Business organisation is a group of individuals that work together to achieve their aim and targets. Vision is the most important attribute that has to be developed by business enterprises so that a directional flow is gained for organisational activities and strategies. Characteristics of vision helps in determining orientation of a company. Corporate social responsibility (CSR) is one such approach which is used by companies to attain sustainability. This report will help in understanding the concepts and dimensional aspects of CSR.
Be it TESCO or Microsoft, the purpose behind inculcating CSR in business functioning is to develop an approach which tends to be more profitable and fruitful for not only the company but for all stakeholders related to it. All implications, advantages, disadvantages and the effects that CSR can have on strategies and outcomes of company's actions have been elaborated in this report. The impact when business enterprises function with corporate social responsibility is also assessed in the following report. This shall help in enhancing knowledge regarding the influence and changes which global businesses have experienced due to industrialisation.
CSR Responsibility is a term that defines accountability of a person or a group towards a subject. When businesses are concerned, essence of responsibility remains the same but area of application differs. For instance, marketing head of TESCO has to fulfil his responsibility of delivering the best marketing strategies which shall help in extracting more profits. On the other hand, responsibility of a ground staff employee is to complete the task that has been assigned to him for the day. Considering the organisation as a whole, responsibility differs. Company is accountable to meet the expectations of employees and clients simultaneously so that business objectives will be met effectively (Lindgreen and Swaen, 2010). The operations of a company have a direct impact over the society and communities which are a part of its external environment.
For example: Dell is one of the largest software and hardware production companies when it comes to computers and laptops. This company has a social responsibility towards the clients and customers that are purchasing or investing their money in organisation by some means. Hence, arises the concept of corporate social responsibility (Schneider and Schmidpeter, 2012). It is an approach which helps companies in understanding the impact their decisions and actions can have on citizens or stakeholders. It is a form of self-regulation which is developed to bring in corporate conscience. Being a regulatory mechanism, CSR helps in serving products and services with a humane meaning. This can be understood better with support of an example provided ahead.
Red Carnation Hotel is amongst the top branded hotels in UK. It has three and five star hospitality facilities. The responsibility of organisation is to deliver efficient services to customers with affordable and standardised pricing. When corporate social responsibility concept is involved in its functioning strategies then firm's responsiveness towards customers increases (Carroll, 2015). They have to look after the fact that organisational goals are not accomplished unethically for earning more profits. No exploitation is said to exist when CSR is implemented.
Henceforth, it is essential to understand that there is deep routed link between ethical functioning, sustainability and corporate social responsibility. All these concepts have equal contribution in developing positive corporate image of a company. Essence of corporate social responsibility is based on the initiatives and actions that a corporation plans for the benefit of society without concerning about profit loss (Aguinis and Glavas, 2012). The size or turnover of company are not considerable while implementing CSR. The assessment of effects on environment or social wellbeing as well as on national economy are some matters of concern when a company adopts corporate social responsibility approach.
Comparing CSR with business ethics and sustainability
Business ethics are certain standards or policies which have to be followed by organisations for developing an ethical governing structure. It is important to have business ethics in functioning so that unfair practises will be prohibited. The variability of these ethics differs from one level to another but core essence of this attribute remains the same for all individuals working in a company (Gainer, 2010). Also referred as corporate ethics, business ethics are like rules and regulations which every person working in the company has to follow. It helps in developing morale approach towards implementation of strategies. Various issues and problems that arise in the business environment can be resolved by using these rules. Legalising a system is beneficial for both; company and its stakeholders (Barnea and Rubin, 2010).
What would be a situation where resources won't exhaust and the business cycle will continue to exist? This case is only possible when sustainability is achieved. Endurance of systems to survive for prolonged periods without affecting external or internal environments (El Ghoul and et. al., 2011). Any business organisation can achieve sustainability when its activities and operations do not affect the ecology, economics or culture adversely. On the other hand, sustainable competition is a situation where a company gains position at which its customer share and profit margins are not hindered by any external influence. Being an idealistic approach, this concept helps in safeguarding consumers from the exploiting practises of business enterprises (Bénabou and Tirole, 2010).
Corporate social responsibility was developed on the basis of these two concepts. In order to develop an insight over the comparative study between CSR, business ethics and sustainability, an example can be taken. Thomas Cook is a renowned organisation in travel and tourism sector. The transition of individual preferences of customers from travel expeditions to enclave tourism have led organisations to develop different marketing strategies. Thomas Cook in this globalising world has shifted its focus from earning profits to achieving sustainability. Hence, the organisation changed its functioning strategies and revised the basic rules and regulations which were earlier established. Moreover, company has increased its participation in awareness programs that will help to reduce the impact of enclave tourism.
From the above example, it is understood that Thomas Cook developed a corporate social responsibility towards ecological disturbances that have been a result of degrading activities during travel expeditions. The changes in business ethics as well as in rules and regulations have improved internal environment while a new approach towards sustainability is visualised through aim and objectives (Kim, Park and Wier, 2012). The business ethics of a company help in binding organisational activities with ethical functioning. However, corporate social responsibility is used as an approach through which sustainability can be obtained.
Current status of CSR in UK/ comparison with other countries
Time has witnessed that major economic changes in functioning of a country have been due to influence of activities of large business organisations. Industries like oil refineries, mining, agricultural sector, manufacturing enterprises, etc. have had a deep impact over the environmental balance of Earth (Kim and et. al., 2010). Despite of the fact that these activities have bought in large scale economic growth but, continuous depletion of resources has created a situation where great danger to human life is estimated. Henceforth, a need to develop corporate social responsibility amongst industrialists was recognised and so, the concept was introduced (Orlitzky, Siegel and Waldman, 2011).
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UK being a nation with great ecological diversity and beautiful landscapes, is considered as amongst the top 5 powerful economies in the world. The country is a part of OECD i.e. Organisation for Economic Co-operation and Development. This collaboration works with an aim to promote policies that are oriented with economic and social benefits of individuals across the globe. UK being a part of this convention has developed legal structures which companies have to follow (Brammer, Jackson and Matten, 2012). The essence of corporate social responsibility lies in the actions that company plans to take for the welfare of people and society in which it has been operating. The country has made its export-import regulations stricter. This has helped in reducing illegal activities like tax dodging, terrorist’s activities, unfair taxations, etc.
Emergence of CSR can be dated back to 1930s in the era of Great Depression. Companies were held irresponsible towards employees and the society which led to such brutal effects on innocent individuals (Lai and et. al., 2010). Since then, major developments in the strategic approach towards functioning of a business took place. Different perspectives towards management and operations were obtained and their orientation towards sustainability was aimed. UN upholds Earth Summit that involves participation from all nations across the world. UK has also been participating in this programme so that ecological disturbances that have been caused to the environment due to industrial activities can be controlled (Servaes and Tamayo, 2013).
This is an example of corporate social responsibility that country has taken for welfare and benefits of its citizens and the Earth. There are different goals for sustainability defined in this Summit which shall help in eliminating poverty and support in stimulating sustainable growth and development. While comparing with other countries, the level of economic growth that UK has achieved is remarkable. Apart from this development, country has also evolved with the concept of sustainable tourism (Jackson and Apostolakou, 2010). The use of renewable energy and encouragement of corporate social responsibility amongst various multinationals are some strategic steps taken by UK for achieving sustainability. Country stands at a good position in the world when implementation of CSR is concerned.
CSR in business models and their relationships with stakeholders
Stakeholders are the individuals that hold some interest in the functioning of a company, majorly focusing on profits and investments. There are different types of stakeholders which include employees, shareholders, customers, investors, partners, etc. Business models are developed with a motive to provide maximum benefits to stakeholders and shareholders. Consumers' perspectives towards business organisations has evolved overtime (Kang, Lee and Huh, 2010). Individuals do not want to get exploited or cheated for their investment in the form of purchase which is made. This perception has influenced companies to adopt a strategy that helps in delivering effective products and services. Corporate social responsibility is one such approach through which consumer satisfaction can be achieved. Brand loyal customers are created when products and services provided by an organisation are consistent in quality and pricing. If their specific needs or expectations are not fulfilled then individuals shift their focus to other companies (Ali and et. al., 2010).
CSR is a medium through which business enterprises take initiatives in returning the obligations they have acquired by accessing resources in a particular society or community. When implemented in the business models, CSR has helped business enterprises to gain innovation in their functioning. Sedentary working styles lead to demotivation amongst employees and their interest levels towards work decreases. As a result, there is a deficiency of innovation and creativity. In order to procure a strong position in the global markets, companies have to keep on working with strategies that help in building innovation in the working style of employees (Mirvis, 2012).
Leaders can use CSR for developing employee interest and satisfaction. Google is one of the best examples for understanding the contribution of corporate social responsibility in business models and their impact over stakeholders. The campus that has been developed as a business centre of company is not a mundane building or skyscraper (Ioannou and Serafeim, 2010). Every facility that an individual requires to sustain a living has been provided in the campus itself. This has motivated employees and their inner conscious to provide exemplary services without compromising in skills and talents. Every strategic step that company takes for benefit of employees play a vital role in the economic and social development. If they are satisfied then profitability is improved which in turn results in the increased retention.
Difference a company can create in fiercely competitive markets by using corporate social responsibility as a tool can be witnessed in the form of response that is gained by stakeholders (Hopkins, 2012). When strategies are in favour of consumers, employees and society as a whole then the probability of success is maximised. Different types of CSR realised for different beneficiaries are environment-focused CSR, community based, charity based and human resource based. Since, an enterprise is aiming to gain profits by using community and environment resources, then it is the duty of this organisation to return back favours in some form or the other (Visser, Matten, Pohl and Tolhurst, 2010). Starbucks is one such company that has gained a remarkable reputation in the world due to its CSR activities. Environmental leadership and more economic accountability are some of the measures which are taken by Starbucks to improve product’s quality and display corporate social responsibility in the market.
Advantages and disadvantages of CSR for companies and general public
Corporate social responsibility when developed in the working structure of a company will help in improving the corporate image of the company. Consumers and external stakeholders develop a positive image towards a brand or business when great quality products and services are delivered with CSR (Green and Peloza, 2011). Policies and legislations that are developed by organisation for personal benefits when extend to be beneficial for other sections of the society then definitely individual perceptions for the company will change positively. Employee retention is an important factor in deciding the working of an organisation. If their satisfaction levels are met efficiently then better outcomes and productivity is obtained (Inoue and Lee, 2011).
Commitments are very significant in business functioning. Corporate social responsibility helps in developing this commitment towards individuals who have been giving their services to the company in some form or the other. Employee retention power increases when organisation fulfils its commitments and promotes social well-being of workforce (Minch, 2011). The purpose behind CSR is achieved when compassion, some amount of empathy, appraisals, incentives and celebration activities are implemented for employees. Their willingness to work and grow with the firm will increase.
Apart from these advantages, another significant benefit that is gained with CSR is generation of cleaner and greener environmental (Hilson, 2012). There are organisations that have developed strategies to implement environmental corporate social responsibility. It can be use of ozone-friendly products or renewable sources of energy like solar power and hydroelectric power, etc. These activities reduce the negative impact that generally industries have on the environment. Positive corporate image when gained through CSR activities helps in developing platform for positive publicity (Arendt and Brettel, 2010). Every organisation requires advertisement platforms and publicity in some form or the other so that consumers and potential customers will become aware about the products and services. The good deeds which are performed by the company using corporate social responsibility approach help in gaining positive publicity.
The disadvantages that arrive with such an efficient approach of working are shifting focus, certain implications over company reputation and increase in cost of production. It would be incorrect to state that focus or orientation of objective is changed when CSR policies are implemented (JušÄius and Snieška, 2015). Organisations have to disclose all their shortcomings and eliminate the products and services which violate or hinder corporate social responsibility approach. This automatically reduces the profit orientation of the company. Moreover, reputation of the firm is harmed when negative factors or weaknesses are disclosed. Since, quality of the products and services have to be best in class and in accordance with ecological balance, the cost of production increases. As a result, product pricing shall increase and significant decline in customers will be experienced by the enterprise. Hence, application of CSR must be appropriate and strategically planned (Luc, 2017).
Effects of CSR on company's marketing strategies, reputation and overall public perceptions
Marketing is one of the most important function of a company. It helps in advertising products and services of the company to the consumers through innovation and creativity. With developments in technology and machinery, consumer perceptions for products and services have also changed (The impact of corporate social responsibility on business performance – can it be measured, and if so, how?, 2012). The use of internet for communicating with customers and clients across the globe has changed the dimensions of marketing. The impact of corporate social responsibility over marketing strategies can be assessed in the form of changing sales and perseverance of customers towards the company products. For instance, TESCO adopts corporate social responsibility approach in its marketing strategies and delivers realistic informations regarding the products. Since, no fake advertising is involved, ethical practises are initiated. Consumers will be attracted to such truthful way of advertising (Business Ethics, 2017).
An overall positive impact is experienced due to CSR on the marketing strategies. Reputation of the company is dependent on the strategies and decisions it takes for the employees and the customers. The attribute like reputation, image or public perceptions are totally dependent on company's marketing activities (Lindgreen and Swaen, 2010). There is a great influence experienced by individuals when it innovative marketing strategies are used. For instance, IKEA has been the leading furniture brand in UK and other European countries. One of the major components for its success is use of innovative marketing strategies. There has been rigorous advertising of its USP that is ready to assemble furniture. People have experienced that the way company presents its products has attracted them to spend money without even thinking twice. Hence, it is conveyed that marketing strategies are important in defining and forecasting the profitability of the company (Schneider and Schmidpeter, 2012).
When corporate social responsibility principles are applied to the functioning of the company then more ethical practises have to be followed. The reduction in corrupt practises helps in building good corporate image of the company. Hence, the overall public perception of organisation is changed positively.
Implications of CSR on company performance
There are different processes involved in development of a business from an idea to actual functioning organisation. Performance is an attribute that helps in understanding the outcomes which are obtained due to specific decisions or strategies. It is important to analyse performance of a company so that necessary changes can be realised and introduced in the current structure (Carroll, 2015). The best example to understand implications of CSR on company performance is Thomas Cook group. The organisation has been working in the travel and tourism sector since decades. The shifting orientation of the company from profit earning to achieving sustainability has caused major changes in travel and tourism sector.
The organisation has taken various steps for safeguarding local ecology and surroundings from the illegal practises and activities of degraders (Aguinis and Glavas, 2012). This has improved the social image of the company and enhanced its reputation in global markets. Company performance has improved after inculcation of strategies that are oriented with CSR. It is significant that when individuals working in a firm are happy and more willing to explore promotional opportunities; then their efficiency levels are increased. Regular trainings, appraisals and incentives are some of the management techniques applicable with corporate social governance. Individuals perceive company as a medium of growth rather than just a source of earning (Gainer, 2010). In this competitive world, growth and development are important parameters which every person wants to inculcate in their career.
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The responsibilities which are classified under corporate social responsibility are ethical governance, follow up for legal system, economic benefits and certain philanthropic duties. When a business enterprise takes all these duties and portrays specific role in enhancing the social well-being of the company then business performance is enhanced (Barnea and Rubin, 2010). It is important to understand that fulfilment of corporate responsibilities is not compromised with profit margins or economical status of the company. If proper economic growth is not ensured, then chances of global developments are minimised. The scope of enhancement in performance is reduced and overall business functioning is disrupted. This can result in decline in the position of the company in competitive markets (El Ghoul and et. al., 2011).
The objective of achieving sustainability and competitive advantage helps in guiding business activities. Performance is also measured by the speed or rate at which business objectives and goals are achieved (Bénabou and Tirole, 2010). Aforementioned advantages of the CSR depict that profitability and productivity of the company is increased when employees are satisfied. Hence, targets and objectives can be accomplished faster. This depicts that positive implications are experienced by business organisations in terms of performance when CSR is applied strategically.
Driving forces for companies
There are different types of driving forces which can be demonstrates in corporate social responsibilities. They are as follows:
Enhance affluence: CSR becomes very relevant that is enhances economies and stability. Thus, it gives the greatest attention to CSR in developed countries (Morgeson, Aguinis, and Siegel, 2013). Stability and security provides luxury choices with social responsibilities. Hence, it assists to fulfil basic needs of customer.
Ecological sustainability: CSR is also driven on sustainability through eliminate wastage, pollution and natural resource depletion. As results, it controls over fuel the CSR discussion and heighten expectations for proactive corporate actions. After this, the best interest of the company is also protects for future and long term availability of resources.
Globalization: Globalization is considerable impacts which increase wealth and power of multinational companies. In addition to this, it also leads question which decrease authority of the nation state especially in developing areas (Farooq, Payaud and Valette-Florence, 2014). Cultural differences are added in complexity of CSR as expectations of behaviour that can be nary according to regionally. With increasing of power can also enhance responsibility and globalization so that needs can be filter with strategic decisions through CSR lens. It ensures optimal outcomes for diverse stakeholders.
Free flow of information With the help of internet and other electronic items, flow of information has shifted at back side to stakeholders. In three types of group such as consumers, NGO and general media, it can be determines. Thus, especially it accesses and affordable communication technologies with permanently changes (Peloza, Ye and Montford, 2015).
Power of the brand: Brand of products and services are most important and focal point in these days. It makes corporate success and healthy outcomes which are depends on public perception and corporation outcomes. Thus, CSR is easily protects honestly which assist to enhance brand and after it as well.
Hence, CSR is determines very important aspect to develops forces and it brought continue development of promotion of products and services (Morgeson, Aguinis, and Siegel, 2013). These five forces are assist to make greater responsibilities which considers important part at workplace.
Hindrances for companies to take more CSR
Many organizations perform corporate social responsibilities in order to provide benefits to the society. There are some practices that are performed by the business organization such as environmental efforts, ethical labour practices and so on. For example, some of the companies such as Starbucks are following these practices and they made this as their core concept. Along with this, there is one more company named as Toms shoes who are also performing the CSR activities. They follow the guideline that if customer will purchase one pair of shoes the they will donate one pair of shoe to a child. There are some of the barriers for the companies to follow these CSR activities and these are:
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Lack of awareness: Many small business enterprises are their in UK who perform these corporate social responsibilities but due to their lack of knowledge they will not be able to get success. Sometimes managers cannot understand the need and demand of their customers and their employees so CSR activities will not be implemented in an efficient manner. So, business organization should understand the importance of these activities so that they can improve their growth in the market (Kim, Park and Wier, 2012). For example, if an enterprise developed these programs and they are not aware about these then they will not be able to provide benefits to the society.
Lack of human resources: Some companies are performing their operations at a small scale and they have less number of employees at their workplace. So they will not be able to implement their corporate social responsibilities. In order to perform these practices, they have to focus on the recruitment and selection of the workers.
Lack of strategic vision: It is important to create a vision and mission for the objectives of the organization that are made by the top management. The higher authority have to perform their activities in a manner so that they can achieve success in the future. Companies cannot achieve their goals and profits due to the weak relationship between CSR and financial performance of the enterprise (Business Ethics, 2017).
High regulatory standards: There are some legislative laws and rules that are made by the government so that performance and environmental safety can be improved continuously. For example, shipping industries are the one that are highly regulated and they are more concerned for the environment and their safety (Arendt and Brettel, 2010). So organization can perform corporate social responsibilities in order to increase their profits and their value.
Competing code of conduct and multiple requirements: There are many customer who have different needs and demands. Organization have to offer quality products and services to their consumer so that the firm will be able to fulfil their expectations. Expenses of the enterprise are increased so they will not be able to implement these activities.
Cost: There are many organization that are perform their business at small scale so they will not be able to increase their profits. The cost is get increased so they will not be able to invest on corporate social responsibilities.
These all are the barriers of corporate social responsibilities and due to these they will not be able to increase the profits. Along with these, there are some more obstacles such as they are not focusing the objectives such as to increase profits, to generate more revenues and so on. Along with this, these programs can increase the cost of production of the firm so they will not be able to attain competitive advantage in the market (Minch, 2011). Companies will not be able to convince their customer as due to the CSR activities they are not fulfilling the goals of the overall firm. Further, companies reputation is also get decreased as per the polices of CSR activities they have to disclose their limitation and due to this they will not be able to build a trust with their customers.
The detailed description of corporate social responsibility and its implications over the functioning of a company have been discussed in this essay. It can be inferred that adopting this approach of governance is a good option for enhancing reputation but unplanned decisions regarding CSR can lead the organisation in serious troubles. There are certain parameters which need to be analysed and examined for fulfilling the aims and objectives of organisations. Global brands in UK and all over the world are focusing in developing techniques and strategies which are aligned with CSR so that sustainability in competition can be achieved. This assessment consists of information regarding existence of corporate social responsibility in UK. The impact and forces which are involved in driving CSR related changes in an enterprise have also been demonstrated. The barriers that arrive while approaching stakeholders through CSR have also been discussed in the essay to develop a broader insight.
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- Ali, I. and et. al., 2010. Corporate social responsibility influences, employee commitment and organizational performance.African journal of Business management. 4(13). p.2796.
- Arendt, S. and Brettel, M., 2010. Understanding the influence of corporate social responsibility on corporate identity, image, and firm performance.Management Decision. 48(10). pp.1469-1492.
- Barnea, A. and Rubin, A., 2010. Corporate social responsibility as a conflict between shareholders. Journal of business ethics. 97(1). pp.71-86.
- Bénabou, R. and Tirole, J., 2010. Individual and corporate social responsibility. Economica. 77(305). pp.1-19.
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