Corporate Social Responsibility: Definition, Importance And Best Practices

What is Corporate Social Responsibility?

Discuss about the Corporate Social Responsibility of Companies.

According to Tai and Chuang (2014), Corporate Social Responsibility of companies can be defined as the initiatives of the company to evaluate and take responsibility of the effects of the operations of the company on the society and environment. Companies must adopt CSR policies to ensure that the operations of the companies have positive effect on the society and the environment. The aim of the companies should be to promote the well-being of the people in a society. CSR can also be defined as corporate citizenship. Implementing the principles of CSR can require companies to incur costs, which may not be of financial benefit to the company in short, term, however incurring such costs will help companies have positive impacts on the society and environment and such positive impact will in turn be beneficial for the company in the longer run (Poussenkova et al. 2016).

Corporate Social Responsibility can be defined as those voluntary activities which are undertaken by companies to operate in a manner which is environmental, social and economically sustainable (Vertigans and Idowu2017). CSR policies have been implemented in every business environment and are no longer considered to be legal obligations to the stakeholders of a company. Many organizations are even taking steps to give effect to the CSR policies and bring such policies in their respected framework. CSR policies should not only be implemented by large organizations, any business irrespective of its size and nature of operations can take steps to positively affect the people and the environment (Cheng, Ioannou, and Serafeim2014). It can be stated that every business organization must:

• Recognize the human rights, be respectful to them and take steps to safeguard the same
• Take responsibility of its actions and assess the impacts of the actions on the ecnomy, society and the environment.
• Be transparent in its activities that have impacts on the society

As opined by Saeidi et al.(2015), the code of Corporate Social Responsibility takes into account many factors which have impacts on the society, environment and economy. Therefore, the code of CSR covers many domains such as Labor and Human rights, Health and safety of workers, Environmental impacts of the operations companies, Ethical considerations and Management systems (Leipziger 2017).The best example of a company who has adopted the code of CSR is Maxim Integrated. The other companies with the best CSR policies include Google, Microsoft. Google had been selected the third time consecutively for having the best CSR policy, Microsoft holds the second place (Forbes.com, 2018). The Walt Disney Company held the third pace among the most socially responsible companies. The Walt Disney Company had held that place since 2014.

Importance of Corporate Social Responsibility

The CSR pyramid or the four part model of CSR had originally been published in the year 1979. The pyramid of CSR was introduced by Caroll. The purpose of the pyramid was to illustrate the different building blocks of CSR. It is to be mentioned that the pyramid was selected as it represents a geometric design which is built to stand strong over the years. The base of the pyramid is the most important part of the structure as it holds the rest of the structure. This is why economic responsibility was placed at the base as the foundation of the pyramid. Legal responsibilities was upon the foundation of economic responsibilities as all business operational must comply with legal regulations of the respective jurisdictions. Ethical responsibilities were placed above legal responsibilities as it is important for businesses to maintain ethical standards while performing its operations. Philanthropic responsibilities were placed at the top as it is desired by societies and that the business acts as a good corporate citizen and contribute to the development of the society (Carroll, 2018).    

The ethical responsibilities are represented in a separate block of the pyramid, ethical responsibilities of business organizations can be expected to saturate and cut through the entire model of the pyramid. If the CSR policy of Microsoft is analyzed by the CSR pyramid model, it can be assessed that its CSR policy complies with all the responsibilities of all levels of the pyramid. However Microsoft has been involved in an anti-trust case for a long time. The Company allegedly had abused its position of monopoly in the European market.

Figure 1 CSR Pyramid

Source: (Carroll 2018)

According to the code of Corporate Social Responsibility workers must be paid the minimum wages which are required by the applicable regulations and laws. Workers must be also be compensated with remuneration for the work done in over time (Korschun, Bhattacharya and Swain 2014). Wages must not be deducted as disciplinary measures.

Workers must not be made to work for more hours which is in excess of the maximum work hours as set by the local laws It can be said that except in emergency circumstances a workweek including overtime should not ideally be lengthier than 60 hours and workers of every organizations must be given one day off in the week. Further no worker should be discriminated on the basis race, age, color, ethnicity, sexual orientation, religion, political affiliation, marital status and union membership.

Best Practices of Corporate Social Responsibility

According to Muller (2014), no child should be employed in the manufacturing process. The term ‘child’ is defined as any person, who as not attained the age of fourteen or someone who has not completed the compulsory education or someone who is under the minimum age for being employed as provided by the law of any country. Further, it is to be said that any person below the age of eighteen must not be employed in a hazardous environment.

The code of CSR prevents any worker from being subject to inhumane and harsh treatment. Examples of such treatment include sexual harassment, coercion, verbal abuse and corporal punishment. Workers must be free to move about in the workplace. Forced or bonded labor must not be used in the workplace of any organization. All work done must be voluntary and the workers should have the right to terminate their employment after giving and serving a reasonable notice period.  The workers or every organization must be given the right to interact freely with others and form and join workers associations (Kelman et al. 2016). Engaging in peaceful assembly is also permitted by this code. Workers must also be allowed to communicate freely with the management regarding working conditions, any discrimination faced by them or any safety concerns.

It is the responsibility of the organizations to take appropriate controls, comply with the safety procedures, and take preventive and protective measures in order to mitigate risks relating to health and safety of the workers in the workplace. Workers employed in hazardous environment must be provided with personal safety equipment. Organizations must identify emergency situations that may arise in the course of employment of workers and must take necessary precautions. Organizations must have necessary scope to deal with emergency situations which include having emergency reporting, appropriate fire detection, adequate exit facilities and evacuation procedures. According to Samuelson and Anderson (2014), companies must establish procedures to track, manage and report occupational injuries. Workers must be encouraged to report any injury or illness sustained by them during the course of their occupation. Further it can be mentioned that workers who are exposed to hazardous environment must be provided hygiene and safety equipment whenever needed. Workers should be able to access the general facilities such as dormitories and canteens. Such dormitories and canteens must be clean and hygienic with proper ventilation and reasonable personable space. Further it can be said that workers must be provided appropriate health and safety training in order to mitigate any risk arising during the course of work.

CSR Pyramid

It is to be mentioned that it is the duty of the companies and organizations to assess and evaluate the impacts of its operations on the environment and necessary steps to reduce any harm being caused to the environment due to the ongoing operations of business. It is to be said that environmental permits as required by the law are needed to be obtained and maintained by companies. Suppliers of hazardous substances must comply with the regulations and laws which prohibit or restrict such suppliers from supplying hazardous or toxic substances. Organizations must comply with the laws and regulations regarding handling, moving, storing, recycling and reusing such hazardous substances (Vaculchuk, Borodkina and Kobzar 2016). Further workers who come into contact with such hazardous substances must be provided special training regarding handling of such substances. Wastewater and solid waste generated from industrial and sanitary processes have to monitored, refined and controlled before releasing the same into the environment as required by the law. Every organization involved in industrial processes must take necessary steps in order to eliminate all types of wastes.

According to this code every organization must strictly prohibit corruption, embezzlement and extortion from being practiced within the organization (Moscato 2017). The organization must indulge in taking or giving bribes for the purpose of obtaining undue advantage in any situation. Information related to business activities of any organization, financial status, performance of an organization must be disclosed to the public in accordance with the laws and regulations. The operation of the business of every organization must be in compliance with fair business standards in advertisements, sales and competition (Moscato 2017). It is to be mentioned that organizations must engage with the community and ensure that the activities of the company aim to encourage the social and economic development of a community. Intellectual property and confidential information must be protected at any cost.

A Corporate Social Responsibility statement has to be issued by an organization in order to ensure that the company affirms its commitment to positively affect the society and the environment. Companies must be aware and comply with the applicable laws and regulations. Accurate information about the activities of the organizations must be communicated to the suppliers, workers and the customers of the organization (ArAs 2016). Every company must maintain documents and records in order to ensure regulatory compliance.

Companies must follow the code of CSR in order to ensure that best results are achieved by the same in the future. Companies operating in socially, economically and environmentally responsible manner following the code of CSR are likely to be successful in the future. However, the functions of the company need to be transparent in order to ensure that clarity and fairness of operations of a company are maintained. Further it is to be stated that managing and mitigating the environmental and social risk factors have become very important for the success of any company in abroad (Wang et al. 2016). There is an increasing awareness about responsible business practices and incorporating such responsible business practices not only benefit the communities and local economies but also the business of the companies. As opined by Vilalva (2015), compliance programs which are effective tend to promote a culture that will encourage social and ethically responsible conduct within an organization and will also promote a commitment to abide by the law. Effective compliance programs also aim to protect the reputation of the organization, its relationships with the investors and help in detection and prevention of misconduct.

Business leaders are often boggled by whether their companies should adopt a code of corporate social responsibility and what might be the benefits of adopting the code of Corporate Social Responsibility. This question can be addressed affirmatively by saying that it is morally obligatory to adopt a code of CSR and it is the right thing to do both ethically and financially (Kapoor 2016). It can be said that CSR policies of a company affects the business of the same. According to the instrumental approach of CSR, which focuses on the business case of the CSR, one must engage in CSR practices if it is beneficial and profitable to the company. It can be said that there are several ways in which a connection can be formed between adopting a code of CSR and acquiring profits from compliance with such code. Following CSR practices will help the company form a positive reputation in the market which will in turn attract more customers. Customers are likely to buy products from companies which have good reputation in the market. Therefore according to the instrumental perspective CSR projects of a company are assessed on the basis of the propensity of such projects to make the customers perceive the company in good light.  Thus CSR can be sophisticated and strategic marketing tactic in the tool box of the company. However, it is to be mentioned that this approach does not imply that companies not operate in compliance with local and international law, it implies that companies must try to go beyond what has been written down in the legislative statutes in order to do good to the society.

If CSR is to be judged from the ethical approach, it can be stated that even though CSR might not be profitable and beneficial to the business in every instance it will have positive effect on the company (Lucas, Van Wee, and Maat, 2016). It can be said that in times of conflict during choosing between what is profitable to the company and what is morally and ethically correct to do, it can be said that choosing the latter at times can help the company portray a positive image to the public. According to the ethical approach it can be said that companies at times accept the loss of profit for moral reasons to ensure that ethical demands such as the interest of other parties are given more priority.

As defined by Crane and Matten (2010), corporate Social Responsibility of companies can be assessed by applying principles of ethical theories. An ethical theory is defined as sophisticated, well thought of, cogent and self-consistent theory which provides answers to a wide range of questions about what should be done when faced with an ethical dilemma and what is the morally correct thing to do in such circumstances (Newton 2017). The ethical theories that can be applied assess the concept of corporate social responsibility are Utilitarianism, Ethics of Rights and Contractualism.

The theory of utilitarianism states the simple idea that it is morally correct to do something or take action which produces the greatest good for the most number of people. As stated by Springer, who is a contemporary utilitarian, companies should aim to maximize the sum total well-being of the society. It can be stated that the theory of Utilitarianism prevents companies commit any kind social evil including discrimination in the work place, indulge in taking or giving bribes, using forced labor as these action do not constitute the well-being of the society in general. According to this approach it can be stated that companies should give as much of priority to the interests of the faraway strangers as the interest of its stakeholders. Proponents of Utilitarianism state that companies should act in ways to promote the well-being of most number of people therefore companies should give more priority to promote the welfare of the poorest sections of the society instead of focusing on providing benefits to the closest stakeholders of the company. The operations of the company that has the best CSR policy such as Microsoft can be assessed by the Utilitarian Perspective. The CSR policy of Microsoft aims to create the greatest good for its stakeholders. The operations of Microsoft increase the well being of the society by contributing significantly to the mass. Its operations also have positive impacts on the society and the environment (Microsoft.com 2018)

According to this theory that rights of human beings are the most important elements and such rights must be realized at any cost. A right can be defined as the claim against other claims of other individuals. In general the theory, Ethics of Rights proposes that morality is constituted by more than just promotion of the good of most number of people.  This theory falls in the branch of deontological theories of ethics (Spence 2016). This theory is opposed to the theory of Utilitarianism as it focuses more on realization of the right of individuals instead of just promoting the good for the most number of people. Therefore, it can be stated according to this theory that the actions of the companies should not compromise the right of any individual for achieving the objectives of the company. It can be said that the CSR policy of a company which is based on the principles of Ethics of Rights will ensure that the rights of the individuals associated and the ones affected by the operations of the company are realized. It will also ensure that moral dignity of all the agents of the company is maintained. The operations of the company Microsoft can also analyzed by the theory of Ethics of Rights. The CSR policy of Microsoft in addition to creating the greatest good for the society also ensures that the rights of its agents are safeguarded and their moral dignity is maintained (Microsoft.com 2018)

This theory of Ethics is the alternative to the theories of Utilitarianism and Ethics of Rights. However, it can be said that this theory has affinities for the theory of Ethics of Rights (Chaffee 2017). The main important principle of this theory is that normative propositions, which are relevant, are defined as the result of the contracts or agreements entered into by the agents.  Therefore, it can be said that a normative proposition is justified as long as the agents agree to it. According to the proponents of this theory it can be stated that the clause reasonability is a condition which is necessary for an agent to enter into the contract or the agreement. Thus it can be said that a policy of Corporate social responsibility which is based on the principles of this theory will focus on the important issues of mutual acceptability and reciprocity alongside the notion of reasonability. The theory of contractualism can be applied to analyze the CSR policy of Microsoft. The company has taken the decision to incur the cost of upgrading the means of production to ensure that the operations of the company do not have detrimental effects on the environment and the society.

Thus in conclusion it can be said that companies must comply with the code of corporate social responsibility in order to be successful in the long run. Companies must ensure that the operations undertaken by them must not have adverse effects on the society and aim to promote the well-being of the society. The code of corporate social responsibility focuses on promotion of human rights of the workers, health and safety of workers, environmental impacts of operations of the companies and workplace ethics. The best example of a company which has adopted the code of the corporate social responsibility includes Google, Microsoft, The Walt Disney Company and Maxim integrated. Ethical theories of Utilitarianism, Ethics of Rights and Contractualism can be applied to principles of Corporate Social responsibility in order to ensure that the actions of the companies have no negative effects on the workers or the environment.

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