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Corporate social responsibility
(CSR)
CSR is... Being a good corporate citizen by delighting stakeholders (customers, employees, suppliers, owners, the local community and government). So important parts of a CSR policy are:
1. Defining (and acting upon) an organization’s ethics and values (see business ethics).
2. Reducing the environmental impact of its activities (see climate change).
3. Improving employees’ jobs and working conditions (see motivation).
CSR takes into account an organization’s social costs and benefits (to society) that are measured by cost benefit analysis. For example, the costs of an airport would include not only the cost of building it but also social costs like pollution and climate change.
How to be a socially responsible organization (Four factors - put profit first, listen to stakeholders, put stakeholder needs into action and ethics - see below)
1. Put profit first Being socially responsible (by delighting stakeholders) can increase profits because of:
a) customer satisfaction Socially responsible products will appeal to green customers e.g. hybrid electric cars like the Toyota Prius. Climate change will become an increasingly important issue and businesses will make money from helping to cure it.
b) motivated and talented employees CSR will increase employees’ pride in their organization and attract the best recruits.
c) better corporate image Image improves through, for example:
d) less interference from pressure groups and government (e.g. less regulation).
e) avoidance of disasters (like the 1984 explosion of Union Carbide’s chemical plant in Bhopal, India, that killed at least 4,000 people )
But some socially responsible policies (e.g. reducing pollution and global warming) can be expensive and reduce profits, particularly if competitors don’t do the same. So companies can only do so much on CSR, the rest is up to government.
2. Listen to stakeholders An organization must regularly communicate with all its stakeholders and reflect upon their needs.
3. Put stakeholder needs into action CSR is based upon stakeholders’ needs but satisfying them all at once may be extremely difficult. For example:
The only solution to these problems is to put customers first because without them the organization would not exist. But it must always remember that customer satisfaction comes from three other vital elements of a CSR policy:
4. Ethics Organizations are socially responsible, because they think it is ethical and the right thing to do (see business ethics).
Key quotes explained
“Be kind, fair and serve the community”, - Adam Smith (Scottish philosopher and economist, pictured right). Smith said these are the most important virtues and are vital for free market capitalism based upon profit and competition (that he advocated in his book, The Wealth of Nations).
“My country is the world and my religion is to do good”, - Thomas Paine (English philosopher, pictured right). The only way to solve the world’s problems (like famine and climate change) is for everyone in the world to work together to do good. With wealth and privilege come responsibilities - “Unto whomever much is given, of him shall be much required”, Jesus said in Luke’s gospel.
- Charles Wilson (ex-boss of General Motors, pictured right). In other words, what is good for business is good for society. This has been a strong argument (particularly in America) to minimize government regulation of business.
“Organizations, like men, if they are to command respect and grow, must have a sense of honour and must fulfil their promises” - Mahatma Gandhi, Indian leader and philosopher(pictured right). Businesses should be morally responsible as well as profitable.
Best books and articles
Milton Friedman (pictured right), The Social Responsibility of Business Is To Increase Its Profits (1970 New York Times article). The responsibility of businesses is to legally maximize profits, not to pursue costly social objectives like environmental improvement (that are best achieved by moral individuals). “Only people can have responsibilities”, he says. But Friedman does support socially responsible actions that increase long-term profits through improved corporate image, recruitment and employee motivation. These are better described as good business practice or enlightened self-interest (doing things for others to help yourself).
Amitai Etzioni (pictured right), The Moral Dimension (1988) Etzioni supports a “responsive community” that serves both individuals and the community, because they need each other.
Michael Porter (pictured right) and Mark Kramer (pictured right below), Strategy and Society (2007 Harvard Business Review article). They advocate Creating Shared Value (CSV) based on the idea that social responsibility and
business success depend on each other. Shared value is defined as policies and practices that create both social benefits and competitive advantage (the ability to beat competitors).
Richard Branson (pictured right), Screw Business As Usual (2013) “Doing good is good for business”, says Virgin’s boss, because social responsibility (particularly concern for people and the planet) attracts and motivates great employees
Peter Drucker (pictured right), Management (1974) Any organization is an “organ of society” and exists to satisfy its stakeholders, particularly customer satisfaction because this increases profits. But it must also consider the social impact of its activities (e.g. relationships with government and local communities) and social problems (like the environment) that may be turned into business opportunities. (see for more detail Management in Business Books section) |
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