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The traditional outlook about corporations has changed. No longer are they perceived exhaustively as profit-churning factories. Beyond this monetary perspective, companies are now being assigned with ethical and moral dilemmas involving what are the further obligations that organizations have regarding the society and global business environment. Corporate Social Responsibility or CSR is an approach to realise sustainable development from within the corporate culture by committing socio-economic benefits to all the stakeholders. CSR is a critical social movement with the primary objective of encouraging organisations and the concerned management to understand the greater influence of their business on the society and the environment, particularly their own stakeholders.
The concept of CSR and theories behind it
The meaning of CSR can be qualitatively defined by many different theories and perspectives. The point of view from which a company implements CSR is thus, diverse. It encompasses a plethora of topics like fundamental human rights, safety and security, environmental impact assessment, economic contribution, corporate governance etc. Irrespective of the definition, the purpose of CSR remains same i.e. to lead the change towards sustainable development (Preuss, 2013, p.580).
In the same way as social responsibility, every company can decide how to, if at all it does, communicate its commitment to CSR and the progress it has achieved in the process. Thus, the concept of CSR reporting is equally flexible. This opens up the scope to be creative where a company can reflect vibrancy in its personality, responsibility in its vision, as well as its pledge and dedication towards sustainability.However, it must be noted that the heterogeneity in the reporting scheme can be very exhausting at times. By considering an analogy in this regard with the financial reporting, one can imagine the amount of anxiety caused.
Broadly, there exist three theories as to how companies approach, or should approach, CSR:
1. Understanding the greater obligations of the company regarding CSR including the economic, legal, ethical and philanthropic obligation. These drive a company to contribute to society’s projects and environmental concerns
2. The triple bottom line dictates that the management tabulate the results not exclusively in economic terms but also consider the impacts in the environmental and social realm (O’Shea et al. 2013, p.150).
3. Stakeholder theory mirrors CSR in that it concerns the organisation itself with the ultimate needs of the stakeholders and how it has resolved or affected these needs.
The issues surrounding CSR
The central idea behind corporate social responsibility is being threatened by the fact that large corporations are being robbed of their freedom of operations. They can no longer stay above broader society and perform isolated economic operations. Through indirect consequences, the conventional views of sustenance, competition and profitability are under serious threat (Mirvis, 2012, p.155).
Some of the prime limitations to CSR can be listed as follows:
1. CSR can be avoided by company on account of their structure. The companies can avoid CSR and still comply with the legal regulations by donating money to governmental funds, projects etc. This weakens the purpose of CSR as it will have no immediate or tangible benefit towards the society.
2. CSR is concerned with the participation of corporations in the socio-economic as well as environmental development. However, it does nothing to address the gap or misalignment between the original objectives of a business and the objectives of social welfare.
3. There is a big gap of requisite skills between the large corporate firms and the non-governmental organisations or NGOs who are directly associated with socio-environmental welfare programs. The planning of CSR cannot be implemented properly with this bridging intervention. The reporting and documenting skills, corporate governance etc. are absent in the NGO setting. Therefore, there are discrepancies in executing this plan.
4. Many CSR mandates state the financial contribution in terms of percentage over profits. Now, in small capital industries, organisations will not produce sufficient funds to allocate for the social causes. Also, in large corporations, it becomes a limitation to spend large sums of money into immediate social causes as there is absence of any road map or blueprint to implement CSR mandates without any dedicated resource (Frias-Aceitunoet al. 2013, p.219).
5. The description of Social work is extremely obscure and since the CSR reporting follows a very flexible and customizable template, a very thin line remains between CSR activities and other random compliances. Using this opportunity, companies showcase basic compliance operations as CSR activities and use up the allocated funds against the latter.
However, successful implementation of CSR can bring about a lot of positive benefits to a business concern. There are mainly three different categories of CSR benefits:
Organisation or Business benefits:
1. Better financial performance
2. Lower costs of operation
3. Escalated image, reputation and improved brand value
4. Better sales performance and consumer loyalty
5. Better productivity and improved quality
6. Better employee appeal and retention
7. Reduced strictness on regulations
8. More access to independent capital
9. Diversity of staff
10. Decreased threat of products and liability
1. Charitable donations and contributions
2. Volunteering and community service concerning the employees
3. Involvement in education of the underprivileged community
4. Community employment and protecting the homeless
5. Product quality and safety
1. Ensuring more products are recyclable
2. Improved Durability and functionality of products
3. More preference on renewable energy and raw materials
4. Better integration of environmental tools into business strategies, including Environmental Impact assessment or EIA, life-cycle assessment, life-cycle cost, eco-labelling etc.
Nevertheless, many large corporations tend to circumvent CSR. Businesses, therefore, require more progress indicators to rekindle their confidence and sustain it. Also, CSR strategies require better advertisement and dissemination. One way in which it can be achieved is via transparency. This will make one organisation the role-model. By appearing as significantly more trustworthy, having certified success and pushing up its own standards of reputation and value, it will become exemplary and drive other companies to adopt similar policies and standards (Marquis and Qian, 2013, p.127).
Provide your opinion on whether CSR should be voluntary or mandatory
CSR reporting can be mandated by legal mandate or it can be dependent on self-choice of the management of an organisation. The legislation of CS reporting puts a compulsion on all firms to participate in CSR and subsequent reporting of the relevant activities, financial donations etc. There are a few advantages of compulsory CSR:
1. Legislation can clear the criteria for any operation to classify as CSR work. This will help the regulatory bodies to monitor the performance of corporations better.
2. Legal mandates ensure universal participation. Even if the philanthropic profile of a corporation is good, many members often refrain from social activities. This will be prevented by compulsion.
However, it is the learner’s opinion that responsibility cannot be enforced by the use of legislative compulsion. Voluntary CSR is imperative to make any quantifiable change in the social sectors. The ideal allocation of CSR accounts for a prodigious contribution towards the development of society. Legal mandates cannot bring enough of a difference. CSR has a huge potential to improve existing social and environmental standards. The following points can be considered:
1. If it is made voluntary, it would instinctively lead to better strategic development of private and public partnership in the society.
2. Voluntary contribution leads to a win-win postulation for the businesses as well as the society and environment which recursively help them to sustain and flourish.
3. The original purpose, and hence, sanctity of CSR is maintained only through voluntary contributions from able enterprises from all sectors.
Large corporations have a collective and individual responsibility to work towards the betterment of the society. However due to the impingement of regulatory bodies and legal mandates etc. often the corporations are looking to exploit the limitations and loopholes in the CSR blueprint. This denotes a weak dedication towards social and environmental obligations. Hence, the learner concludes that the greater benefits of CSR can be derived from voluntary commitment.
1. Frias?Aceituno, J.V., Rodriguez?Ariza, L. and Garcia?Sanchez, I.M., 2013. The role of the board in the dissemination of integrated corporate social reporting. Corporate Social Responsibility and Environmental Management, 20(4), pp.219-233.
2. Marquis, C. and Qian, C., 2013. Corporate social responsibility reporting in China: Symbol or substance?. Organization Science, 25(1), pp.127-148.
3. Mirvis, P.H., 2012. Corporate Social Responsibility. The Encyclopedia of Human Resource Management: Short Entries, pp.153-159.
4. O'Shea, M., Alonso, A.D., Krajsic, V., Hassanien, A. and Dale, C., 2013.Corporate social responsibility. Facilities management and development for tourism, hospitality and events, pp.147-164.
5. Preuss, L., 2013. Corporate social responsibility.In Encyclopedia of corporate social responsibility (pp. 579-587).Springer Berlin Heidelberg.