Importance of Corporate Social Responsibility in Business

Question: Discuss about the Importance of Corporate Social Responsibility in Business. Answer: Introduction: Corporate Social Responsibility is the general term that emphasizes both the responsibility of an organization to make money and the responsibility to interact with the surrounding and operating community ethically (Carroll 2015). It is the concept of that responsibility that is meant to earn profit while playing a major role in broadening the community welfare. The aim of the paper is to focus on the importance of Corporate Social Responsibility and how major companies in the recent sphere are utilizing CSR activities to build a positive image of the Company in the society. In addition to this, a number of Companies carrying out CSR activities will also be highlighted in the paper. Literature review: CSR theories and its related approaches are mostly focused on social realities including economics, political, social integration as well as ethics. These approaches are observed in the social system as a goal to attain social integration and pattern maintenance or latency. As commented by Samuelson and Anderson (2014), a corporation can be considered as an artificial person in law who has some rights and responsibilities towards the society. It has to be understood that not only the humans have certain social responsibility but the organizations operating in the social sphere as well. In this respect, a number of theories can be explained here. Instrumental theories of CSR: In the view point of Zentes et al. (2017), CSR is a strategic tool for achieving economic objectives that will ultimately create wealth generation in the particular organization. Friedman has put forwarded his view on the same approach that the only responsibility of a business body is to maximize the profit marginality of the business and increase the profit of the shareholders. Again, Korschun et al. (2014) pointed out that with the increasing practice of wealth domination, the managerial concept of responsibility has changed to a large extent. The concept of making profit should align with the motives and intension of the stakeholders as well. Carrying out various kinds of corporate social responsibilities will ultimately result in creating a good reputation as well as relationship with the stakeholders of the Company (Samuelson and Anderson 2014). The instrumental theories state the following three major factors related to the improving situation of the environment and the societ y. Maximizing the shareholder value: The major motive behind a corporation is to maximize the value of the stakeholders (Cornelissen 2014). In order to create a long term interest of the corporation, it is vital to devote certain resources for the sake of improving the present situation of the environment where the particular organization operates. A strategy to achieve competitive advantage: CSR activities often contribute to create a long term social objective that ultimately leads to the situation of achieving a competitive advantage over the other existing organizations. The Porter model on the competitive advantage states that CSR activities often create greater social values than the individual donor or the government of the particular place (Singh 2016). This is a kind of philanthropic investment that the organizations need to make that will ultimate lead them a competitive advantage in the major areas of operations. Strategy to attract the bottom of the economic pyramid: In the view point of Cheng et al. (2014), in order to gain more profit, most business strategies are focused on targeting the products on the upper and the middle-class people. However, it has to be understood that there remains a large proportion of population who are at the lower strata of economy. It is indeed important to focus on this group of people. Therefore, carrying out CSR activities to target population of all strata can be possible. Political theories of CSR: There are a number of theories of CSR that focus on the interaction and connection between the business and the power and position of the society. These CSR activities include both political as well as power position of business and its inherent responsibilities towards the society (Cornelissen 2014). The political theory of CSR can be distinguished under two broad divisions: Corporate constitutionalism: As it has been made evident by Davis, that role of power in the business has a vital role to play in shaping the organizational power in the society (Christensen et al. 2014). Thus, any kind of activity focusing on building a reputation in the society, CSR activities can be fruitful for the particular organization. Again, in the view point of Deng et al (2013), the social power of a firm does not only rely on the internal environment but on the external environment as well. Their locus is highly unstable and is constantly shifting from the social forum to other political forum (Cornelissen 2014). This has created the necessity of involving the firm in various CSR activities that will gain importance for the organization. Christensen et al. (2014) also argued that the concept of CSR activities is not only related to economic benefits of the organization but also to gain power and political dominance in the society. Integrated social contract theory: If the socio-cultural context of CSR activities is taken into account, it can be said that the aim of the CSR activities is to integrate the empirical and the normative aspects of management of an organization. These activities in fact offer a process in which the contracts among the various industries and departments as well as the economic systems can be legitimized (Cornelissen 2014). However, the social activities should always run following certain rules. These rules are called the hyper norms. These norms are also related to the religion, culture, and political as well as philosophical thought of the particular region. Sometimes, the organizations have to make contracts with the community for supporting authentic norms and community based legitimacies. Corporate citizenship: This theory also considers the corporation as a citizen and thus, it falls on the part of the corporation to consider certain factors that would impact the relationship between the business and the society. Considering the welfare of the society, it is important to carry out certain CSR activities. In this respect, Cornelissen (2014) commented that major organizations have been found to focus on various social activities that help the organization to create a positive reputation in the society. CSR as a business practice: As stated by Cheng et al. (2014), Corporate Social Responsibility (CSR) has become one of the most standard business practices in the recent time. Companies carrying out CSR activities mean kudos and result in enhancing the reputation of the organization. This kind of reputation holds a powerful statement in the contemporary cynical business world. In this respect, Singh (2016) pointed out that engaging in the policies and procedures where there remained prospective of operating in an integrated social, environmental and ethical way in a close collaboration with the stakeholders of the company. As a specific theory of interacting with the surrounding community and with the larger world as well, CSR activities can be broadly classified under four major obligations. The economic responsibility: As stated by Samuelson and Anderson (2014), economic responsibility to make money is the major obligation of the business version of the human survival instinct. Companies are doomed to perish if they do not make profit. CSR activities directly or indirectly help an organization to make profit. Legal responsibility: An organization has to come up with certain legal responsibilities that would not cause any kind of controversies in the social sphere. In order to create a positive faith on the particular organization, CSR activities hold great importance (Cornelissen 2014). Philanthropic responsibility: Good image can also be created in the social circumstances by performing certain philanthropic responsibilities. Contributing towards societys projects can lead to create a positive image of the particular organization. Sustainability approach: Focusing towards sustainability of environment is an important part of organizational activity (Samuelson and Anderson 2014). Sustainable approach also creates a long-term relationship in the social sphere where the organization operates. Cause-related marketing approach of CSR: The process of formulating and implementing the marketing activities which are attributed to contribute towards a specified amount of designated cause where the customers can be involved to engage in revenue are regarded as the cause-related advertising of CSR. This will ultimately result in the profitability of the organization. Building up customer relationship is indeed important because this way, brand recognition can be build (Carroll 2015). Several approaches by which a cause-related marketing can be made are by hosting musical concerts, coming up with certain charitable programs. It falls on the responsibility of the brand manager to come up with better approach to create a good reputation in the society. The cause-related advertising also creates a win-win situation for the organization and helps in creating a competitive advantage for the particular organization (Singh 2016). Examples of industries doing CSR activities: As stated by Carroll (2015), in the recent market situation, with the increasing impact of globalization and intense competition, providing great product and shopping experience are not enough to create a sufficient customer base. There should be certain activities from the part of the organizations that the customers keep coming back. This approach has been undertaken by almost every organization in the recent time. Some of the best examples of such organizations can be given here: Starbucks: The Company has been operating for more than four decades and has been always responsible towards the society since the beginning of their corporate activities. The Company has developed better ways of providing sustainable means of production of its coffee. Their leadership practice is accountable and provides economic and product quality (Greenbiz.com 2016). In addition to this, Starbucks also supports Ethos Water that provides clean water to billion people. Disney: Disney has gained its name in building reputation in the community. Reading Phys.org (2013), it has been evident that Disney has provided aid after the disastrous situation after natural calamities, like Earthquake occurred in 2010 in Haiti. Moreover, the production Company has also filmed to plant trees in the rain forest that has protected lives of thousands of acres of coral reef. TOMS Shoes: TOMS Shoes is another well known company that has come up with impressive works towards the society. The company is founded on the idea of giving back. It has been found that the Company has donated more than 10 million pairs of shoes that have extended their vision of care for the kids (Cheng et al. 2014). Google: In the view point of Zentes et al. (2017), Google has been doing CSR activities rightly. This search giant has made aggressive moves on multiple fronts towards good citizenship. For example, Google Green, a campaign undertaken by the Company has showed its true effort of creating aware towards utilizing resources effectively and at the same time has supported the use of renewable power resources. Recycling materials or by turning off the lights are the major approaches made by Google. Target: The Company has utilized the concept of Good Corporation Citizen in their day to day business activities. The Company has been found to put effort towards local and environmental support for the communities where they operate. The Company also plays an important role in sustainability approach as well. 5% of the Companys profit is directly invested for charitable purposes (Singh 2016). Conclusion: The complete discussion was based on the understanding of the importance of Corporate Social Responsibility for an organization. A detail approach has been undertaken to understand the importance of CSR in the recent market situation. Various theories and related literature review have been discussed in the paper. Examples of several organizations have been given that has supported the analysis present in the report. It has been found that carrying out CSR activities help an organization to gain competitive advantage in the society and the environment where it operates. In addition to this, building reputational impact is equally important along with providing good quality of product and services. Reference list: Carroll, A.B., 2015. Corporate social responsibility.Organizational Dynamics,44, pp.87-96. Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to finance.Strategic Management Journal,35(1), pp.1-23. Christensen, L.J., Mackey, A. and Whetten, D., 2014. Taking responsibility for corporate social responsibility: The role of leaders in creating, implementing, sustaining, or avoiding socially responsible firm behaviors.The Academy of Management Perspectives,28(2), pp.164-178. Cornelissen, J., 2014.Corporate communication: A guide to theory and practice. Sage. Deng, X., Kang, J.K. and Low, B.S., 2013. Corporate social responsibility and stakeholder value maximization: Evidence from mergers.Journal of Financial Economics,110(1), pp.87-109. 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InStrategic Retail Management(pp. 207-226). Springer Fachmedien Wiesbaden.