Corporate Social Responsibility in Business
This paper seeks to critically analyze the role that corporate social responsibility plays in a business entity`s pursuit of its over-riding objective, which is to maximize profits and increase shareholders` wealth. The paper seeks to draw the relationship between effective corporate social responsibility strategies of a business as a key ingredient in its accomplishment of the profit-maximization objective in the modern-day business environment. The paper will analyze whether the Milton Friedman`s assertion that businesses should only be interested in seeking profits and operating within the rules is true, or whether the integration of comprehensive social responsibility initiatives of a business would contribute significantly to this overall objective. The paper will examine various related theories and practical case studies of companies that are actively engaged in corporate social responsibility as part of their day-to-day activities.
Corporate Social Responsibility
There are several theories of corporate social responsibility that business entities can use to actualize their respective projects. According to Phillips (2011, p56), one such concept is the Stakeholder Theory. This is an offensive strategy that was advanced by Freeman (2010, p78) and it entails the identification of the needs of a particular community or society by a business before hand and its subsequent quest to resolve those particular needs. Another theory which can be used by business entities in their social responsibility initiatives is the Triple Bottom Line approach (Savitz, 2012, p134). This theory entails the inclusion of social responsibility measures as part of a company`s bottom line results in the overall analysis of how profitable the business has been over a specified period such as a financial year.
Fry (2013, p90) adds that the Triple Bottom Line Theory entails social responsibility initiatives that can be easily quantified in monetary terms in the analysis of their overall success. The final theory of corporate social responsibility is the Archie Carroll’s Theory (Carroll, 2014) which entails the classification of social responsibility of a business into a hierarchical order, starting with economic, then legal, then ethical and finally philanthropic corporate responsibilities.
There are several ways through which corporate organizations can implement their social responsibility initiatives based on the above theories. General Motors (2014) for example, has adopted an offensive Stakeholder Theory, which entails its active participation in the promotion of quality education through the Buick Achievers Scholarship Program. The company also actively assists in the revitalization of cities across the United States by giving grants to aid in this specific purpose (GM, 2014).
Shell (2014) is another company which has adopted a defensive approach in its social responsibility activities that mainly revolve around environmental conservation. In this regard, the company has implemented an initiative to conserve the Coral Triangle in the Philippines among many other similar projects. Coca Cola`s (2014) corporate social responsibility approach entails a combination of both offensive and defensive strategies. This is evidenced by the diverse corporate social responsibility initiatives that the company is involved in, such as the Copa Coca Cola Football Program; the Ekocycle recycling program; community-based water projects in Africa among many other similar initiatives.
According to Urip (2010, p234) some of the benefits that a business can derive from its active involvement in corporate social responsibility include the creation of an environment that will enable its long term sustainability and growth. This mainly affects businesses that are involved in the extraction of raw materials from the earth`s surface, and in the process gradually degrading the natural environment. Such business entities include oil and mining companies among many others.
Schwartz (2011, p67) adds that business entities may also increase their overall sales as a direct benefit of their involvement in corporate social responsibility initiatives due to, the implied consumer perception that the business genuinely cares for the needs of the society in general beyond its pursuit of corporate profits.
According to William (2010), there exists a direct link between a business entity which is socially responsible and its overall engagement in ethical business practices. This perspective is best explained by some of the corporate social responsibility theories such as the Triple Bottom Line and the Stakeholder theories. For example, according to the Stakeholder Theory (Phillips, 2011, p80), business entities initially identify the needs and requirements of the community within which they operate and seek to resolve those needs as part of their day-to-day operations. This implies that it is unlikely that the same businesses would engage in practices that contradict the very societal needs and requirements that the businesses seek to resolve.
For example, a business that is proactively engaged in cleaning up and preventing the pollution of the environment would be unlikely to engage in business practices that pollute the same environment. This, therefore, means that corporate social responsibility initiatives of a business tend to reinforce their ethical business practices by providing the required checks and balances to ensure that the businesses conform to their laid down business ethics.
Corporate social responsibility plays a significant role in the long term and short term development of a business organization. This development, specifically depends on whether the laid down goals and objectives of a business entity`s social responsibility program are long term or short term in nature. In the short term, a business may seek to solve a one-time occurrence such as assisting the victims of a natural catastrophe for example an earthquake; or aiding the victims of a disease outbreak or famine as is the case in some parts of the third world countries. In such a case, the impact of these initiatives would be entirely felt by the beneficiaries and the business entity may not directly attribute its success in such initiatives beyond the immediate tangible benefits accorded to the community.
In the long run, however, corporate social responsibility initiatives tend to be structured in such a way that they accord positive results to both the targeted beneficiaries and the business entity itself. This perspective is the essence of the Triple Bottom Theory of corporate social responsibility (Savitz, 2012, p60).
Emerging social responsibility trends and ethical practices are expected to have a significant impact on the growth and sustainability of present and future businesses. This is mainly as a result of the dwindling natural resources such as oil and coal, which primarily power most business entities either directly or indirectly. This situation is further compounded by the fact that the demand for various goods and services is expected to drastically increase in the future due to the growing population rates, in the wake of a declining supply in the raw materials used to produce these goods and services.
Business entities of both the present and the future are, thus, expected to engage in corporate social responsibility initiatives and ethical business practices that will guarantee the conservation of the environment so as to ensure that the limited raw materials are used in a manner that will ensure their long term sustainability. Such initiatives should also include the search for alternative sources of energy and raw materials which will ease the pressure on the natural environment and ensure the growth and solvency of the business entities.
This paper sought to analyze the impact that corporate social responsibility has on the overall growth and development of business entities, especially in relation to their overall objective of profit maximization. In so doing, this paper has dispelled Milton Friedman`s assertion that business organizations should only be interested in pursuing corporate profits and operating within the laid down rules and regulations.
In closing, corporate social responsibility plays a significant role in the growth and sustainability of a business entity, especially in modern-day times due to the changing business landscape and corporate environment. Businesses must, thus, ensure that their corporate strategies directly include social responsibility initiatives as this is the only way in which the organizations will be guaranteed of corporate success, now and in the near and long term future.
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