Corporate Social Responsibility

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Corporate Social Responsibility

Essentially, Corporate Social Responsibility (CSR), is a concept in management which states that organizations must integrate social and environmental concerns and find a common ground that maximizes profitability and reduces adverse impacts to the outside world. This is done through improving business operations and ensuring that all stakeholders are taken care of.

Organizations over the world started CSR begrudgingly due to regulations but now companies are taking a more proactive approach to ward off more regulations and to appease their various publics.

CSR has evolved over the years to become a more inclusive and broader term. There are six core characteristics that define corporate social responsibility.

Corporate Social Responsibility

Voluntary

CSR is voluntary and exceeds the extents prescribed by law. The governments over the world expect large organizations to go beyond the basic requirements and voluntarily do more to be socially responsible entities. Companies have come to expect this as the norm and voluntarily double their CSR efforts to ward off further stringent policies and laws.

One such example is that of companies in UK propagating the code of responsible practice before laws could be enacted to define CSR for them. (Gardner, 2006)

While the voluntary activities are considered a positive aspect of CSR’s characteristics by most critics, some claim that attention should be more focused on the regulations and the implementation of law by all companies.

 

Internalizing or managing externalities.

CSR includes looking at the effects the organization has on the outside world and minimizing the damage caused. The economic impact of the organizations operations are borne by others and companies increasingly voluntarily work to mitigate the effects.

One such effect is pollution which is an adverse impact on the local communities where the firm is located. This is typically managed by regulations dictating companies to internalize the cost of pollution but would be better accounted for by investment in green technologies. Such an approach is more proactive and therefore more beneficial all around. One example is the league of UK NGO’s including WWF, Amnesty International and Action Aid that work towards reducing the negative effects of company actions on the environment. (Husted & Allen, 2006)

Internalizing also includes ensuring that actions like downsizing do not have social and economic impacts that prove too devastating for the company.

 

Multiple stakeholder orientation.

 

While previously firms focused on the effect of their actions on building up shareholder value, they now focus on the effects on a variety of stakeholders. This is a relatively new school of thought and is based on the fact that the companies depend on all stakeholders and must consider their interests as well. These include consumers, suppliers, pressure groups etc.

 

Alignment of social and economic responsibilities

While the trend to look after all stakeholders has increased, the flip side of the argument is that organizations do have the responsibility to maximize shareholder value and must do that alongside. There for the concept of aligning social and economic responsibilities is a core characteristic of CSR…