1.0 IntroductionIn the recent years, the society has raised the expectations of companies concerning social standard and environmental standard, calling for Corporate Social Responsibility (CSR). Companies are being asked to apply sustainability principles to their strategic plan as well as daily operation. Therefore, they have no choice but to redesign the frameworks, business models and rules. The issue has caused heated argument. What exactly does CSR refer to? Is CSR compliance a good thing or a bad thing? What are the advantages and disadvantages lying in time and resources allocation to develop a CSR approach? This study will look in these questions one by one, and at last make a conclusion based on the analysis.
2.0 Main body
2.1 Definition of CSRAccording to Jeremy (2004), the notion of CSR is difficult to pin down. Friedman (1970), a neoliberal scholar, stated that the one and only corporate social responsibility is to raise its profits by using available resources and engaging in activities as long as it does not break the rules of fair play, meaning taking part in open competition with no artifice or fraud. Neo-Keynesian school, however, defines CSR differently. Thomas (1980) defined CSR as corporation obligation to voluntarily repay groups in society distinct from stockholders, and beyond the duty set down by law. That is to say, a company commit to operate not only in an economically sustainable manner, but also in socially, and environmentally sustainable manner. All in all, the disagreement arose over a different understanding of accountability. The theoretical development of CSR has gone through three stages. The first stage from the 1930s to 1940s focuses on corporate-level functions, such as HR, IT, finance, feedstock purchasing, global strategy, risk management, interrelationship among parent company and the subsidiaries. The second stage from the 1950s to 1960s mainly discusses philanthropic work and donation of companies, and deepens corporate-level functions. The third stage from the 1970s to 1990s shifts the focus from ethical accountability and social duty of a company, to corporate social responsibility towards stakeholders such as investors, employees, upstream suppliers, downstream buyers, strategic partners, local communities, and the Mother Nature, and finally to whether a multinational company should be a good citizen. Criticism of corporate practices escalated in recent years as corporate scandals are not hard to see. After realizing both sweatshops and exploitation of child labor abound in developing countries, a lot of community activists in developed countries start to protest against corporations (Bendell, 2004). A company can no longer enjoy economic prosperity while being isolated from the agents on which selfish and ethical actions impact.
2.2 Advantages of CSRCustomers nowadays refuse to tolerate immoral business practices and repel firms that act irresponsibly. Progress of social media has resulted in quick online exposure of negative or destructive practices to the public. Organizations are becoming more accountable for their actions than ever before. The study of Barnett (2007) shows there is always a close connection between corporate financial performance and corporate social responsibility. As for external benefits, CSR practices generate both internal benefits and external benefits, either tangible or intangible.
As Logsdon and Wood (2002) state, CSR compliance can be deemed as public relations campaigns, generating external benefit of corporate brand reputation up-gradation. At present more and more firms are taking a wide range of initiatives include giveaways, fundraising drives and events to benefit communities. For instance, in 2004, KFC was reported to have wasted tons of chicken's parts during the production process. KFC rapidly reacted and held a news conference to explain the situation, but the mass did not buy it, and blamed KFC for wasting so many foods. Again in 2011, KFC was reported to have produced fake soya-bean milk with milk powder from China. Affected by scandals repeatedly, KFC thus encountered a market share lose, to say 30% in China last year. Therefore it decided to rebuild its brand reputation. "Spread a Smile"(2007), "Hunger to Hope"(2009) and “The Journey of Hope”(2012) all attest to its determination. Say that the last campaign attempted to deal with public concerns towards the poor people in South Africa and triggered a lot public sympathy for them. All the humanitarianism endow with KFC public recognition and praise. Investment and funding opportunities favor firms that have public recognition and praise. This is also supported by a recent market survey carried out by the UK Small Business Consortium, suggesting that two in three businesses believe that social and environmental responsibilities contribute to a more successful business.
Besides, CSR also helps to cut expenses of energy and operation as well as limit business risk (Orlitzky & Benjamin, 2001). Other external benefits include customer good will (Solomon & Hansen, 1985), and boosting sales revenue.
As for internal benefits, CSR compliance enable firms to attract excellent staff, to boost morale (Branco & Rodrigues, 2006) and loyalty (Srinivas, 2002), to enhance commitment (Frank, 1996), to promote trust, and to improve workplace attitude (Fulmer et al., 2003).
2.3 Disadvantages of CSRMajor arguments against CRS will be considered as follows. The most important of all is that CRS practices under some circumstances stand opposite to a firm’s fundamental goal. Social goals may be profitable in the long run, but may jeopardize a firm and put its profit in danger. David (2001) examines the CSR ‘doctrine’, and then states that CSR integration hinders both rich and poor countries flourishing as it restrains competition, destroys economic freedom and undermines the market economy. He rebukes the behavior of pressuring firms to demonstrate their corporate citizenship, which forces firms to take care of many stakeholders and to achieve certain environmental and social aims. CSR, in some extent, may impair economic efficiency and represent taxation on those bearing the costs of such economic inefficiency, i.e. the stockholders. Triple bottom line makes benefits hard to measure, since it is hard to determine the return on investment from social and environmental programs.
Another common criticism is competitive disadvantage. Compared with companies that do not comply with CSR and refused to commit to CSR policies, behaved corporate citizen has a disadvantage. For instance, a company invests necessary resources to constituent the society and the environment but its rival does not. The consequence is that the company retains less resources including money for other business pursuits than its rival. That is to say, without strict industry-wide adherence, companies that put money into CSR programs may fall behind during the competition with others. What’s more, CSR programs may distract the companies from earning profits, since the companies have so much on their plates- to mention a few, human rights, environmental sustainability, community development –that they make less effort in operation and management.
3.0 ConclusionIn this paper, two schools of definition of CSR are introduced and compared. The three stages of CSR theoretical development imply that a company of this age should commit to operate not only in an economically sustainable manner, but also in socially, and environmentally sustainable manner. Actually companies have realized the bottom-line benefits of incorporating sustainability into their DNA. Although CSR practices under some circumstances stand opposite to fundamental corporate goal of earning profits, make firms fall behind in the competition, restrain competition, destroy economic freedom and undermine the market economy, firms that give up their CSR in the downturn will lose customers’ trust and cannot find a firm foothold in the market. That’s because CSR integration, as a right thing to do, is beneficial for attraction and retention, improves corporate brand reputation, helps to cut expenses of energy and operation, limits business risk, boosts sales revenue, enables firms to attract excellent staff, to boost morale and loyalty, to enhance commitment, to promote trust, and to improve workplace attitude. In the future companies are expected to undergone further transformation so that CSR is not managed as a separate deliverable any more, but rather be integrated into business philosophy and becomes the guideline of daily economic practices.
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