Companies Today, Especially Multinational Corporations Mncs , Have Essay

Length: 5 pages Sources: 4 Subject: Business Type: Essay Paper: #41728837 Related Topics: Multinational, Multinational Companies, Target Corporation, Companies
Excerpt from Essay :

¶ … companies today, especially multinational corporations (MNCs), have acknowledged that their responsibilities and activities are not just restricted to creating shareholder value, but also extend to addressing direct stakeholders' demands (i.e. employees and customers) as well as taking into account the effect their operations have on the environment and the community. Organizations have readily accepted, and many have even supported, the belief that Corporate Social Responsibility (CSR) should be demonstrated by them. The 'triple bottom line' (3BL) represents another more extensive framework that aims at balancing CSR with sustainability. It endeavors to gauge the social, environmental and economic impacts of a firm's activities. 3BL aims at explaining performance of organizations beyond conventional economic variables (profits, shareholder value, returns on investment). It lays emphasis on overall investment results, including performance factors that relate to the environment and people (Zander & Sutton, 2013). The principle behind 3BL is that the ultimate health or success of a firm can and must be assessed using both its traditional financial measures, and its environmental and ethical/social performance. It has certainly been accepted for some time- by individuals related and unrelated to the business sector- that organizations have numerous obligations towards their stakeholders to act responsibly. Also, it is widely believed and stated that companies cannot hope for long-term success if they neglect key stakeholders' interests over and over again. 3BL's apparent novelty results from its advocators' argument that the total fulfillment of responsibilities to staff, consumers, suppliers and the society (these not constituting an exhaustive list of stakeholders), must be measured, computed, inspected, and reported in the same way as companies' financial performance is assessed over recent several decades. This promise is exciting. A more enduring modern management formula states 'if it can't be measured, it can't be managed'. Because CSR and ethical ways of conducting business are vital management and corporate governance functions, organizations must be receptive to developing tools that make a firm's social, environmental and economic standing more transparent to shareholders, executives, as well as to other stakeholders (Norman & MacDonald, 2004). This paper attempts to address the statement "It is not enough for an MNC to be socially responsible; they should be a triple bottom line firm to fulfill ethical obligations."

Corporate Social Responsibility (CSR)

The term corporate social responsibility (CSR) has two connotations. Firstly, it signifies a generic name for company theories that focus on the money-making obligations, as well as that of ethically interacting with the community. Secondly, CSR also denotes a specific comprehension of that profit-making responsibility, while concurrently contributing to broader aspects of societal well-being (Brusseau, 2012). CSR, in this sense, i.e., is a concept addressing how organizations interact with their neighboring environments and the world, at large. It is comprised of four responsibilities:

1. An economic 'money-making' obligation. A necessary condition in economics, this obligation represents the translation of mankind's survival instinct into the corporate world. There are, of course, exceptions. But for most business operations, profits are a must, without which a business cannot survive, and business ethics cannot exist.

2. A legal obligation to abide by regulations and rules.

3. An ethical obligation to do what is right, even if the law doesn't stipulate it.

4. A philanthropic obligation to take part and support societal projects, even if they don't form part of the firm's business operations (Brusseau, 2012).

The Triple Bottom Line (3BL)

The 3BL approach denotes a type of CSR that establishes that organizational leaders present the firm's bottom-line performance results to stakeholders not just in cost-revenue terms, but also with regards to effects of the firm's operations on the environment and on society. This concept has two preconditions. Firstly, all three elements should be distinctly studied, and separate result reports should be made. Secondly, the organization should produce sustainable outcomes in each of the three areas. The sustainability notion is highly specific, and at the juncture of economics and ethics, it denotes maintaining balance in the long-term (Brusseau, 2012).

Economic sustainability: Valuing financial stability in the long-run over short-term volatile profits...

...

It demands that corporations, being citizens of a particular community, must keep healthy relationships with community members.

Environmental sustainability: This stems from an understanding that the world's natural resources are scarce.

Together, these sustainability elements steer companies in the direction of actions that align with the idea that they are community citizens, not just money-making units. One fundamental difference between 3BL and CSR is cultural, and this perspective naturally suits the guiding value of sustainability (Brusseau, 2012).

Discussion

What the 3BL theory presents as three distinct organizational responsibility categories is actually biased when looked at from the cultural perspective of a specific community/individual. For instance, cultures that depict low power distances are linked to greater overall value placed on CSR, generally, and ethical responsibilities, in particular. In contrast, mastery, or focus on progressing by way of persistent self-assertion (aspiration, daring, success, competence) is linked to lesser focus on social CSR. This moral code is more frequently seen among Anglo-American cultures, where greater emphasis is placed on environmental issues. Most developed countries generally give high priority to the environment. Cultures wherein social hierarchy is considered significant give more importance to economic concerns than environmental and social; top priority is given to shareholder value, as seen in regions like Russia and South Asia. The above discussion makes it clear that 3BL's social dimension is given higher priority in cultures with high levels of institutional collectivism. However, the social dimension may differ even among this segment; e.g. In Brazil, high significance is placed on state and community well-being. Within a multi-national corporation (MNC), these CSR differences are the responsibility of a CSR officer, who is in charge of implementing a centrally defined CSR policy. This policy may lead to differing, or even conflicting priorities, that must, in the end, be resolved (Zander & Sutton, 2013).

Though the 3BL approach is becoming popular among MNCs, its effect on the local environment and community remains unclear. No common factor exists to assess how 'bad' or 'good' a social effect is, nor does a formula exist to evaluate and compare tradeoffs linked to each negative or positive outcome. Though the 3BL theory may be grounded on good intentions, it ultimately misguides firms and stakeholders into believing that an explicit, universally-accepted method exists for calculating and comparing a firm's bottom line in terms of social obligations. Absence of this universal measure allows firms to concentrate on the performance marker that can most easily be gauged and compared- the financial and economic bottom line. Simultaneously, corporations give an impression of effective observance of social and environmental responsibility, by stating vaguely that computing their environmental and social performance is complicated. These very companies, which are front-runners in championing and proclaiming 3BL principles, are the target of indigenous communities and non-government organizations (NGOs) for their adverse impacts to society and the environment. Whether or not this strategy can actually benefit communities or is merely a sophisticated kind of 'green-washing' is yet to be seen. The real threat comes from the perfect reports of corporations' social performance, which attempt to avert stakeholders' and environmental activists' attention from the actual negative impacts that their operations have on society and the environment. While many examples of environmentalism by MNCs can be seen, an equal number if not perhaps even more examples, can be seen that depict 'anti-environmentalism' by corporations. Furthermore, it is imperative to note that incorporating environmental sustainability into the firm's structure is very complicated; environmental issues can seldom be explained in the form of clear-cut alternatives. Additionally, separating the 'environmentally-friendly' hype from the actual reality of firms' environmentalism is essential. Issues pertaining to environment can't all be win-win situations, no matter how much corporations attest that they are (Banerjee, 2007). The inconsistency between environmental and business ethics is well-known. Though academicians as well as businessmen aim to bring together these apparently incompatible contexts of ethics, businessmen have, in practice, basically skirted the sustainability discussion by assuming an "ethically pragmatic, purged, and reassuring" sustainable development version (Milne & Byrch, 2011).

The 3BL also indicates concerns for impartiality between generations and distributive justice for securing responsible, effective utilization of resources needed by businesses on a daily basis (In Aras, 2015). The concept of distributive justice makes sure that the burdens suffered by one entity are counterbalanced by gains reaped. Thus, one segment mustn't reap benefits while others suffer. Though creation of wealth in the community, and corporate profits, have attained new heights in the last many decades, equally clear is the fact that this wealth distribution is limited; also, it is increasingly becoming more unequal. U.S. income inequality is, in fact, more pronounced than ever since this factor began being measured by the American Census Bureau. Wealth and income generation is classified based on two dimensions: 1) Different states have extremely different global income and wealth shares. 2) Stratification of income and wealth within…

Sources Used in Documents:

References

Banerjee, S.B. (2007). Corporate social responsibility: The good, the bad and the ugly. Cheltenham, UK: Edward Elgar.

Brusseau J. (2012). Business Ethics. Retrieved June 23, 2015 from http://2012books.lardbucket.org/books/business-ethics/s17-02-three-theories-of-corporate-so.html

In Aras, G. (2015). Sustainable markets for sustainable business: A global perspective for business and financial markets.

Milne, M.J., & Byrch, C. (2011). Sustainability, environmental pragmatism and the triple bottom line: good question, wrong answer? In 10th CSEAR Australasian Conference, Launceston, 6 -- 8 December 2011 (p. 2011).


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