Monday, October 22, 2012

The War with Corporate Social Responsibility



Money, that is what business is about isn’t it? Or in a more specific term business is about profit; it is focused on enlarging revenue and shrinking expenses in order to maximize gain. So when it comes to companies and the topic of corporate social responsibility (CSR), it is easy to see why there is controversy behind the motives and benefits that stem from CSR.

Corporate Social Responsibility is the idea that companies go beyond their basic operational level and get actively involved in benefiting the community around them. Companies do this in many ways, from converting their products to “green” products to benefit the environment, to voluntarily giving their community monetary and physical contributions such as sponsoring or building new parks and playgrounds.

For executives and managers the question of participating in CSR is a challenging one. They must ask themselves, “Is it truly beneficial/profitable for the company?” or “What gains or loses will the company experience, and if those gains will out weigh the loses?” This is where the first issue of CSR arises: the motive.  While some companies claim they participate in CSR because they honestly want to help society, others do it because of the self-serving benefits that arise from it.

So what are some of the benefits that arise from companies participating in CSR? Well, first off public CSR, such as community clean up events, are a way for a company to get its name out and more familiar with the people in the surrounding areas. Secondly, these sorts of events also contribute to the company’s positive image. When it comes to internal benefits, it creates a family like atmosphere for the employees. These events give employees a sense of belonging to the company by having do more than just the average work day. It follows then that social gatherings and fellowship outside of the work realm will lead to better teamwork and cohesiveness in the work realm. These are only a few of the benefits that arise from a companies focus on CSR (source).

Yet you ask, “With all of these wonderful affects of CSR, why wouldn’t a company not participate in it?” This is an important question that all managers need to ask themselves before making the changes and major company commitment that CSR requires. The First major pitfall that can occur when a company gets involved in the community is the lack of interest that the public will have towards it. Many people may not know about a companies CSR or they may know and just don’t care about it.  This leads to the second downfall: the profits that arise from CSR may not out weigh the cost. This is one of the greatest pitfalls of participating CSR seeing as most companies’ number one priority is to maximize profit. Starbucks, one of the worlds leaders in corporate social responsibility, is the perfect example for this (source).  As Forbes.com says, although Starbucks has a large focus on CSR (by using eco-friendly products, and supporting coffee industries in developing countries) “its shares have recently declined by nearly 50% since 2008.”  Lastly, CSR can create a challenge for companies causing them to make a choice between taking actions that benefit the shareholders or taking actions that benefit the public.  As you can see it, it creates a conflict of interest because serving the public can risk losing profit and this could cause a loss of support from shareholders if public support is not what they want.

In the end, CSR is an important issue for executives and managers to think about before they make a commitment to it. For some it can be beneficial, while for others it can be more costly. What do you think about corporate social responsibility? Do you think companies should better the community around them? Is it truly a profitable measure for the company to take? And lastly, does the company’s motive behind being socially active matter at all?

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