Critical evaluation and discussion of the motives and issues of CSR and its impact and connection with strategic change.

This essay will critically discuss and analyse the significance of corporate social responsibility (CSR) in business management, its motives and issues as well as CSR connection with strategic change. The link between CSR and sustainability plan in business has a particular role in management operations. Each of the below discussed theoretical standpoints make an important contribution to the understanding of CSR financial and societal purposes. A number of business examples from Google, McDonald’s, Lego and H&M and others support the given arguments.

Corporate Social Responsibility or CSR has been defined and criticized by many strategists globally. Kotler and Lee (2005) described CSR as a commitment to improve community well-being through discretionary business practices and contribution of corporate resources. In 2015, CSR has been referred to companies taking responsibility for their impact on society and it is increasingly important to the competitiveness of enterprises. CSR can bring benefits in term of risk management, cost savings, access to capital, human resource management, customer relationship, and innovation capacity. (European Commission, 2015) Besides, CSR has a variety of business tactics and strategies which concern about environmental issues, practice philanthropic activities or ethical labour practices. Yet another definition of CSR suggests that it could be used by firms in order to get more support and awareness of politicians. Political CSR via philanthropy is the best way for politicians to become notable and gain respect from society, e.g. Clinton Foundation. Corporate Social Responsibility is especially valuable in building up the company’s image and relationships with political representatives as well as to establish a positive reputation within the business. (Hillman, Keim, Schuler, 2004) Nowadays, many SMEs and MNCs have a lot of interest in using CSR strategy as it can lead companies to success by increasing sales volume and brand awareness. Good business examples of CSR implementation has been demonstrated by the world’s well-known Google, Microsoft and The Walt Disney Company which were named as the top three CSR winners by Reputation Institute in 2014.

Corporate Social Responsibility plays an essential role in business growth and takes responsibility towards the community and environment (both ecological and social). Potential benefits of implementing a CSR approach were investigated by “The Economic Times” survey in 2013; it has been revealed that about 80 percent of executives have a CSR policy within their business strategy as it helps to improve their ‘general corporate reputation’. Google has been firmly committed to philanthropy activities orienting on the global challenges of climate change, education and poverty alleviation. For example, Google Maps launched China’s State Bureau of Surveying and Mapping with satellite pictures of earthquake-affected areas to better support and direct rescue efforts. Also, donation program Google Grants has supported hundreds of organisations and societies like China Red Cross, China Youth Development Foundation, Help Fight with Ebola and many other voluntary contributions to the community. This helped Google to differentiate from its main competitors and enhance relationships with customers, suppliers and networks worldwide. It is generally recognised that CSR approach helps business to save money, therefore increasing overall profits. For example, McDonald’s takes CSR very serious. They use energy saving equipment, low energy LED bulbs and recycle cardboard boxes as well as turn vegetable oil into biodiesel used by delivery trucks. Cost saving factor is one of the most important benefits in social responsibility thus creating a win-win proposition for both shareholders and society that moves company forward. Another benefit of CSR is that it has a positive impact on employee’s view of their employer. Unilever, a multinational consumer goods company, continues to train their employees online through Learning Management System (LMS) which provides lots of learning programs in more than 20 languages in 100 countries. By doing this, Unilever motivates and inspires potential employees thus creating pathway to their future career development. According to survey findings, 80 percent of respondents would prefer working for a company that has a good reputation for environmental responsibility. (Cooper and Wagman, 2009) It is also interesting to mention that Tom’s Shoes, a Californian company, donates one pair of shoes to a poor African child in need for every pair a shopper purchases. In turn, TOMS Company invests in their employees by providing a variety of benefits such as Paid Family Leave, Life Insurance, fitness and wellness classes. Another positive aspect of CSR states that innovation and corporate social responsibility are closely related concepts that bring benefits to organisations. LEGO responded to its financial crisis by focusing on innovation products; the creation of new bricks that children would buy based on their passion for the movies rather than for LEGO itself. By doing this, LEGO has been growing sales at 24 percent per year every year and growing profits at 40 percent per year every year for the last five years. (McKendrink, 2013)

Having considered the motives of doing CSR approach within the business industry, it is also reasonable to discuss and analyse the issues area. In the improperly managed business strategy, the implementation of CSR approach can cause a risk situation that creates a negative outcome for any corporation. For example, Bayer, an international chemical and pharmaceutical German company, has been accused of having a number of hazardous pesticide ingredients in different products in various quantities. These products mainly contained toxic and had a dramatic influence on bees as well as on many other insects, although the company positioned themselves as eco-friendly. Undoubtedly, social responsibility should result in positive outcomes for both the business and the society but, like an iceberg, most CSR activity is invisible. It is always an active attempt to increase corporate domination rather than simply a defensive ‘image management’ operation. (Miller, 2003) Some strategists see corporate social responsibility as a Public Relation activity that helps business firms to build brand loyalty and develop a positive relationship with key customers. In 2004, the Guardian newspaper article stated that CSR activity is often used as a PR tool and there is no coincidence that firms in areas such as oil, tobacco or mining are its biggest public leaders. Another criticism of CSR claims that this approach has an underlying financial motive so that the company benefits even more than the charity. Paul Polman, the CEO of Unilever company, launched sustainability living plan (USLP) for ten years with the aim to double the size of the company while reducing the environmental impact. The outcome is a virtuous circle where the firm’s stock value increases and its access to investment capital is eased. It is also important to note that many business enterprises, particularly with CSR approach, often save money on labour cost. For instance, H&M’s scandal in Cambodia in 2010 has raised lots of concerns about their factory employees who were paid so little that people did not have enough money for living expenses and food. Besides, the company has been also accused of hiring suppliers with bad working conditions what damaged H&M brand image and the real CSR purposes has been revealed to the public. The last but not the least disadvantage of corporate social responsibility is associated with costs for environmental and waste management programs, employees training schemes and overall investment into local societies and communities. Companies spend lots of money every year on Corporate Social Responsibility just because it is a valuable component in building trust and support from stakeholders. Consequently, it is possible to claim that CSR concept is a strategic management tool that drives the strategy change in organization’s structure in order to avoid a failure or decrease in sales volume.

Corporate social responsibility or CSR is an essential part of management that examines ethical issues in every aspect of the business. Social responsibility is widely recognised as one of the main elements of the strategy formulation process thus making strategic decisions which have economic and social consequences. Due to the internal and external environmental changes, business objectives should be reviewed over time, and they should be reconsidered in relation to the CSR strategy. Todd Ballowe (2009) defined strategic corporate social responsibility as a strategic approach when companies can determine the activities they have, the resources to allocate to being socially responsible that will strengthen their competitive advantage in the market. Indeed, effectively managed CSR programs can create major benefits in terms of reputation, returns, the motivation and loyalty of employees. Today, the growing popularity of sustainable development or environmental sustainability topic has become a very common concept for many business leaders in different industries. In fact, the combination of both the CSR and sustainable development policy is partially the same scheme which solves a number of global problems such as animal protection, pollution or poverty meanwhile earning trust, respect and loyalty of customers. Balogun and Hailey (2008) emphasize the fact that technological change is pushing many firms to adopt new technologies and change the way they both work with their suppliers and customers. The above mentioned example from LEGO shows that innovation and sustainability development helped the company to adapt to external and internal changes, and stay closely-connected with its customers. On the other hand, corporate social responsibility not always go right and a number of CSR failures has been noted. For instance, Gazprom Neft (the largest Russian extractor of natural gas) and Gap (textiles firm) have been named as the worst businesses for human rights and environment damages by annual Public Eye Awards in 2014. Having a CSR approach since 2010, Gazprom still has poor records on safety, environment and transparency. (Bertini, 2014) When mentioning corporate social responsibility, the triple bottom line framework (TBL or 3BL) is important as well. The 3BL is an accounting framework that includes three different dimensions of performance: environmental (planet), social (people) and financial (profit). A lot of businesses and non-profit societies such as FedEx, Tesco, Nike or small shops like Jessica Alba’s non-toxic baby product company, have implemented the triple bottom line sustainability framework in order to analyse their performance, and a similar approach has gained currency with governments at the federal, state and local levels. (IBR, 2011) In addition, as part of an overall CSR plan, the three Ps (planet, people, profit) provide tangible benefits in the form of employee retention and engagement.

Corporate Social Responsibility, abbreviated as CSR and known as corporate citizenship, has been widely discussed and criticized by many strategists and management gurus. CSR can bring a number of benefits to a company such as cost savings, positive reputation and trust in the minds of consumers, brand awareness and increase volume sales. Hundreds of organisations and societies are financially supported by many well-known companies such as Microsoft, Google and Unilever. CSR brings the best to the society and environment thus making a profit. It has become a strong and necessary part of business strategy and makes organisation more competitive. However, corporate citizenship always has been criticized due to its personal corruption motives or high investment cost into waste management and training schemes. Despite these criticisms, CSR popularity still remains high. Corporate social responsibility is a strategic management tool that can improve the current business strategy and move the company forward.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s