Social responsibility concepts and frameworks

Social Responsibility

Corporate social responsibility

Companies are facing increasing pressure from investors, consumers, and the society. For investors, they are required to increase profits while consumers and the society require them to be socially responsible. Scholars have studied corporate social responsibility for years and over the years, they have documented their findings concerning social responsibilities of corporations. Over the years, consumers have built the typology of unresponsive to highly responsive purchasing in response to corporate social responsibility. Unilever and Walt Disney are examples of companies that have had corporate social responsibility in their cultures since their early years. These companies have benefited from being socially responsible by gaining increased publicity and responsive purchasing from consumers. Their profits have also increased considerably because of taking care of their social responsibilities. Companies should embrace corporate social responsibility in order to conform to the unavoidable concept of social purpose of the corporation.

Introduction

Businesses have been criticized for lack of focus on their societal responsibilities. Often complaints are raised that companies put profits before the good of the society. This is what led to the birth of the concept of socially responsible business or corporate social responsibility (CSR) as it is commonly referred to. A study conducted in 2011 by the Massachusetts Institute of Technology (MIT) showed that CSR is a part of sustainability for U.S. corporations and plays a part in 70% of companies Haanaes et al.()

. Large organizations such as Unilever have championed sustainable business through corporate philanthropy. Social responsibility is not only expected of large companies. Small companies are also increasingly finding themselves as the target of social responsibility discussions because it has come to be a way of proving businesses are ethical and nondestructive Turker 192.

While companies engage in corporate social responsibility, it costs them money but a concise argument is presented that it also helps them make money. This paper focuses on organizations and their need to engage in CSR activities and present a case for "spending money to make money."

Discussion

The question on whether these CSR activities are genuine philanthropy or ultimately profitable activities will be answered by finding sources of information to present an argument for both cases. CSR activities will be evaluated both in the short-run and the long-run to see whether there are any benefits of corporate social responsibility.

According to Friedman 49(Friedman

who authored Capital and Freedom, the purpose of the corporation is described as to engage in activities that will increase their profits for as long as it is within the rules and regulations of business and it engages in open and free competition without fraud and deception. In simpler terms, "The social responsibility of business is to increase its profits," )

. This article was the first major analysis of corporate social responsibility. It also forms the basis of today's argument for CSR. However, critics of Friedman's work have also emerged. Some critics stated that Friedman had an outdated view of corporate ownership Husted 177(; Jones 61)

. Shareholders are passive in companies therefore do not exercise active control over the company. Furthermore, other critics state that through dividend processes of business, they are separate from political, legal, and social decision-making Joseph 403.

These critics present an argument that corporations are distinct from other institutions, thus do not gain anything from being socially responsible. Friedman responded to these critics by stating that there are huge similarities between corporations and other institutions. He also stated that the relationship between shareholders and corporate leaders is similar to a principal-agent relationship and therefore the judgment of shareholders is passed through the corporation's managers.

The debate over CSR has been heated and one important notion is that corporate managers have a role to play in maximizing returns on investment. To do this, they have to do everything that is ethical, free, and fair to sustain this investment relationship. Therefore, the corporate managers need to increase the attention of consumers on the company as much as possible. One way through which they do this is maintaining social responsibility. The premise of this argument is that by maximizing profits, corporate executives contribute to the well-being of the society since the shareholders will allocate more funds for such worthwhile activity. The assumption here is that profit is consistent with common good meaning that when organizations spend more money, they make more money BENabou and Tirole 13-14.

In this argument, efforts to increase profits guide corporate managers to be socially responsible in order to gain social benefits.

Unilever is one company that has engaged in socially responsible, sustainable business that has helped them grow to become a large corporation. Since its inception in the early 1930s, Unilever has had CSR at their heart. To them, the benefits of CSR are less obvious than just helping the society and the environment. The company has not only engaged in corporate handouts through giving money to charities but has also engaged their employees in such activities to promote interaction between employees, suppliers, and customers. CSR for them is about managing these interactions to produce an overall positive net effect to the society Joseph 404()

Walt Disney has also engaged in CSR activities. This was founded on the discovery that the company could not entertain families if they disregard the society and how they live. For Walt Disney, being socially responsible has given them credibility and authenticity Joseph 404.