This kind of competition can prove to be more effective than governmental regulations since firms are reluctant to follow government mandates.
Secondary research has been used as the main tool. Important journal articles, case studies and analyses have been included to understand the concept of CSR and its use in gain competitive advantage.
ANALYSIS and DISCUSSION
Social responsibility is closely connected with concern for financial growth. According to this belief, firms seek to maximize their profits by investing in a healthy environment and other public good projects. The firms that have successfully attained the prestigious image of being socially responsible follow this ideology. These firms choose to be more socially conscious not because of any real intention of creating a healthier society but because their actions seem to influence buyer behavior in a positive manner. Companies are thus rapidly developing serious CSR policies with exclusive departments dealing with this. New and better corporate mission statements have emerged that incorporate ethical code of conduct. By the end of 2003, more than 2000 firms had presented their CSR reports.
These firms have successfully found a way to turn social responsibility into financial boom. CSR is now seen as the main strategy to attract customers since it seems to have a positive impact on customers' buying preferences. Companies are vying for increased customer attention by developing a reputation for good corporate citizenship. Microsoft similarly believes in CSR that is "all about the bottom line" and tries to connect it with economic success. It seeks to maximize its market share by investing in public projects. CSR is thus all about developing connections and sustaining the same. When a company makes a conscious effort to listen to their customers and their concerns, it helps them build a deeper connection with them and that results in increased profitability. For example when Microsoft realized that most of its Xbox customers were concerned about labor and environmental problems, it started paying greater attention to environmental issues of areas where their production houses were located. CSR doesn't only help attract more customers- it also increases business-to-business relations. Levi's developed a code of conduct for vendors, which has earned the status of certification among purchasers all over the world. If the firm doesn't follow a proper ethical code, the community would certainly come to know about it as Wiley (1995, p. 25) puts it:
When unethical actions are not dealt with, word spreads that the organization is not really interested in ethics. In some cases, a demotion, rather than firing, may be sufficient to make this point."
Apart from that CSR strategy also brings a company closer to its community as Duncan
Arthur D. Little further adds in "The Business Case for Corporate Citizenship,": "The perceptions that stakeholders have of a company's corporate citizenship performance can significantly affect the business's license to operate. Companies with a poor reputation in this area can find themselves continually responding to criticism of their approach to a whole range of environmental and social issues." (Little, 2002)
CSR is also seen as an important strategy for attracting and retaining quality employees. In other words, employee turn over rate decreases significantly when a firm is actively involved with community. In a 2004 survey, it was found that more than three fourth of MBA graduates would prefer working for an organization that is considered socially responsibly even if it means lesser pay. (Roner, 2004) it has also been noticed that employee do not only view active involvement in community projects as CSR but excellent treatment of employees is another slid indicator of a firm with ethics. When the subject was discussed with Human Resources Director of fast-food chain, in-N-Out, he remarked: "Efficiency wages are self-serving. Our store managers may make 100 to 120% over industry norms, but the money spent on salaries is seen as an investment. Our wages not only broaden the applicant pool from which we can choose employees, but increase performance levels and retention rates.... Although you can never know for sure why people stay with a company, I certainly believe it may influence why people like their job here." (Iriart, 2003) a firm needs to reserve some compensation resources in case of emergencies. When a firm ensures that its employees are treated well and their medical and contingency expenses are adequately covered, it automatically increases productivity and efficiency of its employees. According to International Labor Organization (ILO): "on the job accidents and illnesses annually take some two million lives and cost the global economy an estimated 1.25 trillion, or four percent of annual global GDP." (ILO, 2003) Therefore safer working conditions along with sound compensation plans translate into greater productivity.
In addition to that, firms also need a proper ethical code so that employees can report suspected behavior or violation. O'Dwyer (2006) explains: "If employees do not have channels through which they can report suspected violations and seek guidance on issues that concern them, then ethical codes are unlikely to be enforced."
Studies also reveal that when firms invest in corporate community service programs, they increase their chances of facilitating valuable research and innovation by "developing a variety of competencies, including teamwork, planning and implementation, communication, project management, listening skills, and customer focus." (BSR.org) This may help further in risk management and avoidance. Simon Zadek explains: "Advocates advance two primary arguments for how CE [Corporate Engagement] can help a company manage its risks. The first claim is that engaging in CE can help avoid harms associated with socially irresponsible or illegal behavior perpetrated by employees, and to mitigate the harms to the corporation created by accidents or mistakes.... The second, more complex claim, is that engaging in increased CE will help companies better understand and manage risks that come from new and unfamiliar sources." (Zadek, 2000)
Community service, environmental protection and closer connection with the people translate into better risk management and risk avoidance. This is especially in the case of more accident prone industries including Petroleum and construction. With a sound CSR strategy, a firm can avoid negative publicity when something goes wrong and it can also avoid lawsuits to a large extent. Vice President of Communications and Public Affairs at Occidental Petroleum, Lawrence Meriage explains:
In the indigenous communities where we operate in Ecuador, we have a long-standing relationship with the people. Having them look at us as friends, instead of enemies, means our operations will not be disrupted and we will be able to negotiate new agreements later on. Building these relationships helps us avoid protests, strikes, or other disruptions such as people blocking roads." (Meriage, 2003)
Companies need to be aware of the political issues, which are affecting the community. It helps in formulation correct policies, as CSR strategy should incorporate company's stand of issues of importance. Political awareness also means that firm would be able to correctly anticipate future legislation. It is important to take a stand on issues before laws are formed because this shows a firm's commitment and courage of conviction.
Limitations and Recommendations
This research has depended heavily on secondary research and thus might suffer from some of the weaknesses associated with second-hand knowledge. Some interviews with the people in businesses actually using CSR would widen the reach and impact of our research findings. First hand knowledge is immensely significant in cases of ethical nature because how an insider views CSR is far more important than how it is being perceived by others.
While most firms would either reject social responsibility or adopt it for financial gains only, we recommend a different approach. Firms must be concerned about environmental and other social issues without connecting them with financial gains. In such a firm CEOs and managers aim for the greater good because they believe in it and not because it serves any financial purposes.
This is however an uncommon sight. We don't normally come across firms that would pursue public good without profits in mind but regardless of how uncommon this might be, there are still some firms who practice this belief. Philanthropists or environmentalists who feel strongly for the community most commonly head such firms and thus economic success is secondary to them. Many such firms even believe in not publicizing their charity work. If they are working for the greater good, why advertise it. Social and Environmental Affairs Manager at Adidas, Gregg Nebel explains: "Why market what you are doing if you are simply doing what is right? The feeling here is that there is an expectation that a company will do the right thing, and there is no reason to advertise that we are fulfilling this obligation."
Social responsibility is an important concern of corporations and community alike. It has been receiving increased attention with media focusing on ethical and moral obligations of large corporations and with the world chanting slogans against ever-spreading wings of…