What are the ethical and economic arguments for CSR?
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Broadly, there are three kinds of arguments in favor of placing corporations, at least large and fully developed ones, within an ethical context of expansive social and environmental responsibilities: Show
The Externality ArgumentThe second type of argument favoring corporate social responsibility revolves around externalities. These attach corporations to social responsibilities not morally but operationally. An externalityIn the economic world, a cost of a good or service that isn’t accounted for in the price. in the economic world is a cost of a good or service that isn’t accounted for in the price (when that price is established through basic laws of supply and demand). For example, if a corporation’s factory emits significant air pollution, and that results in a high incidence of upper respiratory infections in the nearby town, then a disproportionately high number of teachers and police officers (among others) are going to call into work sick throughout the year. Substitute teachers and replacment officers will need to be hired, and that cost will be borne by everyone in town when they receive a higher tax bill. The corporation owning the pollution-belching factory, that means, gets the full amount of money from the sale of its products but doesn’t pay the full cost of producing them since the broader public is shouldering part of the pollution bill. This strikes many as unfair. Another example might be a company underfunding its pension accounts. The business may eventually shut its doors, deliver final profits to shareholders, and leave retired workers without the monthly checks they’d been counting on. Then the government may have to step in with food stamps, welfare payments, and similar to make up for the shortfall, and in the final tabulation, the general public ends up paying labor costs that should have been borne by shareholders. Externalities, it should be noted, aren’t always negative. For example, the iPhone does a pretty good job of displaying traffic congestion in real time on its map. That ability costs money to develop, which Apple invested, and then they get cash back when an iPhone sells. Apple doesn’t receive, however, anything from those drivers who don’t purchase an iPhone but still benefit from it: those who get to where they’re going a bit faster because everyone who does have an iPhone is navigating an alternate route. More, everyone benefits from cleaner air when traffic jams are diminished, but again, that part of the benefit, which should channel back to Apple to offset its research and production costs, ends up uncompensated. Whether an externality is negative or positive—whether a company’s bottom line rises or falls with it—a strong argument remains for broad corporate responsibility wherever an externality exists. Because these parts of corporate interaction with the world aren’t accounted for in dollars and cents, a broad ethical discussion must be introduced to determine what, if any, obligations or benefits arise. Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental. To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment instead of contributing negatively to them. Key Takeaways
1:37 Click Play to Learn What CSR IsUnderstanding Corporate Social Responsibility (CSR)Corporate social responsibility is a broad concept that can take many forms depending on the company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands. For a company to be socially responsible, it first needs to be accountable to itself and its shareholders. Companies that adopt CSR programs have often grown their business to the point where they can give back to society. Thus, CSR is typically a strategy that's implemented by large corporations. After all, the more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry. Small and midsize businesses also create social responsibility programs, although their initiatives are rarely as well-publicized as those of larger corporations. Types of Corporate Social ResponsibilityIn general, there are four main types of corporate social responsibility. A company may choose to engage in any of these separately, and lack of involvement in one area does not necessarily exclude a company from being socially responsible. Environmental ResponsibilityEnvironmental responsibility is the pillar of corporate social responsibility rooted in preserving mother nature. Through optimal operations and support of related causes, a company can ensure it leaves natural resources better than before its operations. Companies often pursue environmental stewardship through:
Ethical ResponsibilityEthical responsibility is the pillar of corporate social responsibility rooted in acting in a fair, ethical manner. Companies often set their own standards, though external forces or demands by clients may shape ethical goals. Instances of ethical responsibility include:
Philanthropic ResponsibilityPhilanthropic responsibility is the pillar of corporate social responsibility that challenges how a company acts and how it contributes to society. In its simplest form, philanthropic responsibility refers to how a company spends its resources to make the world a better place. This includes:
Financial ResponsibilityFinancial responsibility is the pillar of corporate social responsibility that ties together the three areas above. A company make plans to be more environmentally, ethically, and philanthropically focused; however, the company must back these plans through financial investments of programs, donations, or product research. This includes spending on:
VolunteeringSome corporate social responsibility models replace financial responsibility with a sense of volunteerism. Otherwise, most models still include environmental, ethical, and philanthropic as types of CSR. Benefits of Corporate Social ResponsibilityAs important as CSR is for the community, it is equally valuable for a company. CSR activities can help forge a stronger bond between employees and corporations, boost morale, and aid both employees and employers in feeling more connected to the world around them. Aside from the positive impacts to the planet, here are some additional reasons businesses pursue corporate social responsibility. Brand RecognitionAccording to a study published in the Journal of Consumer Psychology, consumers are more likely to act favorably towards a company that has acted to benefit its customers as opposed to companies that have demonstrated an ability to delivery quality products. Customers are increasingly becoming more aware of the impacts companies can have on their community, and many now base purchasing decisions on the CSR aspect of a business. As a company engages more in CSR, they are more likely to receive favorable brand recognition. Investor RelationsIn a study by Boston Consulting Group, companies that are considered leaders in environmental, social, or governance matters had an 11% valuation premium over their competitors. For companies looking to get an edge and outperform the market, enacting CSR strategies tends to positively impact how investors feel about an organization and how they view the worth of the company. Employee EngagementIn yet another study by professionals from Texas A&M, Temple, and the University of Minnesota, it would found that CSR-related values that align firms and employees serve as non-financial job benefits that strengthen employee retention. Works are more likely to stick around a company that they believe in. This in turn reduces employee turnover, disgruntled workers, and the total cost of a new employee. Risk MitigationConsider adverse activities such as discrimination against employee groups, disregard for natural resources, or unethical use of company funds. This type of activity is more likely to lead to lawsuits, litigation, or legal proceeds where the company may be negatively impacted financially and be captured in headline news. By adhering to CSR practices, companies can mitigate risk by avoiding troubling situations and complying with favorable activities. CSR strategies may be difficult to strategically assess because not all benefits may be financially translatable back to the company. For example, it might be very difficult to assess the positive impact to a company's brand image that planting 1 million trees may have. ISO 26000In 2010, the International Organization for Standardization (ISO) released ISO 26000, a set of voluntary standards meant to help companies implement corporate social responsibility. Unlike other ISO standards, ISO 26000 provides guidance rather than requirements because the nature of CSR is more qualitative than quantitative, and its standards cannot be certified. ISO 26000 clarifies what social responsibility is and helps organizations translate CSR principles into practical actions. The standard is aimed at all types of organizations, regardless of their activity, size, or location. And because many key stakeholders from around the world contributed to developing ISO 26000, this standard represents an international consensus. Examples of Corporate Social ResponsibilityStarbucksStarbucks has long been known for its keen sense of corporate social responsibility and commitment to sustainability and community welfare. According to its 2020 Global Social Impact Report, these milestones include reaching 100% of ethically sourced coffee, creating a global network of farmers and providing them with 100 million trees by 2025, pioneering green building throughout its stores, contributing millions of hours of community service, and creating a groundbreaking college program for its employees. Home DepotAs part of its annual reporting on ESG, Home Depot highlighted its achievements on focusing on its employees, operating sustainably, and strengthening its communities. In fiscal year 2020, it invested over $2 billion in increased salaries and benefits to enhance its employee well-being. It also reduced energy consumption by 14% from the year prior and are on track to reduce company-wide emissions by 40% by 2030. General MotorsIn 2021, General Motors was placed on the Bloomberg General Equality Index for a fourth consecutive year as well as being placed in Diversity Inc.'s top 50 companies for diversity for a sixth consecutive year. In addition, it has planned for a $35 billion investment from 2020 to 2025 in electric vehicles and aims for 100% renewable electricity at U.S. sites by 2025. Why Should a Company Implement CSR Strategies?Many companies view CSR as an integral part of their brand image, believing that customers will be more likely to do business with brands that they perceive to be more ethical. In this sense, CSR activities can be an important component of corporate public relations. At the same time, some company founders are also motivated to engage in CSR due to their convictions. Why Is CSR Important?The movement toward CSR has had an impact in several domains. For example, many companies have taken steps to improve the environmental sustainability of their operations, through measures such as installing renewable energy sources or purchasing carbon offsets. In managing supply chains, efforts have also been taken to eliminate reliance on unethical labor practices, such as child labor and slavery. Although CSR programs have generally been most common among large corporations, small businesses also participate in CSR through smaller-scale programs, such as donating to local charities and sponsoring local events. What Are the Benefits of CSR?CRS initiatives strive to have a positive impact on the world through direct benefits to society, nature and the community in which a business operations. In addition, a company may experience internal benefits through the initiatives. Knowing their company is promoting good causes, employee satisfaction may increase and retention of staff may be strengthened. In addition, members of society may be more likely to choose to transact with companies that are attempting to make a more conscious positive impact beyond the scope of its business. What Are the 4 Types of CSR?CSR initiatives are often broken down into four categories: environmental, philanthropic, ethical, and economic responsibility. Environmental initiatives focus on preservation of natural resources, while philanthropic initiatives focus on donating to worthy causes that may not relate to a business. Ethical responsibility ensures fair and honest business operations, while economic responsibility promotes the fiscal support of the goals above. What Companies Have the Best CSR?There is no single defining rubric for evaluating the CSR of all companies. Various sources will review and compile rankings differently. Since 1999, Corporate Responsibility Magazine has ranked the top 100 Best Corporate Citizens each year among the 1,000 largest U.S. public companies. Rankings are determined based on employee relations, environment impact, human rights, governance, and financial decisions. In 2021, the top five ranked companies on the list included Owens Corning, General Motors, H.P., Cisco, and Intel. The Bottom LineCompanies striving to measure success beyond bottom line financial results may adopt corporate social responsibility strategies. These strategies may target environmental, ethical, philanthropic, and fiscal responsibility that extend beyond the products they sell. CSRs aim to make the world a better place beyond transacting with customers and may result in company-specific benefits as well. What are the ethical arguments for CSR?CSR's moral argument derives from intrinsic motives namely moral rules and personal values. In fact, based on the Kantian moral philosophy and according to the moral perspective, CSR should be considered as end in itself and not a means to achieve economic or personal goals.
What is the economic argument for CSR?Using the model, we argue that firms can benefit stakeholders while maximizing profit for shareholders only if their CSR efforts are sufficiently differentiated from those of non-profits, with this effect being stronger if the firm can leverage capabilities from its core business to lower its costs of undertaking CSR.
What are the major arguments for corporate social responsibility?Top 9 Arguments in Support of Social Responsibility of Business. Public Requirements: ... . Favourable For Business: ... . Moral Justification: ... . Socio-Cultural Norms: ... . Business Can Shoulder Responsibility: ... . Responsibility Must Correspond With Power: ... . Public Image: ... . Government Regulations:. What are economic responsibilities in CSR?Economic responsibility refers to the practice of making financial decisions based on a commitment to doing good. Some common examples of economic responsibility include investing in alternative energy sources, putting more money into education programs, and funding local charities as a way of bolstering their mission.
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