Corporate social responsibility (CSR) is as a multi-stakeholder approach in which corporations take responsibility for the impact that their operations may cause to the environment, customers and employees. Today’s climate is demanding that businesses have obligations to the greater community in which they operate, as opposed to simply their shareholders. The most traditional justification for CSR is the business case justification, which includes pressure from NGOs, lenders, investors, insurers, as well employees.
The business case justification for CSR posits responsible management as the “enlightened self-interest” of the corporation. More specifically, this notion suggests in order to achieve sustainable profits and long-term success corporation must act responsibly. One of the most prominent examples of the “enlightened self-interest” is the concept of “Fordism”. Henry Ford was very progressive in labor rights area, he paid his employees significantly higher than other blue-collar jobs, and he was also one of the few major corporations that provided jobs for African Americans. Although Ford increased the living conditions of his employees, his motives were not completely altruistic; he had a business justification for doing so. Ford realized that paying workers higher living wages, allows them to purchase the products they make, thus increasing demand and size of the market. This is perfect example of how a business motivation to increase profit can be aligned with advancing human rights. There are several other business practices methods in which business can be vehicle to increase human rights.
Community and NGOs
NGOs and the community at large are now publicly demanding that corporations take responsibility for their actions, as well making note of any failure to fulfill those responsibility. As a result of plethora of NGOs located around the globe corporations are being now watched being watched more scrupulously than ever before. The impact of this negative publicity can have grave impact in the court of public opinion and the potential to deteriorate the value of the corporation’s brand. Therefore, corporations are no longer able to hide their offshore sites because people are now able to share videos of inhumane working conditions from anywhere in the world.
Employee Retention
CSR is also supported by the business case in the matters pertaining to recruiting and retaining talented employees. Corporations that are able to operate Another reason corporations have become socially responsible is to attract a talented workforce. People like to work for companies that have similar concerns with social issues as their own: “81% of Americans feel that a company’s commitment to social issues is important when they decide where they want to work”[1]. Corporations also need to act socially responsible because a negative perception by the general public can also have an adverse affect on being able to attract and hire young talent. Recent college graduates seeking employment are now considering the corporation’s CSR practices when choosing a place of employment. Increasingly, people want to work for a firm that shares similar values and ethics to their own personal views[2].
Consumers
Corporations are becoming more socially responsible in part response to the demand of consumers. Companies can create a competitive advantage and capitalize on CSR initiatives by developing innovative environmental friendly products. Companies who are actively supporting their environment have a better perception by the consumer: “86% of consumers have a more positive image of a company they believe is doing something to make the world a better place”[3]. Corporations such as Nike were quick to change some of their working conditions when the conditions some of their employees were subjected to surfaced on local media outlets. Consumers can support reward business that have good CSR practices by purchasing their goods, but conversely consumers can punish those corporations who have social indiscretions by boycotting or other forms of activism. Nike faced protests and boycotts for its unsafe working conditions and now as result of the negative backlash, Nike has made significant strides in its corporate social responsibility efforts.
Investors
Corporations that are socially responsible can also have a benefit from investors and an increasing numbers are considering CSR in their investment decisions. This form of investment is generally referred to as social responsible investment (SRI), which considers the financial projects of an investment, but also consider the social and environmental implication of the investment. Therefore the public perception of the corporation can also influence the amount of monies the corporation receives from their investors. A study completed by Geoffery Heal of Columbia University supported this theory by finding that, “$1 out of every $9 under professional management in America now involves an element of socially responsible investment”[4]. As social responsibility continues to influence the investment decisions of financers, it becomes more imperative for businesses to incorporate these values into practice.
The importance and focus on the CSR phenomenon has grown a lot over the recent years. Corporations are starting to place more time and resources in carrying out CSR. A recent study conducted by Economist Intelligence Unit found that executives are placing more importance on corporate responsibility[5]. As employees, consumers, and the greater community continue to demand that businesses become more responsible citizens, in order for businesses to survive and thrive it is imperative to incorporate CSR into their business practices.
[1] “Why CSR?” http://www.consciouscomm.com 15 February2008
[2] “Just Good Business” The Economist. 386 (2008) 19 January 2008
[3] “Why CSR?” http://www.consciouscomm.com 15 February2008
[4] “Just Good Business” The Economist. 386 (2008) 19 January 2008
[5] “Just Good Business” The Economist. 386 (2008) 19 January 2008
