Business and Society
Corporate Social Responsibility
Corporate social responsibility refers to operating a business in a manner that provides an account of the social and environmental effects of the business’s operations. It is a company’s initiative to take responsibility for its positive and negative effects on the wellbeing of the surrounding society and environment. The term can also be used to refer to the efforts applied by a company to act responsibly towards the society and the environment that go far and beyond the regulations set by environmental protection groups and environmental government regulators. .
Elements of Corporate Social Responsibility
For CSR to be truly successful there are various elements that need to be looked at. All the elements that will be discussed will have both an internal and external aspect.
i. CSR Strategy
The CSR strategy is the basic blueprint of how the company will practice corporate social responsibility. There needs to be a clear vision, a future goal and the strategy needs to be comprehensively defined.
It is essential for the strategy to receive support from all members of the organization especially high profile executives. With this support in place, it is easier to come up with a definition of the CSR strategy.
The company’s stakeholders and the public will require a document showing the company’s ambitions and goals concerning CSR.
ii. CSR Management System
This system outlines the actual actions that will need to be carried out so that the strategy can work and produce the desired results.
At this stage, more people in the company need to become engaged in the strategy. Information on how the employees have received the strategy is gathered. This forms a foundation on how to engage the most positive people.
The management system is the vehicle the company is going to use to get more external recognition of its CSR activities.
iii. CSR Reporting
Reporting the first results of the company’s CSR activities is the next step. It is used as a test to determine if the company has initiated worthwhile activities that could be reported to the stakeholders (Allen, 2011).
The CSR reporting is meant to test the CSR team’s coordination and management skills.
The CSR report will be the official face of CSR activities to the outside world.
iv. Stakeholder Engagement and Communication
The CSR team needs to ensure that it is constantly engaging the stakeholders to enhance the long-term value of the entire process.
Relationship between Financial Performance and CSR
Also referred to as corporate citizenship, corporate social responsibility often entails incurring short-term costs that have no financial benefit in the near future to promote positive changes in the environment and the society.
Corporate social responsibility has a strong and positive correlation to financial performance. Several studies have found that CSR activities in a corporation are associated with several bottom-line benefits. Since practicing corporate social responsibility incurs financial costs then the procedures should generate benefits so that it can be a sustainable business plan. The shareholders of a company invest their money in the business expecting the highest return after risk adjustments. Therefore, the CSR needs to have bottom-line benefits so that it can be sustainable (Tsoutsoura, 2004; Mwangi & Jerotich, 2013)
Chouinard has implemented corporate social responsibility in a variety of ways in his company, Patagonia. Everything the company does is tied to corporate social responsibility in many ways. For instance, since 1996, the company has been utilizing materials that are less harmful to the environment to manufacture its products. The company switched from conventional to organic cotton. The company also makes fleece jackets from recycled soda bottles.
He was also brave enough to provide an account of all the ways that his company had been harming the environment before the switch was made. He chronicled these events in the company’s website for the entire world to see. This move further endeared the company to the customers for its openness and transparency. The company now takes responsibility for everything it makes. The company will replace a product if the customer expresses dissatisfaction, repair the product, resell it, and finally recycle it when it can no longer be of use.
Factors affecting managerial ethics
Various factors affect managerial ethics. They include individual characteristics, the manager’s stage of moral development, structural variables, issue intensity, and organizational cultures.
The first factor is the stage of moral development of the individual. The first level is the pre-conventional where a person’s choice between right and wrong is based on his personal experiences. The second level is the conditional whereby an individual’s moral value exists to maintain the societal standards as well as living up to the expectations of others. The final stage is the principled level where individuals strive to make an individual effort to define moral principles aside from what others in the group have already prescribed.
Individual characteristics- the values inherent in everyone help us decide what is wrong or right. Ego strength is the measure of a person’s convictions. Managers with high levels of ego strength resist impulses to act in unethical ways. Locus of control measures the degree to which an individual believes he controls his own fate. High levels of control translate in doing the right thing while resisting temptations to act unethically.
Structural variables- existence of a formal ethical framework, job descriptions, rules and regulations, documented codes of ethics, and well-structured performance appraisal systems have a great impact on ethical behavior or lack thereof.
Organizational culture- Organizational cultures that are more likely to promote ethical standards and practices are those that engage in conflict tolerance, risk tolerance, and have high levels of control.
Deontological ethics refers to normative ethics that judges morality by analyzing the nature of the actions and the will of the actors. These two aspects are analyzed instead of analyzing the goals achieved after the action. The major reason for deontological ethics is the fact that we cannot control the future.
David Geffen lied about going to college in a job interview in order for him to become an agent with William Morris Agency. He lied that he had graduated from UCLA because the company was only hiring individuals who had gone through college and graduated. According to him, it was idiotic to think that being a college graduate is necessary to be an agent. He deceived others and ended up being a billionaire, a philanthropist, an entertainer, as well as bringing advances in medicine and art. Deontological ethics suggests that what he did was wrong because he lied in order to get a placement in the agency. This is despite the fact that the lie enabled him to bring so much advancement to the world.
Making ethical decisions
According to the executive vice president of Lockheed Martin, there should be no ethical dilemmas in the workplace. This is because every individual who works in the company should already have standards and ethical codes that clearly describe what the individual should or should not do. Decisions in the workplace become easier when the individual employee has his own set of ethical standards. The executive also confirms that ethics change over time and therefore, the leaders need to constantly assess themselves and their ethical framework to determine if they are appropriate for the change in circumstances. The ethical moral code in Lockheed Martin is: ‘Do what is right, respect others, and perform with excellence.’ (Rendtorff, 2008).
Allen, F.E. (2011, Apr 26). The five elements of the best CSR programs. Forbes. Retrieved on 7/11/2015 from http://www.forbes.com/sites/csr/2011/04/26/the-five-elements-of-the-best-csr-programs/
Mwangi, C., & Jerotich, J. (2013). The relationship between corporate social responsibility practices and financial performance of firms in the manufacturing, construction, and allied sector of the Nairobi Securities Exchange. International Journal of Business, Humanities and Technology, 3 (2): 81-90.
Tsoutsoura, M. (2004). Corporate social responsibility and financial performance.
Rendtorff, J.D. (2008). The corporation as a good citizen: a case study of Lockheed Martin.