Corporate Social Responsibility and Transnational Companies
In this essay, I have discussed how essential Corporate Social Responsibility (CSR) is for the success of Transnational Corporations. UN Global Compact is also being discussed. I have also included case studies to support of Nike, Primark and Microsoft. Moreover, I have included positives and negatives about CSR and the factors that exist in CSR which may lead to the success of transnational corporations. Finally, I have included the role of stakeholders in CSR.
Corporate Social Responsibility (CSR) has no universally-acknowledged definition. However, on a general note, it is referred as "transparent business practices that are based on ethical values, compliance with legal requirements, and respect for people, communities, and the environment" (Baird, Kramer & Wofford 2002). Accordingly, companies are not only liable to make profits but are also expected to make a positive influence on the human race and our planet. As far as the term "People" is concerned here, it includes "the company's stakeholders: its employees, customers, business partners, investors, suppliers and vendors, the government, and the community" (Baird, Kramer & Wofford 2002). In today's contemporary world, the company's stakeholders look forward more and more that companies should be friendlier towards environment and responsible towards society while carrying out their business activities. In the world of business, corporate social responsibility is, on the other hand, presented as "corporate citizenship" implying that it is essential for a company to act as a "good neighbor" for the respective community (Baird, Kramer & Wofford 2002).
In this dynamically changing business world, companies need to be socially responsible in order to compete with other companies and to enhance the productivity. Rapidly changing technology made it possible for the companies to cross the borders and extend their products or services worldwide. Reputation and perception is very important aspect for the companies along with the increase in the ability to generate and manage profits. Globalization has made it difficult for the companies to gain consumer loyalty. Along with that the companies are working hard on making a relationship with the employees and with the market place they deal in. Sustainability is nowadays totally related to how a company relates itself with these factors (Baird, Kramer & Wofford 2002).
Transnational corporations and multinational companies are the same terms used for the companies or firms that have gained success over a period of time and serve internationally. Their vision, goals and strategies are also made for international market.
The prevailing technologies in some sectors especially transport and communication is one of the reasons. Majority of these now multinationals were rather small-medium sized enterprises. Internet is one of the most particular technological innovations that removed various issues and constraints. With the advent and advancement of the internet, multinationality is not a point to miss. National borders are now considered as the international markets and as opportunity. Import and export of raw materials to finished products is no more a complex phenomenon. Resource controlling, employing people and managing the coordination is no more a limited scale (Aggarwal, Berrill, Hutson & Kearney 2010).
The Corporate social responsibility in the past was defined or perceived as the compliance with the environment, philanthropy and to develop and maintain good relationships with all the stakeholders involved. Companies have announced incentives for the people involved with the process to contribute more towards the environment and to further modify the process in such a way that can benefit society and environment on the whole. For the prevention of social and environmental issues, companies are focusing on ways that can benefit the company and those issues at a time. Educational trainings, sponsoring educational and training programs and funding of programs that are associated with the communities are now the focus. There are companies who are initiating the programs with local governments.
Corporate Social Responsibility and United Nations' Global Compact
The United Nations designed The Global Compact for encouraging multinational companies to become socially answerable to the peoples all around the world and required them to commit to 10 principles as active members. As far as human rights are concerned in the Global Compact, companies are required to maintain and revere the security of human rights that are acknowledged on an international level. Secondly, it was expected of the companies to ensure that involved in abuse of human rights. Thirdly, businesses must make sure that they maintain and advocate the self-determination of association and the efficient appreciation of "the right to collective bargaining" (Bitanga & Bridwell 2010).
They were also expected to get rid of every kind of unnatural and enforced labor and to abolish child labor. Moreover, the companies were required employ people without any kind of discrimination and biasness. The Global Compact of United Nations also required the companies to take a preventive approach to face environmental and ecological challenges. It also required them to embark on project for the promotion of environment responsibility to a large extent. They were also obligated to prop up the enlargement and improvement of technologies that are friendly for environment (Bitanga & Bridwell 2010).
CSR: Positives and Negatives
CSR is one of the ways to attain and maintain a balance between environmental, social and economic responsibilities for a corporation in its operations. Most of the times it is to meet the expectations of the shareholders and stakeholders. Corporate social responsibility is also called E-bottom (environmental -- ethical- economic) and corporate accountability. Tough competition, internationalization, and social media made the corporate social responsibility a generic concern for every organization. It is an integral part, starting from the vision and ending on the profits, of every organization working internationally. The importance of corporate social responsibility enhanced because of the choice of society for the distribution of services and commodities (Sexty 2011).
The business enterprise needs to fulfill its social responsibility by getting the maximum profit. The society allows the enterprises to use the resources from the society provided that there should be some check and balance and some process of compliance. Offensive practices must be checked and as long as an organization is within ethical values and social practices, it is doing welfare for the society. Only a healthy and growing economic system can benefit the society and can provide chances of employment and a better living standard for all (Sexty 2011).
Thus, Corporate Social Responsibility can not only help in the enhancement of the competitive advantage of a company but a number of its types such as recycling (sustainable development) can be used for costs reduction. Moreover, it is a good practice for boosting the morale of the human resources of a company acting as a motivational factor. It also acts as a facilitator for the development of efficient and successful management and related characteristics. To cut a long story short, multinational companies who practice CSR religiously are far more efficient and thriving than those who don't.
Environmental, social and economical issues need to be addressed under the head of corporate social responsibility. The corporate social responsibility advocates are not very supportive with the idea that a corporation should maximize profits to play their role for the betterment of the society. Another negative aspect of corporate social responsibility is that when the transnational corporations take the responsibility of corporate social responsibility then the governments are least interested or relieved to play their part for the society. We can say that corporate social responsibility is pretty un-democratic (Sexty 2011).
To cut a long story short, Corporate Social Responsibility has the main issue of taking the world into a direction that is not right. This is because a majority of multinational companies have used Corporate Social Responsibility as a major approach so that the attention of the world can be diverted away from the depressing and harmful impacts of their activities on the society and environment. Thus, they are making use of CSR continuously in a smart way so that their operations cannot be stopped and the respective government authorities cannot compel them to modify their business practices (Worth 2008).
Evidence of Corporations around the World that have Benefited from CSR
Nike created the M-audit system keeping in view the corporate social responsibility, and with the implementation of that system the working conditions and the views of the labor can be audited. Their auditors audited the M-audit and graded each site from A-D categories which was based on performance. These audits showed that there were issues like underage labor, worst working conditions and even a low wage rate. In this way, Nike faced all the criticism and eventually created such a corporate social responsibility that made it boom and progress more and more (Rison).
Primark provides equal opportunities to the employees and the selection base is totally merit. Merit based assessment can be beneficial for both the corporation and for the employees as well. They tend to treat the suppliers fairly. They widely support the local communities and environmental responsibilities are taken seriously. They have initiated the ethical trading system to promote the merit based…