Corporate Social Responsibility

Introduction

Corporate social responsibility has become an integral part of marketing for many corporate bodies around the world. Many firms currently have clearly defined corporate social responsibility programmes that they observe on an annual basis. Multinational corporations such as Coca Cola, General Motors, and Toyota have budgets in excess of $ 100 million meant to engage in various corporate social responsibilities across the world. These activities range from environmental conservation to supporting the needy and responding to calamities in the markets where they operate. In this paper, the researcher aims to determine why businesses are currently determined to participate in corporate social responsibilities.

Discussion

Corporate social responsibility is a relatively new concept in the corporate sector. According to DuBrin (2011), many firms embraced Shareholders’ Theory for a very long time. This theory holds that the managers and boards of directors have a responsibility to ensure that shareholders earn attractive profits. It emphasizes on the need for a firm to be profitable irrespective of the effect that this may bring to other stakeholders. This theory worked well during the industrial revolution and few years after this revolution. The peasants were forced to work in the large industries to earn a living. More often, they were forced to work in harsh environmental conditions that exposed them to diseases and physical harm. Many died while at work while others sustained life changing injuries. However, the shareholders were not bothered because the social structure at that time favoured them. The customers on the other hand did not have alternatives when purchasing particular product. They had to buy a particular product from the only available company because market competition was almost non-existence. The shareholder of a given business entity was the king and all other stakeholders had to do everything to ensure that he is satisfied. Corporate social responsibility was not necessary at that time. In fact, firms rarely engaged in activities that did not bring them financial gains.

According to Clegg, Kornberger, and Pitkis (2014), many firms started to realize that Shareholder’s Theory started is no longer effective in the mid 18th century and early 19th century when firms started facing competition soon after the Second World War. A good example is the case study about the rise and fall of Eastman Kodak. Kodak was the leading manufacturer and distributer of films used in photography. The firm’s global market share in the film industry was over 85% (Chandler & Werther 2014). The firm was very successful and the main focus of the directors was to ensure that the shareholders of the firm earned attractive profits. When a time came to move on to the digital technology, the board of directors ignored the changing customer needs for digital films and preferred to continue providing outdated products just to protect the profitability of its shareholders. This poor decision enabled Fuji Film and a host of other minor companies to overtake Kodak in the film market because they responded to the needs of customers. This was a warning to many firms that Shareholder’s Theory was no longer applicable in the modern society. The theory had to give way to a new model that focused more on all the stakeholders other than just the shareholders.

Stakeholder Theory emerged in the 19th century when firms started facing stiff competition. The narrow focus that was put on the need to ensure that shareholders’ interests are met had to change. According to this theory, a firm must ensure that the interests of all its stakeholders are taken care of to achieve sustainable growth (Reiß 2012). The figure below shows stakeholders that a firm must strive to achieve their needs.

Source (Freeman, Wicks, & Parmar 2004, p. 76)
Source (Freeman, Wicks, & Parmar 2004, p. 76)

According to Crane and Matten (2010), any business can only exist if the owners are assured that they can benefit from it in one way of the other. That is why shareholders’ interest of getting profits from their investments is still critical for a firm’s survival. However, a firm must realize that unlike before, customers now have capacity to make choices when planning to purchase an item. They will only purchase a product that meets their needs. A firm can only exist if it has employees who undertake various tasks to ensure that product reach the market at the required time.

DuBrin (2011) says that employees are the most important assets to any organisation. Their interests such as attractive remuneration and good working environment should not be ignored for them do deliver excellent services. Suppliers play an important role within an organisation. For a firm to retain reliable suppliers, it must pay them promptly and engage them actively with the aim of addressing any issues that may strain the existing relationship. Every firm has a responsibility to the government in various respects. It must pay tax, follow the set rules and regulations relating to the industry where it operates, and maintain relevant communication with government agencies as may be required from time to time.

The public is a relatively new stakeholder that has been introduced in this mix and is turning out to be very critical. All the stakeholders mentioned above come from the society. It is for this reason that firms have realized that they can no longer ignore the public as they struggle to grow sustainably. The image of a firm and popularity of its brand is shaped by the society. For example, Apple Inc has been voted the most valuable brand in the world for two consecutive years. According to Stanwick and Stanwick (2013), when conducting the polls, Forbes- which is the company that ranked Apple’s brand as the best- noted that it did not dismiss the opinions of those who had never used Apple’s device. This means that public opinion can be shaped even by those who have never used a product.

Many people who have never used Apple Computers believe that it is of high quality. Similarly, not many people can afford a limousine. However, their opinion is that it is one of the best cars that one can ever own. Given the importance of this opinion, firms have become very keen on maintaining good relations with the public. It is for this reason that Stakeholders Theory is believed to strongly support corporate social responsibility. A firm such as Coca Cola Company may want to maintain a positive image in the public. Dropping the prices or giving free products may not be the solution to gaining public acceptance. In fact, such strategies may drive it out of the market. The best option of gaining this acceptance is to engage in activities that are cherished by the society. According to Perkins and Arvinen (2013), a firm should try to determine an area that is of concern to members of the society at a particular time. Environmental concerns are currently the most pressing issues that firms find to be relevant. However, responding to natural calamities such as earthquakes, cyclones, or famine may also help a firm to gain positive public image.

According to the research by Johnson (2015), many firms currently consider corporate social responsibility as part of their marketing strategies. Engaging in activities of public interest may have minimal or no direct financial benefit to a firm. No profit is expected from such activities. However, it helps a firm to not only gain publicity but also favour in the eyes of the communities that were supported. The people who were offered help will always remember the help extended to them by the firm at their point of need. People who saw the support from the firm will be convinced that one day the firm may support them at a time of need. This creates a sense of responsibility and commitment towards the firm. The society will feel that they have a debt to pay to the firm. They will feel responsible in the development of that particular organisation. When they have to make a choice when purchasing a given product, their emotions will lead them to the brands that offered them help. They develop emotional attachment because of the good deeds of the firm. Zhong (2011) says that it is almost impossible to sway a client from a product that he is emotionally attached. Every time he purchases such a product, he will be buying the good memories of the past other than the product itself.

Moral Foundations Theory may also help in explaining why firms consider engaging in corporate social responsibility. The theory holds that a firm has a moral obligation to the public. This theory is based on five pillars.

Harm/care

Aquinas (2006) says that it is immoral for a firm to flourish while people in its immediate environment suffer. It is a fact that their suffering may not be eliminated by an individual firm. However, the little input that it puts towards caring for those suffering may be all that is needed of it to prompt other firms to do the same thing. That is what morality dictates.

Fairness/reciprocity

The operations of firms, especially those in the manufacturing and transport sectors, have massive impact on the environment. The society may suffer in one way of the other due to pollution from these companies. It is morally right for the relevant firms to be concerned about the welfare of these people by supporting their healthcare expenses and engaging in environmental conservation. The fairness is seen when the firm reciprocates the support from the society by supporting them in a given way.

Loyalty

Loyalty is something that is earned through deliberate efforts to do that which is considered right. For a firm, being loyal may mean cooperation with the local communities to address various issues that affect them on a regular basis. This may earn such a firm trust with the locals.

Authority/respect

Moral Foundation Theory also dictates that a firm should respect authorities and obey policies and regulations set up to guide its operations. In many developed nations, there are policies guiding the amount of carbon a firm can emit per given duration. Respecting such laws is a way of being socially responsible.

Purity/sanctity

Firms ought to focus on purity in their operations. It is unfortunate that some organizations ignore rules and regulations they should follow as a way of improving their profitability. As Walker (2011) says, a firm should not sacrifice morality for profitability.

Conclusion

Corporate social responsibility has become an important aspect of marketing for many organizations across the world. Firms have come to realize that they not only have a responsibility to the shareholders but also other stakeholders who are affected by the firm directly or indirectly. From the discussion above, it is clear that firms businesses should bother with corporate social responsibility because it is both economically and ethically important. Marketing is taking a new shape in the modern society. The society is becoming weary of constant advertisements that flood both traditional mass media and the modern social media they use in their normal life. This has made it necessary for people to learn how to ignore these advertisements which in most of the cases are considered a nuisance. However, firms cannot stop promoting their products and their brands. Getting involved in corporate social responsibilities such as environmental conservation and responding to calamities has become an alternative to traditional advertisement. On moral grounds, firms have the responsibility to give back to the society that supports it various ways. When a manufacturing firm offers to pay a part of medical bills for its employees and society members within a given locality, it should not be considered a favour. It is a responsibility for the firm because its activities affect the environment negatively.

List of References

Aquinas, P 2006, Organizational behaviour: Concepts realities applications and challenges, Excel Books, New Delhi.

Chandler, D & Werther, B 2014, Strategic Corporate Social Responsibility, Sage Publications, New York.

Clegg, H, Kornberger, K & Pitkis, T 2014, Managing & Organisations: An introduction to theory & practice, Sage Publications, New York.

Crane, A & Matten, D 2010, Business ethics: Managing corporate citizenship and sustainability in the age of globalization, Oxford University Press, Oxford.

DuBrin, A 2011, Leadership: Research findings, practice, and skills, Cengage Learning, South-Western.

Freeman, R, Wicks, A & Parmar, B 2004, Stakeholder theory and the corporate objective revisited, Organization Science, vol. 15, no. 3, pp. 364-369.

Johnson, C 2015, Organizational Ethics- A Practical Approach, Sage Publications, New York.

Perkins, S & Arvinen, R 2013, Organizational behaviour: people, process, work and human resource management, Kogan Page, London.

Reiß, M 2012, Change management: A balanced and blended approach, Books on Demand, Norderstedt.

Stanwick, P & Stanwick, S 2013, Understanding business ethics, Sage Publications, New York.

Walker, A 2011, Organizational behaviour in construction, Wiley-Blackwell, West Sussex.

Zhong, C 2011, Corporate Social Responsibility, Administrative Science Quarterly, vol. 56, no. 1, pp. 1-25.