Dimensional Aspects Of Corporate Social Responsibility
What is Corporate Social Responsibility?
Corporate social responsibility can be defined as an obligation beyond that required by the law and economics for a firm to pursue long term goals that are good for society.
It contributes to economic developments to improve the workforce’s quality of life and their families, the local community, and society.
In summary, corporate social responsibility is about how a company manages its business process to produce no overall positive impact on society.
Corporate Social Responsibility Means;
- Conducting business in an ethical way and the interest of the wider community.
- It means responding positively to emerging societal priorities and expectations. For example, when society is concerned about global warming, the firm should show some leadership and concern.
- It should be acting properly and seem to be acting properly. It has a willingness to act ahead, and it should be willing to act ahead of regulatory confrontation. It shouldn’t wait for the government to force it to behave properly.
- The company has to balance the shareholder’s interests against the interests of the wider community. Clearly, shareholders require profits; otherwise, the business won’t exist. The community also has to be catered for. Some of the profits might have to be retained and used to improve the workforce or better working conditions, meeting environmental standards and regulations.
Relationship Between Corporate Social Responsibility and Business Ethics
Corporate social responsibility of business ethics is linked. Both concerns both concepts concerned values, objectives, and decisions based on something other than the pursuit of profit.
Socially responsible firms must act ethically.
The Difference Between CSR and Business Ethics.
Business Ethics is concerned with individual actions, which can be assessed as right or wrong by reference to moral principles, and we can see ethics as applied to individuals.
Corporate social responsibility is about the organization’s obligations to all its stakeholders are not just the shareholders. All the stakeholders, their aspirations, and their concerns must, to some extent, be addressed or recognized at least by the organization.
Dimensional Aspects Of Corporate Social Responsibility
There are four dimensions of corporate responsibility.
Economic Dimensions of Corporate Social Responsibility
The company must earn a profit; if it doesn’t earn a profit, it won’t exist. The economic responsibilities are the fundamental layer of Carroll’s CSR pyramid. It involves being profitable. The primary motive for business organizations is to produce goods and services to society at a reasonable price and profit in the process.
Profits from selling goods and services go to shareholders and other investors to survive and grow.
Legal Dimensions of Corporate Social Responsibility
Legal responsibilities are the second layer of the CSR pyramid and coexist with economic responsibilities as fundamental precepts of the free enterprise system. Firms are expected to operate under the legal system and regulations while creating profits for shareholders.
Firms fulfill the “social contract” between firms and society by being legally responsible and comply with the law. Society codifies what is right and what is wrong, and It gets us to recognize what is right, what is wrong in the legal system on board to act accordingly so the firm must comply with the law.
Ethical Dimension of Corporate Social Responsibility
Ethical responsibilities involve activities and practices expected by the society and done by firms voluntarily regarding fairness, justice, and respect for or protection of stakeholders’ moral rights. Ethical responsibilities are voluntary choices of firms since they are not codified into any law or regulation.
These responsibilities reflect social norms, expectations, and concerns of consumers, employees, shareholders, and the community. It’s not just acting for profit, but doing what is right and what’s fair and is not just generating profits.
Voluntary and Philanthropic of Corporate Social Responsibility
Philanthropic responsibilities involve firms’ activities that are aiming to become good corporate citizens by performing altruistic activities. Society and communities expect firms to use their resources to promote social welfare.
This includes actively engaging in acts or programs to promote human welfare and goodwill. Philanthropic responsibility distinguishes itself from ethical responsibilities by a sense of discretion, it is promoting human welfare and goodwill. It is helping people. It’s promoting people on welfare, which is the end game.
It’s helping the workforce, helping the community, being a good corporate citizen, contributing to the community, and the quality of life, of the people, in the community, and society in general.
Debates Incorporate Social Responsibility.
Should business organizations be concerned about social issues and problems?
Is it the obligation of companies to look after society as well? Or should it just make a profit on ah, pay dividends to the shareholders and salaries to the managers and good salaries to the workers?
Should they also be forced, or should they have responsibility for looking after the environment?
There are two schools of thought on the issue.
The Free-Market Views of Corporate Social Responsibility
The business’s job is to create wealth with the interests of the shareholders as the guiding principle.
The free-market view is about making a profit and forgets everything else. It is the job of the lawmakers’ society to make sure that society is working properly.
The free-market view argues that all businesses’ role is to create wealth by providing goods and services to increase their profits and engage in open and free competition without deception or fraud.
That’s the free-market view those of you put forward by a very famous Nobel Prize winner in economics, Milton Friedman. And there are many people from different economics types from different persuasions within the economics school to suggest that it’s got its supporters.
For example, the Austrian economists would say that business’s job to make a profit to survive to compete, and there’s nothing in there about looking after society.
But if you look at the view the Friedman view to create wealth but if it has a chance, it will become a monopoly.
The managers who have been put in charge of a business have no right to give away the owners’ money. That’s the view the managers run the business on behalf of the shareholders, not perhaps involved on a day-to-day basis. Therefore the managers have no right to give away the shareholders’ money. The managers are employed to generate wealth for the shareholders, not to give it away.
It also argued that free markets and capitalism have led to economic and social development improvements in health and longevity. The benefits that we see around us have come to us through capitalism. That’s the argument, and therefore, why make it difficult?
It’s the free market view also, to attract quality workers, it’s necessary to offer good pay and conditions, which leads to a rise in living standards on wealth creation.
Consumers get the product thereafter because the product is sold cheaply and efficiently on the market.
The free markets contribute to the effective management of scarce resources. It’s the managers, look after the scarce resources and put them out into the marketplace.
However, regulation should be kept to a minimum since regulation kills initiative and creates barriers to market entry.
Free-Market Case against Corporate Social Responsibility
- The responsibility of a business is to create shareholder wealth.
- Efficient use of resources will be reduced if the businesses are restricted in how they can produce
- The pursuit of social goals leads businesses away from their primary purpose. The primary person purpose of the business, it’s argued, is to make a profit, not to look after the community.
- Corporate management cannot decide what is into social interest anyway because corporate management is too busy looking after it. Therefore, it is difficult to determine the social interests and who knows what the social interest is.
- If it did do it, it would pass on the costs to the consumers anywhere. It would simply increase the business’s cost, which would be reflected in higher prices later on in the marketplace.
- Corporate social responsibility reduces economic efficiency and profits.
- Directors have a legal obligation to manage the company in the interest of shareholders. Nothing for other stakeholders, so corporate social responsibility would lead to inefficiency and less profit.
- Corporate social responsibility behavior imposes additional costs, which eventually reduces competitiveness, and companies overseas or elsewhere will out-compete.
- CSR places unwelcome responsibilities on businesses rather than governments.
Corporate Social Responsibility View.
Corporate social responsibility view, which businesses should be concerned with social issues. Businesses should make a profit but also spend some of the profits on social issues.
Businesses are in society because society allows them to be there, and therefore, they have a responsibility to look after society.
- Those managing businesses should recognize that they depend on society.
- Business relies on inputs from society and socially created institutions.
- It argued that there is a social contract between business and society because each should recognize the other, and the two of them should behave in a way that supports each other.
Stakeholder Theory of Corporate Social Responsibility
- The theory suggests that business organizations have a responsibility to various groups in society. The internal and external stakeholders are not just the owners are the shareholders.
- This view is that the organizations have an obligation to the internal and external stakeholders to the community, the society internally, the workers, and even some of the managers themselves.
- The responsibility includes responsibility for the natural environment.
- Decisions should be taken in the wider interest, not just in the narrow shareholder interest. Whatever decisions the company takes, it should integrate considerations of the community, society of people, and perhaps people who do not necessarily work for the business people on the outside who would be affected by the business’s behavior.
Arguments for Socially Responsible Behavior.
- It’s the right thing to do.
- It improves the firm’s public image, so it’s good for the firm. It’s good for the company.
- It’s necessary to avoid excessive regulation.
- It can be profitable if companies are behaving responsibly. Customers like the companies on customers were, therefore, discriminate in the marketplace in favor of the products of the companies who are behaving responsibly.
- A better social environment benefits the firm; if the environment is bad it affects the firm,
- It will attract investors. A company that seems to behave properly and well is attractive to investors that want to become involved.
- The employees will be more motivated. They don’t think the company is greedy, taking all the profits and leaving bad conditions behind to see the company as responsible.
- It can also correct social problems that the business has caused. Businesses can create pollution, environment and companies that are acting responsibly can help to fix it.
- This is the practice of acting in a costly and inconvenient way, but which is believed to be in one’s best long-term interests.
- Enlightened self-interest means it will be costly, but you benefit from it in the long term.
- Anita Roderick, the Body Shop founder, summarized it; being good is good for business.
Corporate Social Responsibility Benefits
Corporate social responsibility can benefit the firm in several ways;
- It can help attract and retain good staff because people want to work for that business.
- It can attract green and ethical investment. People want to invest in that business.
- It attracts ethically conscious customers, customers who say this business is supporting the community.
- It could do could actually lead to a reduction in costs through recycling.
- It differentiates the firm from its competitors and can be a source of competitive advantage.
- With a competitive advantage that can lead to increase profitability in the long run.