Literature has identified social corporate responsibility as the important corporate social responsibility of organizations (McGuire et al 1988). The increased importance of corporate social responsibility in the corporate decision making and organization’s relationship between its social and ethical policies and financial performance is the driving force for organizations to emphasize on corporate social responsibility. However, the economic aspect of corporate social responsibility is known and justified by many organizations but ethical and political aspects of corporate social responsibility are still ignorant. Today, ethical aspect of corporate social responsibility is greatly associated with the business ethics, which was viewed before only as administrative compliance with the legal standard of organization. Since, business ethics has gained more importance as to earn the respect and confidence of the customers, it is now widely recognized that in order to succeed, organizations must adopt corporate social responsibility as a core of the organizational activity (Sims, 2003). Moreover, the relationship between political beliefs of corporate stakeholders and corporate social responsibility of the firms is acknowledged in terms of high CSR firms in Democratic states while low CSR firms in Republican states (Political Views Affect Firms' Corporate Social Responsibility, Study Finds, 2008). These different aspects of corporate social responsibility have emphasized on the need to assess why some firms are more committed to CSR than others. In this regard, three different aspects of CSR will be examined namely economic, ethical and political. Additionally, the benefits and damages will be evaluated that might be experienced by the company.
Corporate Social Responsibility of Firms
According to Mcwilliams and Siegel (2001), different organizations have found increasing needs for devoting maximum resources to corporate social responsibility (CSR). However, these needs are identified from internal as well as external sources. Internally, there is pressure from stakeholders of organizations such as customers, employees and suppliers. Externally, there is environment pressure where there is growing competition and organization are more struggling to have maximum market share (Mcwilliams and Siegel, 2001). Different corporations have identified different CSR needs for the organization management such as obeying laws and participating in community-based work and so on.
However, the definition of CSR is still not clear, but many have associated it with good actions and intentions of organization (Mcwilliams and Siegel, 2001). According to McWilliams and Wright (2006), CSR activities are such activities incorporating social features into organization’s business process through adopting progressive human resource management. Through understanding the definition and importance of corporate social responsibility, organizations employ strategic activities as well as coursework writing service that could increase organization’s profitability. McWilliams and Wright (2006) have presented different theories of CSR. The stakeholder theory of CSR emphasizes on the managers to satisfy a variety of constituents including employees, customers, suppliers and other community organizations. In this regard, managers in organizations are also expected to satisfy the stockholders and owners of the organizations. Moreover, it is stated that organizations must be engaged in certain activities of corporate social responsibility that are taken as important by the non-financial stakeholders (McWilliams and Wright, 2006).
Economic Perspective of Corporate Social Responsibility
Different researchers have agreed on the point that organizations must obey laws as legal entity in the society. According to Reinhardt et al (2008), Firms have the ethical and social duty beyond just legal compliance with environmental regulations. The economic perspective of CSR is associated with gaining more profit in the social interest. The economic perspective of CSR is to increase the organization’s profitability that is specifically related to environmental protection (Reinhardt et al 2008). Organizations exist to generate profit from their businesses while corporate social responsibility activity concerning environment protection means that organizations will have to sacrifice their profit due to social interest involving benefitting to individuals in the society rather than their shareholders.
According to Schreck (2009), corporate social responsibility from the economic perspective offers opportunities for organizations to reduce their present and future costs by increasing their operational efficiency. The profitability of the organization is increased as CSR activities of organizations draws the consumers away from competitors and improve the profitability of the organization. According to Zu (2008), through corporate social responsibility, organizations are able to develop a better relationship with their investors and can access more capital. Many studies have demonstrated evidence, according to which, investors and shareholders are mainly concerned about corporate social responsibility of their firms as it has important effects on the financial performance of the firm (Hill& Knowltown, 2006).
According to instrumental theory of CSR, CSR is a strategic tool that is used to achieve economic objective of the organization. This theory justifies that organizations engaged in CSR activities do not refer to organization losing their profit, but rather it emphasizes that making maximum profits to shareholders is the only corporate social responsibility of organization (Ganiga and Mele 2004). According to Reinhardt et al (2008), new theoretical economic perspective has identified certain dimensions of CSR, which can improve the organizational financial performance in the industry it operates. Based on these findings, there are numbers of companies that adopt CSR for increasing the profitability of the organizations.
Different organizations such as Wal-Mart, Coca Cola and Nike are the best examples of those organizations that largely incorporate thesis writing service in their corporate social responsibility. As recognized of Wal-Mart that has employed a strategy of making logistical processes to make it more economically friendly. The concept behind‘Green Logistic’ of Wal-Mart as an effort to protect environment can be seen as the core of the implementing system that monitors the overseas suppliers for meeting the social as well as environment standard (Heying and Sanzero, 2009). In return, the company assesses the transformation’s effects of becoming environmentally friendly. Similarly, Coca Cola as the world’s largest beverage company has also incorporated the environmental protection activities in its business operational process. The company’s corporate social responsibility activities concerning environment protection has been recorded as to increase the company’s financial performance (Coca Cola Social Responsibility Report 2009 and 2010).
Ethical Perspective of Corporate Social Responsibility
The ethical perspective of CSR is associated with business ethics, which is considered as applied ethics. According to Crowther and Rayman-Bacchus (2004), business ethics is the main concern of CSR as it inculcates the sense of business responsibility in organization’s employees. Moreover, the term ethics is broadly used for moral standards defined by a society, which are obligated by organization as social legal entity. Ethically, CSR incorporates integrity in the organizational activity and the business conduct of organization (Boeger, 2008).
According to Idowu and Louche (2010), business ethics and corporate social responsibility can be used as alternative of each other towards government regulation and intervention. Thus, the ethical aspect of CSR is more likely to be concerned with moral standards and social normative issues such as how organization should behave. It is argued that different organization have adopted CSR because they think that organizations have moral obligation towards the people, thus this moral obligation of corporation rejects the idea of pursuing profit. However, ethically, businesses have to work for internal as well as external stakeholders. According to Idowu and Louche (2010), it is an organization’s ethical obligation to respect the concern of customers and employees. In this regard, organizations are expected to provide training, incentives and other rewards, on the other hand, for customers they should provide customer service facility.
According to Boeger (2008), organizations’ internal as well as external behaviour reflects its ethical obligation for business. Today, environment protection is considered as the ethical responsibility of organization. Many organizations that adopt environment protection activity as corporate social responsibility of its organization are conscious about incorporating environmentally friendly procedure in their operational activity (Prasnikar, 2006). Boeger (2008) argued that corporate reputation that is associated with business ethics is now largely based on the corporate social responsibility. In this regard, he argued that the brand image of of an organization also depends on the organizations’ moral and ethical obligation. However, many have associated environment as a means of compliance with business ethics, nowadays many organizations have built their image based on fulfilling ethical obligation (Crowther and Rayman-Bacchus, 2004).
Studies have found that, organizations that do not obligate business ethics or employ corporate social responsibility have to suffer from severe consequences. According to Idowu and Louche (2010), ethical violation by organization can cause serious damage to reputation of company. Moreover, the company’s failure to meet the ethical corporate social requirements of different stakeholder affects the organization’s profitability and image negatively. In addition, different boycotts, sanctions and regulatory actions can damage the business. One of the best examples is the Exxon and Shell that were involved in unethical business practices related to human rights abuses and other environmental damages. This abuse of human rights and violation of environmental damages caused damage the company’s reputation and provoked to consumers’ boycott (Werther and Chandler, 2010). Another example is of Daishowa-Marubeni International Ltd, which is an integrated forest products company. Boycott was launched by a group of Canadian activist against the company for logging on long-disputed native land. In this regard, the boycott was actually against those customers who purchase products of the company.
Political Perspective of Corporate Social Responsibility
Legally, every organization is obliged to meet certain level of corporate social responsibility, according to which it manages its operational activity as to lower pollution levels. Corporate social responsibility is the way to make business a political process, such as policies formulated by organizations are the result of negotiations among the individuals who are interested. Thus, political aspect of the corporate social responsibility is associated with legal aspects of organization. However, if organizations do not comply with legal obligations they can get into lawsuits, which can later have effects on finances of organization. Thus, political or legal perspective of corporate social responsibility is recognized as a critical aspect of the CSR for organizations to survive in the market. According to Banerjee (2007), political aspects of CSR can be identified as organization political member of society where it has political responsibilities and roles. Different industries have found corporate social responsibility as the core of the organization and put it as highly important agenda for the business. The political theory of corporate social responsibility focuses on the company’s interaction and connection with the society for power and position. Thus, this theory signifies political considerations and political analysis in the corporate social responsibility. According to the corporate constitutionalism theory, organization is a social institution and it should use the power responsibly (Ganiga and Mele, 2004).
Literature about political aspects of CSR has found that cultural and political context is a significant element in developing the companies’ policies. Moreover, globalization of organizations has made the organization to consider their CSR and in this regard, they are persuaded to focus on the social needs as well as legal problems that exist in the society. It is found that organizations pursuing corporate social responsibility through political and legal compliance are competent as to have a better image of organization. Moreover, process of globalization has increased the importance of political and legal obligation of organization and it has further enhanced the significance of political and legal condition in a country (Boeger, 2008).
The above discussion demonstrates why organizations are more likely to incorporate corporate social responsibility with economic, political and ethics perspective. There are certain benefits and damages that can be faced by organizations due to adopting corporate social responsibility.
Benefits of Corporate Social Responsibility
However, corporate social responsibility has been identified as such business philosophy that makes the organizations to take social and environmental responsibility for their business actions to reduce the environmental damages and breach of human rights.
Benefits to Organizational Financial Performance
Different studies have found corporate social responsibility very effective and beneficial for increasing the organizational productivity and profitability. Besides, there are other benefits found concerning corporate social responsibility of organization, including extension to business realm and environment protection. However, organizations are mainly concerned with the profitability that is earned for their shareholders, it is vital for them to understand that adoption of corporate social responsibility is beyond just earning profit (Werther and Chandler, 2010).
Benefits to Public Relations
The most significant benefits of corporate social responsibility are the protection that it provides from lawsuits and other sanctions. If organizations do not incorporate corporate social responsibility, they would find themselves violating social, legal and political standards set by society. Those organizations that violate the environmental standards are subject to number of fines and penalty (Werther and Chandler, 2010). Organizations through applying alternative energy reduce lawsuits and fines. The public relation benefits of the corporate social responsibility are the most important of all benefits because the company that has a reputation for giving fair wages, having hiring laws and engaged in pollution reduction activity attracts to potential workers and customers. Since employees are considered as an important part of operational process, it is important that they are satisfied with their jobs and organization that takes care of its employees creates high morale for their employees. In addition, good corporate reputation may assist the organization to have community-based relationship that can provide the organization with enormous benefits for organization operating in specific areaa (Boeger, 2008).
Disadvantages and Damages of Corporate Social Responsibility
Despite the fact about the benefits that corporate social responsibility can bring about, there are certain disadvantages or damages of adopting corporate social responsibility. Different studies have found corporate social responsibility ineffective in terms of giving good returns. In this regard, it is argued that organizations that invest large amount of money for corporate social responsibility are not able to estimate the benefits they have. Other studies have identified the corporate social responsibility ineffective and argued that there is no positive effect of corporate social responsibility for the financial performance of the firms (Boeger, 2008).
The changes in the traditional operational activity of the firm increase the total production cost while the price of the product remains same. In the result, the company does not earn the profit that is equal to the money invested in adopting changed the operational process of business. Moreover, charity and other sponsorship programs held by organizations as demonstration of corporate social responsibility do not help the organization to increase their business (Werther and Chandler, 2010).
This paper identified and assessed the corporate social responsibility as the core of the organization. It is found that few organizations are more likely to incorporate corporate social responsibility than others due to the benefits of adopting corporate social responsibility. In this regard, three different aspects and perspectives of corporate social responsibility have been recognized. It is found that by incorporating CSR, there is a positive effect of CSR on the financial performance of the organization. Moreover, ethical aspect of corporate social responsibility emphasizes on the ethical obligation of organization being social entity. Political aspect of corporate social responsibility is found to be important as it is related to legal aspects of organization in which organization can find it if it does not comply with corporate social responsibility. In addition, benefits and damages of corporate social responsibility have been identified in terms of influencing the main reason of organization for which it exists. At last, it can be concluded that organizations are committed having corporate social responsibility because they have found social and corporate responsibility profitable for their organizations. Since every organization has the only purpose of existence and that is to earn maximum profit, organizations have found corporate social responsibility as important to have increased profitability.