Corporate social responsibility (CSR) is a policy adopted into business models, whereby a business adopts a self-regulating culture. This entails active compliance with the rule of law (both international and local), ethical standards, as well as the cultural norms of the areas where a business is located. Over the years, since the establishment of CSR, academicians and business practitioners have tried coming up with the best definition of CSR. David Keith, one of the academicians suggests that CSR refers to “the decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest” (Archie, 1991, p.2). Eells and Walton argue that CSR refers to “the problems that arise when corporate enterprise cast its shadow on the social scene and the ethical principles that ought to govern the relationship between the corporation and society” (Archie, 1991, p.2). Nonetheless, CSR is the combination of actions taken by business organizations as a way of embracing responsibility for their actions, as well as making positive impacts in the society.
The key areas where organizations engage in corporate social responsibility include environmental issues, community issues, employees’ practices, and consumers’ issues. The growing interest in taking care of the environment as part of business organizations’ CSR is because of the awareness that the stake of the future generations depends on the current generation’s ability to sustain and preserve the environment (Salls, 2005). In addition, business organizations recognize the need to preserve the environment because good environment contributes to business efficiency in terms of supply of quality raw materials.
One of the advantages of participating in this area of CSR is that a business organization is able to please its customers, as well as attract more customers into the business (Salls, 2005). In the modern times, customers are becoming more demanding, specifically due to the increased global awareness about the importance of environmental conservation. For this reason, customers are looking for business organizations, which are engaging in environmental friendly practices. This is because such practices present them with purchasing options, which do not compromise the future of the environment. Another advantage of engaging in environmental issues as part of CSR is that it helps a business organization to reduce costs (Salls, 2005). When a business is sensitive about the environment, it rarely wastes its energy sources, water, or raw materials. Instead, it utilizes them in the best possible manner. These contribute greatly in cost reduction. This is because efficient utilization of resources ultimately results into optimization in production.
Moreover, such practices safes a business organization the penalties and fines that it would have incurred due to improper usage of resources (Salls, 2005). This also contributes in cost reduction. Corporate social responsibility in the environment also helps a business organization to manage environmental related risks. For example, if a business is convicted as one of the greatest air polluters in a given industry and do not take any actions towards reducing the level of its pollution or at least reducing the impact of the pollution to the environment, it risks losing business contacts with its suppliers and corporate customers. This is more so when a business’s contracts are environmental conscious because they are likely to consider environmental issues in their supply chain policies. Therefore, CSR in environmental issues assist a business organization to manage environmental related risks in the course of business operations.
However, CSR in environmental issues can be a costly endeavor to a business organization. This is because a business organization incurs additional costs in funding various environmental programs, training employees on environmental issues, and developing efficient waste management and resource utilization programs. In fact, some of the opponents of CSR argue that CSR is an investment, which does not have returns. They therefore say that if an investment does not have any measurable financial results, then it ought not to be undertaken (Salls, 2005).
In the area of employees’ issues, business organizations recognize that employees are the most valued assets in any business organization (Archie, 1991). Business organizations therefore endeavor to treat their employees with respect, provide them with just working conditions, encourage non-discriminatory practices in all areas of the workplace, and pay them reasonable salaries. One of the advantages of this area of CSR is that it helps in improving employees’ morale in the workplace (Kokemuller, 2012). Commonly, improved employees’ morale results into positive work performance, and hence increased organization’s productivity. In addition, CSR in employees’ practices encourages teamwork in the workplace (Kokemuller, 2012). With fair working conditions and non-discriminatory practices, employees with different hierarchical levels are able to interact freely with each other. Just like improved morale, teamwork also results into positive work performance, and hence, increased productivity of the organization.
Furthermore, CSR in employees’ practice helps an organization to achieve diversity in the workplace (Kokemuller, 2012). This is because; non-discriminatory practices assist an organization to hire employees from different cultural and social backgrounds. Diversity in the workplace helps to enrich the corporate culture of an organization due to presence of variety of backgrounds and life experiences of the employees (Kokemuller, 2012). However, CSR in employees’ practices is also a costly endeavor. An organization has to incur additional expenses in developing employees’ programs, which encourage teamwork, among other things. In addition, providing fair working conditions and reasonable salaries for all employees implies that an organization has to have a larger human resources budget.
CSR in community issues entails giving back to the community through engaging in various activities, which add value to the lives of the community members (Archie, 1991). Some of the community CSR activities that business organizations engage in include sponsoring educational activities, awarding scholarships to needy but bright students in the community, helping community members gain access to scarce resources such as water, and sponsoring community projects, directed towards poverty alleviation and improving quality of life. One of the advantages of CSR in community issues is that it helps an organization to gain acceptance in the community within where it operates (Kokemuller, 2012). This in return contributes to increased popularity of the organization among its business contracts, including the corporate customers and suppliers.
Acceptance by community members within where a business operates also helps an organization to avoid some of the risks associated with physical business location. In some cases, local community members bring litigations against location of certain businesses within their areas of residence due to various reasons such as potential pollution and depletion of natural resources. However, when a business organization is sensitive to the needs of the local community, it is unlikely to face such risks.
However, just like other CSR areas, engagement in community issues is also costly. This is because an organization has to set aside a certain amount of resources on annual basis, directed towards the community. Furthermore, an organization requires additional human resources to oversee identification and implementation of community projects. This is an additional expense because an organization has to pay these individuals. Moreover, engagement in community issues may sometimes create conflicts between a business organization and private organizations, which are involved in taking care of community issues. This is because, sometimes, business organizations source funds for implementing community projects externally (from donors and well-wishers). Private organizations with community interest view this as their core activity, and usually accuse business organizations of using private individuals’ money to ‘create’ names/reputations for themselves, or rather, build their reputations at the expense of private individuals.
In the area of consumers’ issues, business organizations endeavor to produce quality goods and services for their consumers in the market. This is a practice commonly applied by business organization, which operate in crowded marketplaces (Archie, 1991). Such business organizations strive to create unique selling positions that distinguish them from their competitors. The advantage of CSR in consumers’ issues is that it helps organizations to build loyalty among their customers (Kokemuller, 2012). This is because of the reputation gained from best practices and business integrity in the market place. However, the practice is usually expensive. An organization has to develop strategies for creating unique selling positions in the market place.
CSR plays a vital role in sustainability of business operations in oversee countries, specifically the multinational companies. This is because different countries have different views regarding CSR. For example in America, CSR is more of charity, while in Africa; CSR is more of poverty eradication and HIV/AIDs awareness and control (Waldman et al., 2006). Participating in such issues help multinational companies to operate in different regions of the world for a long period. In addition, multinational companies require adherence to international standards, which guide trading practices across the globe. When planning to expand business operations outside its host country, an organization should consider the international standards, which regulate global business. In many cases, adherence to these standards is through participating in various areas of CSR in different regions where a business operates.
Moreover, an organization with intentions of having global presence should always consider the cultural differences, which exist across the globe. Different regions of the world have different cultural practices, which they usually apply in business practices. The Hofstede model of cultural dimensions would be a good tool of understanding the different cultural practices in the world, and how they are applied in business (Waldman et al., 2006).
In my opinion, the company should engage in CSR since the benefits of the different areas of CSR overweigh the costs. In fact, the only disadvantage of CSR in all areas is that it is costly. However, the company can employ various cost-reduction measures to ensure that costs associated with CSR are minimized. Besides, the company should study the various international standards and cultural practices, which apply in oversee trading. This would entail understanding how different regions of the world practice CSR and how different cultures of the world incorporate their cultural practices into the business world.