The Concept Of Csr Business Essay

The C at a timept Of Csr pipeline disposal Essay2.2 The biography of CSR by the Centuries. The rail line Relations, Accountability, Sustainability and Society Centre, known as BRASS, in its explanation History of in bodied loving certificate of indebtedness and Sustainability (2007), states that The history of aff fitting and surroundal tending more than or less trade is as old as craft and traffic itself. Commercial logging trading operations for example, together with laws to protect forests, lav both be traced back al some 5,000 years. In quaint Mesopotamia rough 1700 BC, King Hammurabi introduced a code in which builders, innkeepers or farmers were put to oddment if their negligence ca apply the deaths of opposites, or major inconvenience to local citizens. In Ancient Rome senators grumbled about the failure of professiones to contribute sufficient taxes to fund their soldiery campaigns, objet dart in 1622 disgruntled sh areholders in the Dutch East In dia high society started issuing pamphlets complaining about management secrecy and self-enrichment . move further, Eberstadt (1977) claims in his study that phenomena of affectionate province were already granted in the ancient Greece, while forthwiths corporeal responsibility movement is an attempt to restore a 2,000-year-old customs of businesses being connected to the community (cited in Panwar, Rinne, Hansen Juslin, 2006).In the 18th deoxycytidine monophosphate the businesses started to anticipate that having an efficient labour hale was crucial for the successful economy of their dallyivities. During that period Adam Smith, the great moral philosopher and pi virtuos nonpareilsser in scotchs, present for the graduation exercise beat the customs dutyal or classical economic stumper. The graphic symbol model suggested that the needs and the interests of the world would best be met if the psyches act in self-seeking manner. Driven by their own self-interests , the individuals would produce and deliver uprights and go which would seduce them profit, but also meet the needs of the others (Fernando, 2009). According to Brown (2005), the companies in identify to keep their employees satisfied, because of the negative effects that the lack of food, ho victimisation and wellnesscare had in the labour force efficiency, they started to invest in housing, healthcare and nourishment. Thus, the histrion villages of the industrial revolution, caller-out medical facilities and the subsidized works bay windowteen appeared. That public presentation of affable philanthropy by the companies give the sack be considered as the trumpeter of the modern day CSR.Sims (2003) claims that the contemporary CSR originated back to the beginning of the 20th carbon and is based upon twain regulations. The rootage, the principle of charity, is based on religious tradition and suggests that those who are tumesce financially should give to those with difficulties. The stake one, the principle of stewardship, says that the disposals demand an indebtedness to serve the society and satisfy the homokinds needs since their wealth and the post that they commence springs through their activities inwardly the society. This second principle had an impact on affect how companies were faced by g overnments, press and other convocations and led to the conductivity of new more socially responsible laws.The turn of the businesses to the society and the phylogenesis of a more societal cerebration led the organisations to outgrowth their responsibility and consideration for both social and environmental well up-being. This response to environmental and social matters by the participations is what it is known today as Corporate brotherly responsibility (Panwar et al., 2006).2.3 Definitions of Corporate amicable certificate of indebtednessThe rise of the concept of Corporate Social Responsibility during the past decades resul ted to the continuous debate about the exact mean of the term. The provided if ecumenicly received soak up about the term CSR is that is a concept which covers several aspects. Frankental (2001), comments that CSR is a vague and intangible term which provide mean whatsoever involvement to anybody, and therefore is effectively without meaning.Castka, Bamber, Bamber and Sharp (2004) contest that there is no single authoritative rendering of CSR. The CSR concept seems to be a in general framed umbrella embracing a vast number of concepts traditionally framed as environmental concerns, sustainable victimization commonplace relations, corporate philanthropy, human resource management and community relations.During the examination of various literatures it brush off be seen that there is non a single generally accepted description, although many authors and worldwide institutions defined the term CSR in similar offices.The first academically accepted definition of CSR piece of ass be found in the book Social Responsibilities of the Businessman, written by Howard Bowen in 1953. Bowen defines CSR as an contract to pursue those policies, to get to those stopping points, or to follow those lines of action that are lovable in terms of the objectives and take to bes of our society (cited in Panwar et al., 2006).Carroll (2004) argues that the social responsibility of businesses encompasses the economic, intelligent, honourable, and discretionary ( openhearted) expectations that society has of organizations at a given point in time, while Buhmann (2006) simply defines CSR as doing more than what is required by law. Johnson, Scholes and Whittington (2005), define CSR as the ways in which an organisation exceeds its minimum obligations to stakeholders specified through regulation.The World Business Council for Sustainable schooling (WBCSD) defines CSR as the continuing commission by business to be pretend ethically and contribute to economic gro wing while improving the quality of life of the men and their families as well as the local community and society at large (cited in Castka et al., 2004).Finally, the internationally known law firm Freshfields Bruckhaus Deringer in the report The Development and Impact of CSR on the Construction Industry (2006), defines CSR as the voluntary desegregation of environmental, social and human rights considerations into business operations, over and in a higher place legal requirements and contractual obligations.To conclude, it go off be clearly seen that the base line of the above definitions is the volunteering obligation that the organisations inherent(prenominal) lead over their employees and their families, the environment and the general public which sometimes may go further their legal requirements.2.4 Layers of Corporate Social ResponsibilityAccording to Sachs, Ruhli, and Mittnacht (2005) the probably best known economic paradigm that prepare the ground for further look on the concept of CSR is the Carroll Pyramid (Figure 1). mannequin 1Carroll (1991) suggests that there are four-spot mixture of social responsibilities that an organisation should take into account while conducting its activities and those responsibilities constitute total CSR. Those four social responsibilities of an organisation were presented into a four-layered pyramid model, called The Pyramid of Responsibilities. The four layers of responsibilities are economical, legal, ethical and philanthropic.The bottom layer and the foundation of the pyramid is the Economic Responsibilities. The business essential be profitable in ordain to keep its shareholders satisfied, produce verticals and run necessary to the consumers and be able to acquire new jobs and promote innovation.The second layer of responsibilities is the legal and is all about following the law. The businesses should not only be profit driven but at the similar time they must respect the laws and regulations pr oduced by regimen and it is expected that the businesses would keep their economic activities inside the framework of the law and pay by the rules of the game.The ethical responsibilities are cerebrate to fairness and morality. The peoples rights and beliefs must be respected, any kind of harm, material or social, must be avoided and any harm caused by others must be prevented.The last layer is the philanthropic responsibilities which urge the businesses to be good corporate citizens. The businesses through their activities must contribute resources to the community and most meaning(a)ly must be able to help to remediatement of the quality of life.Carroll displace the four layers of responsibility in a pyramid in allege to show the strong connection betwixt the four kinds of responsibilities. If a kind of responsibility in the pyramid model is absent consequently the ones above cannot be achieved.Lantos (2001) characterises the Carrolls pyramid model of CSR as altruistic o r improver and argued that the firm will be good to use it as market too in secern to promote its image. Following this view Lantos (2001) proposes a new model of responsibilities by reclassifying Carrolls pyramid from four to three layers. The first layer of Lantos model is the Ethical CSR and takes economic, legal and ethical responsibilities as one group. The second layer is the Altruistic CSR which is equal to Carrolls philanthropic layer and suggests that businesses must contribute to the community even if a part of the profits must be sacrificed. The last layer of Lantos model is the Strategic CSR where businesses are fulfilling their philanthropic responsibilities not only because of generosity but also because they expect financial returns from the positive publicity.2.5 Business moral philosophical system and Corporate Social ResponsibilityBusiness Ethics and Corporate Social Responsibility are two block related to concepts but they are not identical. As it can be s een Business Ethics play a very important exercise in Carrolls Pyramid of responsibilities as Ethics Responsibilities are placed in the second highest layer. Both concepts refer to values, goals and decision making based on something more than however making a profit (Mullerat, 2010). In general terms the bottom line of morality is individually doing the right thing while avoid evil and harmful actions for you and the others in your activities. On the other hand CSR is more about the obligations that an organisation must submit over its stakeholders than just its shareholders. A socially responsible organisation must act ethically (Mullerat, 2010).Phatak, Bhagat and Kashlak (2005) define Business Ethics as the moral thinking and analysis by corporate decision-makers and other members regarding the motives and consequences of their decisions and actions. Furthermore, Ferrell and Fraedrich (1998) add that business morals compromises moral principles and standards that guide behav iour in the world of business. The concept of Business Ethics is vital for every self-respected organisation and this is why many companies today develop codes of ethics and make truenesss about their ethical behaviour to the public (Fisher, 2003).According to Seitel (2001), the organisations develop ethics codes in order toIncrease public trustfulness Due to various scandals, mainly concerning corruption and briberies inside organisations, the publics avow for businesses has been declined. Thus, companies have decided to adopt the ethics code in order to improve their image.Stem the tight of regulation Due to the declining trust and confidence of the public for businesses, the governments increased their legislations and regulations in order to reverse the situation. The companies adopted the ethics codes in order to show that they have ethical behaviour and can be trusted.Improve internal regulations Due to the increase of the size of organisations and the development of multi national operations it is essential that some codes of conduct must be created in order to have the same behaviour standards among the employees.Business ethics depend on two main factors, culture and time (Svensson and Wood, 2003). The business environment culture is influenced by traditions, religion, ethical values and individuals and can be defined as what is accepted and what is unaccepted. The political partys success can be affected if divergent opinions, that is to say different cultures, cannot be adopted satisfactory by the organisation. Additionally, what is accepted and what is unaccepted can be affected by the business time element. The business world is a fast changing environment and what is considered ethical today it can turn out to be injure tomorrow. As it can be seen the success or the failure of a business is closely connected with ethics and that is why Business Ethics must be used as a corporate philosophy rather than a corporate code in every organisatio n.To conclude, Johnson et al. (2005) argue that the societys expectations, which have major influence on companies and organisations, are based on three directs of Business Ethics. The macro level is the first one and is related to the ethical posture of the company. Simply, the macro level is related to the extent in which the organisations are willing to do more than their legal requirements in order to satisfy their stakeholders. The second one is a part of the macro level and is the Corporate Social Responsibility level. This level is concerned the ability of organisations to cudgel the minimum requirements needed in order to maintain the organisations ethical stance. The individual or managerial level is the last level of Business Ethics. This is a very important level since is connected with the behaviour and actions of individuals inside the organisation.2.6 Drivers of Corporate Social ResponsibilityThe current momentum behind Corporate Social Responsibility is being built based on a variety show of very important factors. Ernst and Young (2002) mention that there are atomic number 23 key drivers which encourage the increasing business focus on CSR. These are (1) greater stakeholder awareness of corporate ethical, social and environmental behaviour, (2) direct stakeholder pressures, (3) investor pressure, (4) coadjutor pressure and (5) an increased sense of social responsibility (cited in Jones, protect and Hillier, 2006).Panwar et al. (2006), argue that there are diverse motivations that lead to the adoption of CSR by the organisations. For example a business is adopting CSR in order to meet mandate legal requirements aimed at controlling destructive business practices while some other business is using CSR in order to increase its merchandiseivity and improve its financial performance. It is also suggested that a company by using CSR in its practises can improve functional areas such as market lay and risk management.According to Wood (1991) , the concept of CSR is being driven by three major principles. Firstly, businesses are obliged to use their power responsibly since they are above all social institutions. Secondly, the responsibility for the outcomes of the involvement with the public is upon businesses. Lastly, discretion must be exercised in decision making processes by the individual managers who are also moral agents.Andriof and McIntosh (2001) opine that the driving force behind the concept of CSR is the consumers and employees. These two categories are holding the power in the market system nowadays. Consumers and employees are now well informed about the several challenges the world has to face and they do not really believe that the governments can change things. They accept that corporations are the most powerful social institutions of the present era and most importantly they are willing to takings those corporations who are responsive to their concerns.Finally, Girod and Bryane (2003) use a strategic marketing view arguing that CSR is a key beak to create, develop and sustain tell apart brand names. Furthermore, the Commission of the European Communities (2002) argues that the organisations in order to better react to the fundamental changes in the overall business environment they adopted CSR and used it as an important element in new and emerging forms of governance. These changes include globalisation and the responsibilities companies feel the need to address, as they increasingly source products and services in developing countries the issues of image and reputation, which have become increasingly important elements in corporate success and the need for companies to recruit and retain exceedingly skilled personnel (cited in Jones, et al., 2006).2.7 Benefits of Corporate Social Responsibility umteen organisations are using nowadays CSR as a marketing tool due to the fact that the performance of CSR practices can bring to the organisation a wide range of potential benefi ts, both direct and indirect.The Department of employment and Industry (DTI) has said that implementing a CSR policy, can bring real business benefits by reducing risk, by enhancing brand value, by opening doors and creating good will, and by improving lag efficiency and morale. It can also puff stable and ethical investment and add competitive edge (Chartered add of Building, Report)According to Mackey, Mackey Barney (2005) in the case that a company surpasses the minimum CSR requirements then the potential benefits can lead to a positive effect to the companys performance and value.Gildea (1994) and Zaman et al. (1991), stress out that look has shown that companies that care for the environment and demonstrate good CSR practices experience increased consumer purchase preference in increment to increased investment appeal (cited in Panwar et al., 2006). Many consumers prefer to cloud for ethical business. A survey conducted by Cone Inc. (2004) showed that 91% of the consum ers have a more positive image of a product or a company when it back downs a cause. The 90% of the consumers would consider switching to other companys product or services if they found out about a companys any unlawful or unethical practises. In addition, Muckiewicz (1993) supports that the reputation of an organisation plays a vital role as research studies show that 9 out of 10 consumers use it in order to decide which product or service they will buy from those that are similar in price and quality.According to Bernstein (2004), CSR benefits both the company and the community. Due to use of CSR the corporate culture and corporate name of the company can be modify significantly thus the best employees can be attracted and the motivation of the workforce will remain in high levels. The society benefits from CSR practices as well through a variety of services and action, though the company has to create some sort of societal benefit in order to be called socially responsible.So me of the potential benefits that a business can have from the use of CSR practices can include improved financial performance and favourableness reduced operating costs long-term sustainability for companies and their employees increased staff commitment and involvement enhanced capacity to innovate good relations with government and communities better risk and crisis management enhanced reputation and brand value and the development of closer links with customers and greater awareness of their needs (cited in Jones et al., 2006) . Table 1 presents a summary of business benefits of CSR.TABLE 1Concluding, it must be noted that the benefits from the adoption of CSR practises can never be predicted or be constant since each company operates in a different and always changing environment. Barnett (2007) adds that this unpredictability could lead to limited support for CSR initiatives from the board, in times of financial instability. Thus, the business case supporting CSR has to be spe cific for every company and based on Rowley and Berman (2000) CSR achievements of an organisation cannot be collated against some standards, since those does not exist. Furthermore, McWilliams and Siegel (2001) point out that the potential existence of those standards would discontinue CSR to be considered as part of the investment decisions, as the company would be able to make judgements for its business case in a more formal way.2.8 Criticism against Corporate Social ResponsibilityThe concept of CSR, as it can be seen from the various definitions presented on previous paragraphs, is based upon the principle that businesses do have another responsibility than just making profits. either organisation has a responsibility towards the society, its people and the environment as well. At the same time, many are those who are opposed the idea of integrate CSR practices into their corporations and they believe that shareholders interest can be conflicted by operating a good business.D r Milton Friedmann (1970), a renowned economist, in his article The Social Responsibility of Business is to Increase its Profits affirms that there is one and only one social responsibility of business is to use its resources and engage in activities intentional to increase its profits so long as it stays within the rules of the game, which is to say engages in open and free competition without deception or fraud. According to his economic model the organisation is an economic institution which should only focus in the economic scope. Organisations are seen purely as legal entities incapable of value decisions. A manager who uses a firms resources for non-profit social purposes is idea to be diverting economic efficiency and levying an illegal tax on the organisation (Balabanis, Phillips and Lyall, 1998).Following this view Dr Robert Barrington (2008) states that the managers are concentrated on crackers issues rather than hard issues of the bottom line and this is something that is costing money to the shareholders. Moving further Frankental (2001), conclude that CSR is simply a public relations institution and it will remain like this. He believes that CSR can only have real substance if it embraces all the stakeholders of a company, if it is reinforced by changes in company law relating to governance, if it is rewarded by financial markets, if its definition relates to the goals of social and bionomical sustainability, if its implementation is benchmarked and audited, if it is open to public scrutiny, if the compliance mechanisms are in place, and if it is embed across the organisation horizontally and vertically.Henderson (2001) after the examination of various issues related to the concept of CSR comments that the current widely-held doctrine of CSR is deeply flawed. It rests on a ludicrous view of issues and events, and its general adoption by businesses would reduce welfare and step down the market economy. In the same motion Moir (2001) suggest s that those who adopt the neoclassical model of business would follow the view that the only social responsibilities that a corporation can have are to provide employment, pay taxes and mainly to exploit its profits therefore, maximise its shareholders value.On the other extreme of the arguments above, Dave Packard, the co-founder of Hewlett Packard Company once said I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a companys existence, we have to go deeper and find the real reasons for our being. We inevitably come to the result that a group of people get together and exist as an institution that we call a company so that they are able to accomplish something collectively that they could not accomplish separately they make a contribution to society (cited in Handy, 2002).Concluding, Freeman (1984) argues that a corporation is wrong to be seen just as a private economic institution, as it was suggested by Fried man (1970), but it has to be also seen as a social institution. This way, corporations would be responsible for any of their actions against the people, the community and the environment. Based on his Stakeholder Theory, companies operations should not be based on the interests of their shareholders but they have to be based on the interested of their stakeholders.2.9 Corporate Social Responsibility and StakeholdersThe definition given about the concept of CSR from Johnson et al. (2005) includes the words obligations to stakeholders, which indicates that stakeholders have an important role to play in this extent.Freeman (1984), the father of the Stakeholder Theory of the firm, defines stakeholders as any group or individual who can affect or is affected by the achievement of the organizations objectives. The Stakeholder Theory of the firm is used as a basis to analyse those groups to whom the firm should be responsible (Moir, 2001).The identification of the different stakeholder gro ups of the organisation is extremely important during the implementation of CSR practices. Usually the stakeholder groups are confused into primary and secondary stakeholders. According to Clarkson (1995) a primary stakeholder group is one without whose continuing participation the corporation cannot survive as a freeing concern, while a secondary stakeholder group is those who influence or affect, or are influenced or affected by the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival. Based on those definitions a primary stakeholder group contains shareholders and investors, employees, customers, suppliers, governments and communities. The secondary stakeholder group includes the media and a wide range of special interest groups (Clarkson, 1995).According to Freemans (1984) definition of stakeholders the relation between the company and its stakeholders can be described as two-way. Castka et al. (2006) support the vie w that the implementation of CSR is all about the right choices and strategic decisions and comment that the dilemmas that an organisations stakeholders can have are which choices and decision must necessitate in order to satisfy. Berman, Wicks, Kotha and Jones (1999), in order to find a outcome for those dilemmas, derived two distinct stakeholder management approaches the instrumental and the normative approach. The first, instrumental approach, suggests that concern for stakeholders is motivated by the perception that financial performance can be improved. The second, intrinsic stakeholder commitment approach, assumes that organisations have a normative (moral) commitment to profit stakeholders interests (Castka et al. 2006). The instrumental approach was the one empirically supported in Berman et al. (1999) research while Harrison and Freeman (1999) mention that the conduction of more research is essential in order to clarify the model of the normative approach.Although furthe r research is required it can be clearly anticipated, through the examination of various literature, that the instrumental approach is the most desirable among researchers. McWilliams and Siegel (2001) suggest that corporations need to guardedly consider in which aspects of the CSR to invest in and they comment that by using cost-benefit analysis the managers can ideally determine the level of CSR. Additionally, Agle, Mitchell and Sonnenfeld (1999) argue that the decision to make a CSR investment is driven by the needs of the most powerful stakeholders within the organisation, such as top management staff and is usually connected with their desire to gain more profits and increase the shareholders value.Finally Castka et al (2004) believe that the purpose of CSR is an investment and it must be considered and treated like one. Moving further they suggest that the balance between the need for maximizing profit from CSR and the demand for CSR from multiple stakeholders is the key to a core return on investment in CSR (Figure 2). In order to achieve this balance stakeholders expectations should be assessed and examined through dialogues and must be translated and include into the companys strategy plan.FIGURE 22.10 Areas of Corporate Social ResponsibilityAndriof and McIntosh (2001) preserve that CSR is not chequebook philanthropy, nor a study based on business ethics. They argue that the concept of CSR can be described as a vision that corporate leaders have for their business which is beyond of just making profits. CSR has an impact on every activity of the company and can affect areas either inside or outside the company.According to Andriof and McIntosh (2001) the four distinct areas that CSR encompasses areThe communityThe EnvironmentThe MarketplaceThe WorkplaceBy operating within these four areas companies can conduct specific programmes and make the difference and can actively monitor, evaluate and change their effects of their activities. The implementat ion of CSR and the thinking behind becoming involved in these areas represents the new way of doing business.2.11 Activities of Corporate Social ResponsibilityThe concept of CSR can be divided into many and diverse domains. Sen and Bhattacharya (2001) provide six broad domains of CSR activities, based on a comprehensive summarisation of CSR domains contained in Socrates The Corporate Social Ratings reminder (Kinder, Lydenberg, Domini Co. Inc. 1999), a database that describes and rates more than 600 companies in terms of their CSR records. These domains of CSR activities areCommunity Support The company provides support to the community with the use of health and educational and housing programs for financially disadvantaged. The generous and innovative giving is promotedDiversity The company provides initiatives for sex, race, family, sexual orientation and disability diversityEmployee Support The company promotes health and safety, ensures job security and profit sharing, develo ps relations with the labour unions and allows employees involvement.Environment The company avoids the use of hazardous waste management techniques, uses and produces environmental friendly products, develops contaminant control and recycling techniques.Non-domestic Operations The company prevents operations in countries where human right violations occur or unhealthy labour practices take place. product The company produces safe product and promotes research and development and innovation.Following the same line Johnson et al (2005) present a checklist of the organisations responsibilities. Those responsibilities are divided into two categories, the internal and the external aspects of CSR, based on the areas that the organisations activities can affect. Internal aspects of the companys activities can include employee welfare, working conditions, job design and intellectual property. External aspects of activities can include environmental issues, products, markets and marketing, suppliers, employment, community activity and human rights.2.12 Factors influencing Corporate Social Responsibility