Corporate social responsibility (CSR) is no longer a tenable option to just be silent. Companies have to take responsibilities of their actions as a result of the impacts their businesses causes to the community and their stakeholders. For example during the recent oil spill of the British Petroleum Company (BP), at the coast of United States, the U.S. government did not remain silent on the issue but urged BP to take responsibility of the spill which endangered the health and safety of humans, plant and animal life.
In addition, businesses cannot exist without the community and in the same way, community cannot exist without business. This is in the view that, if there is no community, where would the business sell its products? And where would that business get labor from, to produce those goods and services consumed by that society or the community?
It's in the light of answering these questions that CSR has become a major topic in businesses today than it was 20 years ago. In advancing such an argument, businesses have had a greater awakening that it's not only producing goods and services that matters, but they have a responsibility to give back to the community.
Background of corporate social responsibility:
Since the year 1960s, the concept, nature and scope of corporate social responsibility has changed over time. In the 18th century, Adam Smith, a philosopher and economist developed a classical view that the needs of a society can best be fulfilled through the interaction of individuals and organizations in the market place. He argued that, individuals would produce and deliver goods and services that would earn them a profit and also meet the need of others.
The industrial revolution of the 19th century brought radical technological changes in Europe and United States which acted as a catalyst for the emergence of new industries. The new technology allowed efficient production of goods and services, organization reaped a lot of profits creating a class of wealthy and rich individuals. Completion heightened and organizations became concerned with idea of milking away profits leading to what came to be known as "Social Darwinism." That is survival for the fittest.
The social Darwinism philosophy neglected employees' welfare and the community at large. This is because the philosophy justified cutthroat competitive strategies where other stakeholder such as employees and the society were only used as a means to create wealth for business owners.
Criticisms arose in the 20th century against these large corporations for practicing socially unacceptable behaviors. As a result, laws and regulations were put in place to protect employees, consumers and the society. Example of the said law is the Sherman Antitrust Act.
Between 1900 and 1960s, business all over the world began to accept additional responsibilities other than just being driven by huge profits and obeying the law. Thus, businesses agreed to be good to do good business.
However, between 1960s and 1970s, there was a major turnaround that saw emergence of civil rights movement, consumerism, and environmentalism which influenced societal expectations towards businesses in respect to solving societal problems whether they were caused by the business or not. It's in this view that corporate social responsibility (CSR) still exists in much of the business world today.
CSR trends and developments:
The scholars of CSR agree on a mutual consensus that the concept emerged in 1930s and 1940s and became formalized in 1953.
In 1950s, CSR was referred as social responsibility (SR). According to Carroll, (1999) the work of Howard R. Bowen, (1953) marked the beginning of corporate social responsibility. Bowen argued that the actions of large corporations affected the community at large and businesses ere responsible for their actions covered in their comprehensive income statements.
In 1960s, CSR formalization continued to gain momentum and the only justification to show that firms were socially responsible is to use their economic gain, by paying back to the society.
In the 1970s, business people became occupied with corporate philanthropy and community relations. In 1971, the Committee for Economic Development (CED) comprising of business people observed that business functions by public consent and its basic purpose is to serve the society. This reflected a changing social contract between the business and the society.
In 1979, social responsibility disclosures found their way in the annual reports of the organizations, covering environment, equal opportunity and community involvement.
In 1980s, more studies and intensive research on kept going on and as a result other business themes such as corporate social responsiveness (CSP), public policy, and business ethics became notable in the arena of business.
In 1990s, the themes developed in the 1980s including stakeholders' theory and business ethics theory took the center stage and in this year there was tremendous improvement in corporate social performance. As the millennium approached, there were renewed efforts to increasingly measure corporate social responsibility development.
In 2000, the United Nations (UN) Global Compact, the largest CSR scheme with 8,000 signatories across 135 countries, sought to persuade large corporations to adopt business practices which are universally accepted principles in regard to human rights, labor practices, environment and corruption.
A study conducted in 2007 by the British non-profit accountability and Brazilian Business School using the Responsible Competiveness Index (RCI) to measure how countries are performing in their efforts to promote responsible business practices ranked Sweden as number one followed by Denmark and Finland. United States, Japan and China were ranked among the last.
Forms of corporate social responsibility:
CSR has continued to arouse public debate, calling for a better understanding of its implications. There are various types CSR namely; environmental, human rights, financial and political responsibility, as discussed below.
Pricewaterhousecoopers survey, found out that the number one issue for companies in the future will be environment conservation. According to U.S. respondents, the priority is reduction of carbon emissions. Environmental issues that affect the businesses globally include global warming, sustainable resources and pollution. People, environmental groups and governments are advocating for corporations to make efforts and preserve the environment in which they operate.
Human right responsibility
The emergence of civil rights movement between 1960s and 1970s acted as platform for a global marketplace in the 21st century. Corporations have a moral obligations to ensure that human rights are respected all the levels of supply chain, from the time the product is produced, to the time its consumed by the ultimate consumer. This has lead to a push for the use of strict labor standards to be applied to suppliers, and a demand for fair trade products such as chocolate and coffee.
Finance is a sensitive and important matter when it comes to accounting. Some corporations include the aspect of CSR in their financial reporting. Others are so observant to involve themselves in CSR activities that are directly related to the organizational goals and objectives. For instance, in the financial year 2009, Sony spent approximately 3.6 billion Yen on social contribution activities like education, arts, music and culture through the use of Sony's technology, products and other resources in which Sony operates.
The world today has a global marketplace and more and more businesses engage in mutual trade agreements, contractual arrangement, and integration with other political regimes. Thus, trading with repressive regimes is a difficult issue in CSR.
Concept and definition of corporate social responsibility:
Archie Carroll, (1979) describes Corporate Social Responsibility (CSR) as the economic, legal, ethical, and discretionary expectations that a society has for the organization.
The concept of CSR is broad and diverse. It means that organizations have moral, ethical, and philanthropic responsibilities in addition to their responsibilities to earn a fair return for the investors and comply with the law. A traditional view of the corporation suggests that its primary responsibility is to its owners.
Milton Friedman, (1970) supports this traditional view and asserts that the social responsibility of a business is to increase its profits. He strongly argues that businesses should use their resources and engage in activities designed to create more wealth for stockholders' or owners and should do so within the required law. He further adds that corporations are artificially legal persons and can only have artificial responsibilities, only people can have responsibilities.
Friedman's view is in sharp contrast with CSR view which argues that there is a social contract between the business and the society, involving mutual obligations and that businesses exist to solve the problems faced by the community.
Not all businesses are involved in CSR activities or behave in a socially responsible manner. Some businesses tightly hold on Friedman's free market view while others embrace a social contract between them and the society arguing that being involved in CSR activities is an ethical thing to do, adding that socially responsible actions can indeed be profitable in long run as compared to firms whose only motive is to make profits.
This ethical behavior goes beyond the law that organizations will meet the expectations of the society that the organization will conduct their operations in…