The Concept of Corporate Social Responsibility

The Concept of Corporate Social Responsibility (CSR)

The paper objected to discuss the concept of corporate social responsibility (CSR) and presents an empirical case study on how an organization has encountered it in its operations. To do so, the paper gave a historical overview of the concept, its evolution where the three different waves were examined in details.

Main Areas of Corporate Social Responsibility

Moreover, main Areas of Corporate Social Responsibility such as employees, stockholders, the community, and environment were extensively reviewed. Additionally, the main drivers of the corporate social responsibility such as profit motive, public image, a financial improvement among other factors were discussed. Arguments For and against it were analyzed. The main arguments by two prominent scholars including Friedman and Potter were reviewed.

A Case on Volkswagen Emission Scandal

Lastly, the paper presented a case on Volkswagen emission scandal. From the information researched in this paper, it was concluded that CSR is an indispensable aspect of any business and greatly contributes to the final success of the firm in the market. Evaluable, it is recommendable that businesses embrace it for suitable development and breakthrough in current dynamic and competitive globe.

Corporate Social Responsibility

Social Responsibility is a decisive topic and an area of concern that has pervaded the global business in the recent past. Recent studies have exposed that managers in different companies are have increasingly encountered different factors which they have to consider in their day to day management of a corporate (Wang et al, 2016, p 534). Many companies encounter diverse variables both within the outside and internal environment that directly affects its performance. Consequently, the external and external factors have a direct bearing on the achievement of the company’s goals and objectives and the entries strategy formulation, and such factors are wholly influenced by the corporate social responsibility of the concerned organization (Chuang, 2014, p 117).

Consequently, corporate social responsibility can be used by a corporation to position its products and services to potential clients. Moreover, companies must ensure their activities are friendly to the environment as well as the community and should, therefore, contribute to solving the problems facing the society in which it operates (Lindgreen and Swaen, 2010, p 2). The triumph of any company is solemnly dictated by the scope to which CSR and internal factors are aligned with external elements to help the firm in identifying success factors while neutralizing obstacles through strategic planning.

To achieve the above goals and growth prospects, corporate social responsibility becomes imperative to business operations and therefore indispensable. Fundamentally, corporate social responsibility (CSR) can be described one of the contemporary concepts that refer to the duty that the company has to the community as well as environment that it operates from. It can be through economic development or other social aspects which directly contribute to the growth of the society. Just like many other firms in different sectors, no entity either profit-making or non-profit making is an exception in contributing to the society. It has a duty to ensure its activities align with the social development of the environment in which it operates (Valenti et al., 2014, p 43). The relationship and reputation of companies with clients are based on its attractiveness in solving social problems affecting people. Different organizations have different categories of people that it has to serve their interest adequately.

1.1 History of CSR

Adeptly, corporate responsibility is not a rigid concept but rather a dynamic idea which keeps evolving day by day based on the environmental, social and political factors governing the business operation and the ever-changing need to hold companies or organizations accountable and responsible for their day to day operations. Precisely, CSR history can be coined back to over 5000 years commonly in Ancient Egypt’s Mesopotamia about 1700 BC. Notably, this was the time when King Hammurabi was entirely dissuaded by traders, advisers and other groups of people whose intelligence or advice led to deaths of innocent lives (Chuang, 2014, p 117). As a result, the king through his advisers developed and came up with a code of practice which required all builders, farmers and even innkeepers to be put to death if in one of the instance or the other, their misguided intelligence could cause death of others or significant inconvenience of many local citizens in the community or by then in the kingdom (Wang et al., 2016, p 534)  

Similarly, it was almost during the same time where senators in the magnificent Ancient Rome were infuriated with the failure of business to adequately and positively contribute to the growth of the company by downplaying their responsibility to pay sufficient taxes that would be used to finance the kingdom and the military. Furthermore, in1622 majority of the dissatisfied shareholders within the Dutch East India had begun issuing several leaflets that were grieving the aspect of secrecy as well "self-enrichment" by the management (Wang et al, 2016, p 534).

As industrialization became aggressive, the overall influence of trade on the community as well as the environment assumed a completely new dimension and therefore setting in a shift in a paradigm on how trade should impart the society. For instance, during this time, the famous "corporate paternalists" ion the later 19th and early 20th centuries had begun using some of their wealth to fund philanthropic ventures (Schwartz, 2017).  Arguably, it was until the 1920s when the discussions concerning the social responsibility of different organisations begun to obtain some clear grounds and was receiving a warm reception across the world. As a result, this became the birth of the “modern” CSR movement. Subsequently, corporate social responsibility was for the first time coined in 1953 which was accompanied by the “Bowen's Social Responsibility of Businessmen" (Tai and Chuang, 2014, p 117).

Historical annuals depict that the history of CSR is as also as the ancient trade that begun in Mesopotamia. Additionally, it has been noted by different scholars that CSR has been fully revitalized by the widespread industrialization and impact or influence that trade has continued to have on the community as a whole. Between the 1980s and 1990s, it was put on record that shell was the first company to recognize CSR formally (Ismail, 2009, p 13).

1.2 Evolution of CSR

Throughout the past two decades and before, CSR has grown out to be an indispensable aspect of every business. Accordingly, it has become imperative to all that aided by specialization and consolidation of trade activities; there are there main conspicuous evolution waves or phases that CSR has gone through to date which although different, they coincide each other.

The preamble wave took place in the early 1990s and was known as the compliance wave.  The wave was primarily characterized by different compliance regulations and standards which were being promoted by the international agencies. The cardinal ambition of was to make every effort to persuade consumers that the supply of different product was of required quality and very clean (Ismail, 2009, p 13). It was during this wave that the international organizations begun developing certification to guarantee quality as well as establishing third part versifications for factory claims regarding labor standard and regulations, social needs as well as environmental concerns. As a consequence, several corporate social responsibility measures and standards evolved throughout the compliance wave.

The second wave of evolution took place the mid-1990s and termed to be triple bottom line.  Considerably, all attention and efforts were directed to how organizations were running their operations in regard to the environment in addition to its social and financial impact on the society (Tai and Chuang, 2014, p 117). The objective of the second wave was to influence organizations to develop and publish some important articles that would assure business people that indeed the triple bottom line was mostly a productive investment which would give payback vial enhanced marketing of the firm image and minimizing ion costs.

Considerably, the second wave greatly influenced organizations by ensuring that they become more conscious about building and sustaining positive image by encouraging different organizations to embrace pro-environment activities which positively impacted the society by improving its status Wang et al., 2016, p 534). As a result, it was during this wave of CSR evolution that the concept of triple bottom line fruitfully entrenched the aspect of cooperate social responsibility as the primary driver of any firm as well as defining different means through which its impact on the society as well as the environment could be gauged (Ismail, 2009, p 13). It is recorded that the second wave entirely overlapped the first wave of CSR evolution for a minimum of five years.

Lastly, the third wave was known as the responsible competitiveness wave which took place in the mid-2000s. It was upon the realization that by participating in CSR, firms were not going to lose profits; and that the practice could significantly build the status as well as image of the company in the society that many companies openly integrated CSR in their management from early 2000 (Swaen, 2010, p 5). Simply, during this time, all businesses that were embracing positive behavior in their operations were instantly rewarded by the market. Similarly, those firms which downplayed the CSR aspect in their management were retributed due to their lack of concern for the society or the environment. For instance, a study conducted in Pakistan indicated that the financial performance of the organizations increased directly with the improvement in social performance (Ismail, 2009, p 13).

1.3 Main Areas of Corporate Social Responsibility

The main parts of CSR include employees, clients, government, environment, society among many other groups that will be discussed in this section.

Clients/consumers: Customers become the first set of people who have a direct interest in a Company. Additionally, consumers want the businesses to come up with new products which are less costly, convenience to them, low risk and able to address the desired purposes. Poor services rendered to this group are likely to cost the firm considerably concerning premiums paid as it severely impairs firm’s performance Consumers expect organizations to at all-time provide adaptive solutions which are highly efficient in reducing the risks they are exposed to (Swaen, 2010, p 5). In response to client’s demands, different entities have developed various schemes which are meant to adequately address the diverse risks its consumers are faced with.

Employees: Workers form another important part of a corporate social responsibility. The company has to ensure that employees are well taken care of and developed. Workers form another important part of a company’s CSR. For instance, staffs are highly recognized by the management for exemplary performance. Fringes benefits and other subsidized health care costs become the primary focus of any company to its employees (Chuang, 2014, p 117). Moreover, companies are recommended to have a well and reputable employee’s recruitment and selection process which ensures that workers are hired from different backgrounds (Ismail, 2009, p 13). Diversity at the corporation is highly valued as it reduces discrimination, preference and other employment malpractices which are unethical. Fundamentally, firms are also encouraged to develop and implement an anti-discrimination policy.

Shareholders: The investors become another category of the group through which a firm has to demonstrate its CSR. Shareholders are the owners who have contributed their money to invest in a trade opportunity. As a result; they anticipate returns on their investment. A company should ensure that shareholders value is maximized throughout and yield a high return on their investment by creating more value (Valenti et al., 2014, p 44). Appealingly, to be successful, companies must adopt information technology software which ensures that the company provides accurate financial information to its shareholders; thus enhancing their confidence.

Community: To enhance its CSR to the society, business has developed robust ways through which it gives back to the society out of its surplus profits. First, the company has programs that ensure that its knowledge and expertise are shared with the entire community and thus exchanging ideas for the benefit of the society. Secondly, many of the employees should be hired within the community and thus provide job opportunities for many of the people who were initially unemployed (Swaen, 2010, p 5). Third, different activities such as philanthropic activities which include donations to the community for those people who are affected with natural disasters like the hurricane should be actively embraced as a sign of concern to the community for doing trade with it. The firm should at all times, when necessary, donates both material and financial products which can promote lives in the society for the destitute ones.  Moreover, companies should embrace sponsorship activities by undertaking different events within the community. For instance, AIA Insurance Group has also prompted sports as it an official sponsor of Tottenham Hotspur. Additionally, it offers more than 4000 different activities such as games and music which encourages the community to live health lives (Valenti et al., 2014, p 44).

Environment: businesses should be concerned with the status of the environment by encouraging its clients on the need to invest in the green economy. Additionally, at workplaces employees are inspired to undertake practices which are meant to promote the sustainability of the environment Due to its commitments in development enhancement of the indoor environment in Thailand and Hong Kong, it has received different awards such as “Best Green Development Award.” Companies are to ensure that all its activities endeavor to protect and sustain the environment both presently in future by embracing internationally recognized means and method which are aimed at reducing environmental degradation (Valenti et al., 2014, p 44).

2.0 Drivers of CSR

Conferring to Lindgreen and Swaen (2010, p 5) there at least five primary motives for CSR which include the desire for proper awareness of corporate ethical, social, environmental needs, stakeholders pressure, peer pressure influence and the increased sense of CSR. Similarly, Ismail (2009, p 13) stated that there are different motives as to why organizations are adopting CSR practices.  For instance, companies are embracing CSR to meet the legal requirements of the environment in which they are operating. Through the same study, it was suggested that firms are adopting CSR to minimize on illegal practices which can reduce profits and dent of the corporate image as well as fostering policies which can enhance their operations both within and with the external environment. Likewise, according to Tai and Chuang (2014, p 117), the aspect of CSR is being inspired by three main factor or principles. First, organizations are obliged to utilize their discretion responsibly because they are above all social institutions. Secondly, the outcome of trade operations with the public is determined by the extent to which the business is responsible. Lastly, it is inspired by the fact that managers have the discretion of making decisions which are to be in line with social requirements and support both the environment and the community.  In their study, Wang et al (2016, p 534) established that the core driving force for CSR is essentially the consumers and the employee. In support of this, the study noted that the two groups of individuals are instrumental as have the same ability to sway the market in either direction.

3.0 Argument For and Against Corporate Social Responsibility

Potters’ View of CSR

The need and necessity for CSR have become handy for all organizations which are aspiring to attract public trust and loyalty. However, throughout its evolution and revolution, corporate values have attracted a strong discussion between the supporter and those who are against the social concept. This section will provide a theoretical appraisal of corporate responsibility argument from different theory perspective with the main focus on Friedman's recommendations. After appraising the various views advocated by different theories, the paper will then provide a summary of the argument for and against it empirically from studies conducted internationally.

According to potter, CSR has got a significant role to play in an organization especially in regard to financial matters. According to the pottery theory, it is wrong for the business to disregard different laws which are meant to protect the environment in which they operate in as being burdensome or may be a kind of threat to the company and thus resisting them.  In constant, companies are encouraged to be responsible and consider various regulation protecting environments as being important as such rules are meant to be capitalized on to build a strong reputation. Despite the fact that there a number of costs to be incurred in ensuring that environment are protected, potters standpoint is that the resulting benefits outweighs the costs incurred and thus the need to encourage responsible actions by companies. The benefits highlights are on a marginal scale which includes financial improvement, product quality enhancement and even public image. Subsequently, according to potters view, companies can satisfactorily engage in CSR practices without having necessary to interfere with its financial position. Such argument has been adopted by companies like Hewlett to invest in environmental protection.

According to a study conducted by Tai and Chuang (2014, p 117), would the organizations embrace the minimum threshold for social guidelines, then automatically, the potential benefits would be the increased value for its performance and overall image in the market.

Similarly, a study conducted by Ismail (2009, p 13) did indicate that companies which included  CSR practices within their business operations reportedly realized a significant improvement of consumer purchases as well as enhancing the involvement appeal for potential investors who are ready to associate with socially responsible firms. A survey conducted recently indicated that over 91% of consumers who were surveyed indicated that they had positive image of those companies which were upholding social values.

Moreover, it is believed that corporate values have the capacity of protecting the interests of the stakeholders. For instance, the company has to show maximum concern for employees, investors, the community, environment, government supplier among many other stakeholders who have a direct relationship with the firm. The protection of these groups interest has the capacity of enhancing the viability and reputation of business in the market as they have the ability to sway it either way.

Furthermore, it has been argued that CSR can help a company to avoid legal suits by the government and other watchdogs which can result from the illegal operations. Consequentially, such unlawful practices can cost the company in terms of fines imposed or even dent its public image. Customers and consumer loyalty can also be enhanced through responsible actions. When firms engaged in different activities in the society like cleaning of the town, sewage control, environment pollution regulation, tree planting and sponsoring community needs, many are likely to be attracted by such and which to be associated with the firms’ brand and thus becoming more loyal as well as convincing their close friends to trade with it.

Despite the fact that CSR has been a strong supporter, there exist different arguments against it which are discussed below.

In Friedman's views, firms should endeavor to earn as much as they can by complying with the governing rules and laws. Among the basic rules that companies have to the society includes the basic payment of taxes (Friedman, 2007). According to the school of thought, consumers are presumed to be sovereign and thus having the ability to induce corporate decisions in regard to tier interests and the community as a whole. However, Friedman argues that CSR activities can harm company financial position, a move which has faced contemporary challenge about its role in protecting the community interests (Friedman, 2007).

Skeptics have frequently claimed that the core reason why businesses are formed is to make profits. As a result, the attention should be directed towards wealth maximization and ignore acting socially responsible. Subsequently, such practices should be left to nonprofit making organizations and the government which has the capacity of promoting social growth.

Engagement in social activities like cleaning the environment, sponsoring sports and philanthropy action directly reduces company profits and thus treating their future existence. Thirdly, organizations have a moral responsibility of producing goods and other services which is the basic reason to justly their common existence. As a result, it’s not economically variable for organizations to participate in CSR activities.

4 .0 Case study: Volkswagen emission scandal

In the year 2015, the Environmental Protection Agency (EPA) executed a court warrant search order in Volkswagen’s headquarters in Canada. The move was fallout after an international outrage concerning the Volkswagen diesel cars; which were polluting the environment unnoticed by the environment agencies.  A deeper delve into the scenario revealed that Volkswagen was selling diesel cars in Canada which were dabbed to be environmentally friendly. Consequently, the company had assured the public that the vehicles were fitted with software that could reduce carbon gas emission and thus protect the environment.

Consequently, it was astounding to finding out that the vehicles were fitted with "defeat device" which could alter the performance of the vehicles the moment they were being tested and produce “true” result that the vehicles had conformed to all regulatory guidelines. However, such actions were merely meant to deceive the public as well as bypassing the regulatory requirements for their benefits. Subsequently, an investigation was set up and Volkswagen, led by the CEO pleaded guilty of misleading the public. The CEO consented that over 11 million cars were fitted with the defeat testing system. Accordingly, the firm was fined up to a tune of US$2.8-billion (Crête, 2016, p 25). As a result, the firm was forced to stop any future sale of the diesel cars.

The truth concerning the debate that was ongoing everywhere was revealed by an NGO body which conducted an independent test for the diesel cars in relation to emission test and shocking found out that the vehicles were not as described by the company. The US-based environmental watchdog E PA established that more than 500 000 cars which were wholesaled in the US were released up to 40 times toxic which was regarded to be higher than normal a car; which was much higher than required standards (Sianoet al., 2017, p 27). Nevertheless, within the same time frame, US-based scholars and Germany environmentalist were conducting a research about the environmental friendliness of the cars sold by Volkswagen. Astonishingly, the result revealed that many of the cars did not pass the standard emotions test; however, Volkswagen declined any wrongdoing. Consequently, this was followed a b a massive recall of more than 500 000 cars sold to the US citing software failure for gas emissions (Crête, 2016, p 26).

Among the parties who are directly linked with the company include shareholders who expect their wealth to be maximized, secondly, employees also have a goal of securing employment and being remunerated for their efforts, the environmental agents are also concerns as their goal is to control the environment. Lastly, we have consumers who have the main goal of obtaining maximum value for their cars purchased from Volkswagen (Sianoet al., 2017, p 27).

The Utilitarianism theoretical framework is based on the assertion that actions taken by an individual or anybody should result in something which can be considered to be resulting in greater satisfaction or good. Consequently, institutions, individuals, and organizations are encouraged to only choose those activities or activities which maximize pleasure for the majority of the people (Secchi, 2007, p 347).

When Utilitarianism is applied to the Volkswagen scenario, as elucidated in the preamble of this paper, it entails a lot of parties who are directly concerned. Subsequently, the parties are the employees including the CEO, customers, an environmental agency such as EPA as well as the indirect parties: individual residing in different areas where Volkswagen sold their diesel cars.

In reference to utilitarianism Volkswagen activities were fully impermissible, based on the fact that the company failed to maximize the required “great good” for all; particularly when the scandal was proven true everyone was left discouraged and saddened by the Volkswagen actions. Primarily, Volkswagen was responsible for their deeds. Since the company was in full knowledge of what was happening and knew that what they were doing was wrong. The firm had developed craft software which was designed to cheat the available detective systems (Secchi, 2007, p 348). Although such actions could have crested utility and value to the company, and of course there was upward shift in sales during the period, the entire system failed in its entirety to safeguard the happiness and creation of great good for all.

As a result, in reference to Utilitarianism theory, the punishment would be regarded as being morally obligatory for Volkswagen, since the theory states that that reprimand is only permissible when the outcome would lead to maximum utility and contribute towards happiness. To recapitulate, Volkswagen failed to maximize great good for all as the environment was polluted and thus affecting the entire population which could lead to greenhouse warming and related diseases which can cost a lot of money thus causing sorrow to the majority (Sianoet al., 2017, p 27).

Suggestively, there exist conflicting goals between the company values and the need to sale more defective cars.  Essentially, the company has core objectives and principles which govern their operations among them being the ability to create environmental friendly cars through slogans like “Think blue”. Consequentially, it is expected that the company should abide by their principles and code of ethics by providing valuable and quality cars to consumers while protecting the environment.

References

Crête, R., 2016. The Volkswagen Scandal from the Viewpoint of Corporate Governance. European Journal of Risk Regulation, 7(1), pp.25-31.

Friedman, M., 2007. The social responsibility of business is to increase its profits. In Corporate ethics and corporate governance (pp. 173-178). Springer, Berlin, Heidelberg.

Lindgreen, A. and Swaen, V., 2010. Corporate social responsibility. International Journal of Management Reviews, 12(1), pp.1-7.

Ismail, M., 2009. Corporate Social Responsibility and its role in community development: An international perspective. Journal of International Social Research, 2(9), pp 13-24.

Secchi, D., 2007. Utilitarian, managerial and relational theories of corporate social responsibility. International Journal of Management Reviews, 9(4), pp.347-373.

Schwartz, M. S. (2017). Corporate social responsibility. Routledge.

Siano, A., Vollero, A., Conte, F. and Amabile, S., 2017. “More than words”: Expanding the taxonomy of greenwashing after the Volkswagen scandal. Journal of Business Research, 71, pp.27-37.

Tai, F.M. and Chuang, S.H., 2014. Corporate social responsibility. Ibusiness, 6(03), p.117.

Valenti, A., Carden, L.L. and Boyd, R.O., 2014. Corporate social responsibility and businesses: Examining the criteria for effective corporate implementation utilizing case studies. International Journal of Business and Social Science, 5(3), Pp 43-65.

Wang, H., Tong, L., Takeuchi, R. and George, G., 2016. Corporate social responsibility: An overview and new research directions thematic issue on corporate social responsibility. Academy of Management Journal, 59(2), pp.534-544.