In the business and corporate world today, Corporate Social Responsibility (CSR) is a principle that is both expected and required from an ethical point of view. Organisations are required to fulfil CSR through four main elements, namely, economic, legal, ethical / moral and philanthropy.
What is Corporate Social Responsibility
Corporate Social Responsibility is a concept that is expected from all organisations and business entities that they should contribute to the wellbeing of society, community and not be purely focused on maximizing profits. This responsibility can be 'negative', meaning there is exemption from blame or liability, or it can be 'positive,' meaning there is a responsibility to act beneficently. (Arrawatia, 2011)
According to the Green Book of European Commission (Nielsen, 2001), Social Responsibility is a concept whereby the companies decide, on their own accord, on a volunteer basis, to contribute to a better society and a cleaner environment. On that basis, the company management should not be just motivated for the interests of their shareholders, but also for all other stakeholders both directly and indirectly effected, example, employees, communities , customers, vendors, governing authorities, competitors and society at large. Hence the concept of social responsibility could be understood from two different angles, namely, from an internal perspective of the employees and from an external perspective, the other stake holders which by the actions of the organisation, may affect the environment, business partners and the surroundings. (Fontaine, 2006)
Of late, Corporate Social Responsibility is becoming a marketing strategy or “green washing” amongst corporations as an aspect of misleading consumers, mainly due to the lack of product distinction and the tendency for consumers to choose a product from an organisation that provides a well-connected or better engagement with the consumers and other stakeholders. (Solvalier, 2010) The corporations that embrace Corporate Social Responsibility can obtain viable advantages compared to their competitors, such as better brand image, better encouraged employees, good profits and better support from local communities, which sums up an important element in supporting both the organisation and the product.
During current times, when governments have impaired or lower ability in their spending, the corporate sector is seen as playing an important supportive role in sectors as culture, arts, science, sport, health, among others through a wide range of activities of extending financial support, such as, donations, sponsorships, patronage and cause related marketing (SMART Company, 2005).
However, Corporate Social Responsibility practices has also been a subject to argument and criticism, considering that there is a strong business interest in this practice.
Business and Stakeholders
Business means constant engagement and contact with all stakeholders. There are various kinds of stakeholders, from vendors, to suppliers, to customers, to shareholders, to creditors and more, and each one of them needs a different and specific requirement, needs and strategy in order to make them want to work with an organisation.
Nevertheless, there are also numerous ways to try to influence them that an organisation is the better one to conduct business with (Rabinowitz, n.d.).
As we’ll will see in the future, Corporate Social Responsibility should never be ignored by company business managers, since for consumers and other stakeholders, the major binding factor attracting them to support the product of a company, is the company’s own market reputation, and its acceptance by others is that they are keeping an operational strategy that bases on sustainable development (Victoria University - Melbourne , 2013).
Caroll’s Corporate Social Responsibility Pyramid
Economics responsibilities in the context of Corporate Social Responsibilities is the right of an organisation or company to be able to conduct its business to increase the wealth of its shareholders, repay its creditors whilst producing goods and service that is of value to consumers and society in the context of sustainable development. (GONÇALVES, 2019)
Positive impact – Economic responsibilities
From a positive impact perspective, in the case of Google Inc, as the company went public listed in 2004, it considers investors as the major stakeholder in its activities. This is to ensure that the company grows its investment and becomes profitable for the shareholders. This ensures the shareholders as the main stakeholder in the company, is than able to determine and enhance the level of capital investment into the company, which eventually enables greater funding to conduct business. (MEYER, 2017)
As Google Inc focuses on Corporate Social Responsibilities, by proving useful products to consumers, which in return satisfies consumers and other stakeholders. With this usefulness of the product, it makes them popular with other stakeholders and consumers, which leads to greater profits to the company and simultaneously satisfies Google’s investors with regards to return of investment.
Google Inc implements several key actions with regards to good Corporate Social Responsibilities, which includes Data Centres which use less power. This 50% less energy used compared to other similar data centres, contributes enormously to energy savings and towards the Green Economy concept. This reduction in environmental impact inspires consumers that Google Inc is contributing to sustainable development, which creates brand loyalty amongst consumers.
Consumers continuous support for Google products translates to better investor earnings and profits and the company can remain profitable.
Negative Impact – Economic responsibilities
In July 2018, Google Inc was slapped with a penalty of USD $5 billion fine by the European Union for using its Android phone software to stifle competition (D'Onfro, 2018).
Under the European Union anti-trust law, Google Inc was found guilty of mandating phone manufactures to exclusively pre-install Android software on their phones. Under the anti-trust law, it is illegal for Google Inc to pay phone manufacturers to exclusively install this Android software and applications, which Google did between year 2011 and 2014.
Impact to Google Inc shareholders is the financial impact of such a hefty fine and the potential risk of eroding its brand image. This is further coupled with expected opportunity loss to its advertising model, as Google makes most of its profit selling targeted advertisements (McGrath, 2018).
Legal responsibilities in Corporate Social Responsibilities is generally defined by laws that are enacted by governments of a sovereign state. These laws are in statutory sense and can be by international or national laws. Also included are both soft law and hard law, public regulations and corporate self-regulations (Buhmann, 2004)
Legal fulfilment is straight forward and simple for all companies as the laws and regulations are stipulated and available for compliance. Any company or organisation must comply in accordance to the regulatory requirements, failing which the company will be deemed as having flouted the law and it will constitute a criminal action. This will hurt the core of its business and subsequently affect profit (Dreveborn, 2010).
Positive Impact – Legal Responsibilities
From a positive impact perspective, Levi Strauss & Co, an apparel manufacturer has demonstrated compliance to Occupational Health & Safety Act requirements by implementing various standards and guidelines. This is published through the company’s Sustainability Guidebook – Safety Guidelines and is implemented across all its subsidiaries worldwide (Levi Strauss & Co, 2017).
This Safety Guidebook spells out the company’s Environment, Health & Safety policies and requirements.
The Safety Policy has been transmitted and made available to all employees including their business partners and vendors. This Safety Guidelines includes the setup of Safety Committees for Hazard Assessment, Risk Assessment and Hazard Control. Included in detail is Emergency Preparedness covering Aisles & Exits for quick and safe evacuation from their factories in case on an emergency. As part of the local regulations in their factory located in India, they are mandated to provide exit signages in English, but as part of the company’s good practise, Levi Strauss & Co have decided to include dual language exit signs, that is the mandatory English sign and additionally an exit sign in the Local Language. This practice, of incorporating local language signages, being higher than the legislative requirements, indicates the company’s commitment towards employee safety and benefits.
Translating this good Corporate Social Responsibilities for employees will result in a more engaged work force and better employee retention. The company will also be considered an employer of choice when recruiting new personnel (Cheeseman, 2016).
Negative Impact – Legal Responsibilities
In year 2015, it was revealed that Volkswagen was caught selling their vehicles with the engines emitting nitrogen oxide 40 times above the legal limit (Dans, 2015).
This is a failure of Volkswagen from legal responsibilities by masking the fact that their diesel engines which had undergone extensive testing, using software to mask the engine impairments, was in fact emitting toxins, above the allowable limit and poisoning the environment.
The company’s aim was to merely market its product, with lower production cost as the engines were built with less than stringent legal requirements. This gave the company an unfair advantage over their competitors who were diligently spending more to comply to the legal requirements of emission control.
Volkswagen had failed in keeping their sustainability promises by neglecting their legal responsibilities (ERM Group Company, 2018). Their action has caused excessive environmental pollution and clearly indicates a lack of self-regulating function with the management and developers of the engines.
Ethical responsibilities under the umbrella of Corporate Social Responsibilities is expected by companies, whereby they will need to follow the generally held beliefs about behaviours in the surrounding community or society. This is setting a higher bar for making contributions in a positive manner for society (Sarokin, 2019).
Ethical responsibilities are about focusing on the cultural, political and diversity of the surrounding communities, engaging in fair price products, fair wages to employees and anti-bribery policies. This responsibility is generally about being conscious of the influence to society and other stake holders.
Positive impact – Ethical Responsibilities
LEGO Group company has a group policy transmitted and practiced through Expected Ethical, Social and Environment Conduct Letter. This includes Anti-Bribery & Corruption, Anti-Trust Compliance and Anti-Money Laundering policies. Their policies are further expanded by the published Code of Ethical Business Conduct (LEGO Group, 2017).
All employees are required to undergo e-learning training courses on business conduct and anti-corruption every alternate year. By mandating this training to all employees, LEGO Group ensures that their employees understand and practise good ethical business conduct to ensure that their work habits and engagement with suppliers and vendors does not infringe bribery or gives the company an unfair advantage over its competitors. The requirement of having to attend re-training every 2 years, further emphasises the commitment of management that all employees should be continuously trained on ethics & compliance so as to remain current with their business practices.
Negative impact – Ethical Responsibilities
Nestle was recently earmarked as the top five unethical companies as voted by Ethical Consumers readers (Hunt, 2018).
Nestle has been irresponsibly marketing baby’s milk powder in developing countries as being equal to mother’s milk. This was specifically focused on the poor and under educated mothers in these developing counties.
Mothers in these countries were encouraged to feed their babies with instant milk powder formulas and in order to mix this milk, the less educated mothers were using water that was polluted to mix the milk formulas. Given the level of poverty amongst these citizens, they did not have the means nor the facility to boil the water first before mixing the formulas. Nestle, even though they were fully aware of this situation, continued to aggressively promote instant milk powder to these rural poor all in the pursuit of filling their coffers.
This is an obvious case of mis-representation of facts with regards to the lesser benefits of instant milk formulas versus the natural nutrients of mother’s milk. Nestle’s action is paramount of an example of an organisation compromising their ethical values and responsibilities to merely fulfil shareholders profits.
In Corporate Social Responsibilities, philanthropy is considered an important element for companies conducting business. Philanthropy is not just giving out donations to charity, rather its about investing to bring about social change for the long-term benefit of society. Philanthropic investment may not necessarily be in the form of financial aid, but rather, it can be in term of time and knowledge shared to improve the long-term wellbeing of the community (Baines, 2016).
Positive impact – Philanthropy responsibilities
General Electric company in year 2016 had contributed USD $88 million to various community projects and educational programs through their company’s foundation called GE Foundation (Vilas, 2017).
Through this GE Foundation, they developed an initiative for education and skills, called, Developing Futures and Developing Skills. This initiative is focused at 14 to 24-year-old students in the aim of developing them to become globally productive citizens by providing them exposure and learning experiences that are required to equip them with skillsets to become the work force of tomorrow.
This learning experience for the students enables them to acquire various levels of knowledge and skills by implementing a competency-based learning methodology. This skill acquisition will enable these students, in the future, to be employed both domestically and globally in niche markets requiring specific skills.
By this implemented program for young students, General Electric is directly contributing to the long-term benefit of society by training students for future job market needs and General Electric may themselves benefit by some of them being employed in the company.
Negative impact – Philanthropy responsibilities
Unilever has been accused with “green washing” and hood winking society at large by claiming to provide sustainable development for poor and needy countries but on the other hand they have exploited the labour force in these very countries. It has been accused by Indian, South African and Kenyan governmental officials and non-governmental advocates for abusing human rights, labour rights and environmental protection. These officials have claimed that Unilever has only given lip service with regards to sustainable growth in these under-developed countries as they have ignored a large number of complaints from workers, including sexual harassment of Unilever tea workers in Kenya (Barber, 2017).
Unilever has so called, invoked a campaign on philanthropy responsibilities by claiming to be committed to helping poorer nation and less developed counties but in fact have failed to live up to their promises by blatantly abusing the rights of workers in these nations all in the name of increasing their profits for the benefit of the investors.