreign investors are also attracted to countries that demonstrate commitment to ethical responsibility with regards to business operations and governments that support good governance and robust business sector. Such countries are perceived as being attractive as well as being a place where business investments can be secure (Verma, 2015).
Shrinking Role of Government
The provision of public goods and services [such as public parks, education (public schools), water purification and distribution systems, power, and general hospitals] is one the core functions of government. Governments deliver environmental and social objectives in the private sector through the use of legislation and regulations. However, limited resources means that governments cannot fulfil every social responsibility or need on their own, making it necessary that other organizations contribute towards societal welfare. This makes private sector participation through CSR efforts necessary (Verma, 2015).
Conclusion
The adoption of consistent CSR policies and strategies is important for businesses. CSR means that the company takes responsibility for any consequences of its actions while working to contribute to social good. CSR activities are necessary to support government efforts and resources. Adopting CSR practices carries benefits for companies such as increased attractiveness and positive image, increased customer loyalty, and increased attractiveness for investors.
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- Verma, L. “Impact of corporate social responsibilities in modern business environment”. International Journal of Scientific and Research Publications (2015), 5 (2), I-4.
- Bhattacharya , C. & Sen, S. “Doing better at doing good: when, why, and how Consumers respond to corporate social initiatives”. California Management Review, (2004), 47 (1).
- Carroll, A. & Shabana, K. “The business case for corporate social responsibility: A review of concepts, research and practice”. International Journal of management Reviews.
- Jeppersen S., Kothuis, B. and Ngoctran, A. “Corporate Social Responsibility and competitiveness of SMEs in Developing Countries: South Africa and Vietnam”. (2012). http://www.afd.fr
