Why Organisations Engage in Corporate Social Responsibility.

Stoik Musah
LBS, Leicester,
shamsmusah@gmail.com




Responsibility results when an individual or organisation accepts a certain duty , and follows up by endorsing that duty with corresponding behaviours. In the case of social responsibility by an organisation the corresponding behaviour will be manifested in its corporate , legal, and economic systematic actions in recognition of a given societal responsibility and its attempt to meet that social need ( Oosterhout and Heugens 2006). This essay intends to explore why organisation might get involved in Corporate Social Activity- and even seek to demonstrate the extent organisation legitimize their CSR potentials in the eyes of critical outside audience by adopting formal CSR ethical programmes and policies to influence CSR practice.

Much academic work conducted ( Carroll 2000, Bovens 1998, Goodin 1986, Lantos 2001) in this subject area, would agree that the corporate social responsibility concept is about the societal duty of business organisations in general. Carroll (2000) define corporate social responsibility as the economic , legal,ethical and discretionary expectations that society has of an organisation at any point in time. In a more broader terminology of the concept, the Worldbank(2004) define corporate social responsibility as the commitment of business to contribute to sustainable economic development – working with employees, their families, the local community and society at large to improve the quality of life, in ways that are good for business and good for development. Overall the basic idea of the literature studies in the concept is that corporate social responsibility is rooted in the recognition that businesses are an integral part of the society, and it would seem common sensical they have the potential to make a positive contribution to social goals and aspirations (Jones, Comfort etal 2005).

From the above definitions, it can be very well imagined that the notion of corporate social responsibility in the academic field of business and society is a vague term which can mean anything to anybody. The CSR concept literature studies not only seek to define CSR in these vague terms but also stretch to develop the framework to understand more systematically , the complex network of factors that lead companies to engage in CSR initiatives. For instance there is an increasing public demand on business leaders to include social issues as part of their strategies in the present day social and political business climate (Lantos 2001). Managers continually meet demands from various stakeholder groups to devote resources to CSR. Such pressures emanates from constituencies as employees, consumers, communities and environment( McWilliams and Siegel 2001). Employees pressures includes the increasing public recognition of certain employee rights in the workplace , including non-discrimination in hiring, firing and promotion. Similarly consumer pressure includes production of safe products and greater amount of consumers information. While community and environmental pressure encompass investing in pollution abatement equipment and ensuring that the business operations do not threaten the safety of local community etc. With reference to the above highlighted stakeholder groups, the pressures from internal actors as employees was highlighted in the works of Aguilera, Rupp etal (2005) analysis on examining how employees might push corporations to engage in CSR initiatives. Their findings suggests that CSR perception shapes employees altitudes and behaviours towards their firms. Infact the perceived fairness of any working environment do impact employee well being (i.e job satisfaction , stress and emotion) as well as other internal organisational considerations as absenteeism, and employee commitment (Collquit 2001). In effect where fairness is perceived , employees are happy and hardworking.

Equally pressures from external actors as consumers and community usually exercise their CSR demands using voice and social movement strategies, such as impose sanctions and demonstration as in the case of the anti-genetically engineered food and crops campaigns in the E.U, the anti-Nike activist demonstration in the US or the anti-Shell activist demonstration in Ogoni, Nigeria (Paine and Moidoveanu 1999). Smith(2002) observed that these organisations are sceptical on the possibility that product boycott announcements is associated with significant negative stock market reaction, and this affect investors belief on sales both directly and indirectly, through harm to the firm and brands reputation.

For example , the criticism of Shell-BP by environmentalist on the companys operation in Ogoni-Akwa Ibom State, Nigeria, and the company apparent failure to use its influence to prevent the death penalty sentence passed by the Nigerian authorities on Ken Saro-Wiwa and others protesting Shells environmental damage to Ogoniland has resulted in the widespread negative publicity of the British company in that country(Aguilera, Rupp, Williams etal 2005).For this reason a critical consideration of CSR by many firm is the reputational risk, heightened by criticism of corporate practice as the above (Shell Nigeria experience),particularly by NGOs- as a result the business case for CSR is much stronger. This consideration has forced companys to realise that being socially responsible is not only the right thing to do, it can also distinguish a company from its industry peers. In this case - in a highly competitive market, CSR might provide a valuable basis for differentiation; this is seen as more firms now include environmental claims within their advertising instruments (Drumwright 2000).

On the contrary, the subject academic debate entails those critics who question the greater attention of the concept application of shareholders fund to the CSR community initiatives, without regard for the likely effect on companys profits and organisations future opportunities for research, innovation and expansion. Kapstein(2001) in his work on “ False Notion of Corporate Social Responsibility” reiterated the ideas of the neo-classic economist Milton Friedman(1962) that business only social responsibility is to use its resources to engage in activities designed to increase its profit, so long as it engage in open and free competition without deception or fraud. Friedman (1962) concept of business and societal relationship was strictly centred on the latter producing the needed goods and services at prices the former can afford. Friedman reasoned that a departure from this business role amount to spending some one else money, and placing the firm at a competitive disadvantage. He question whether managers were competent to engage in social issues, and saw no reason this group of individuals should carry out the role of government in the society.

However the accuracy of the ideas in Friedman economic model in separating business and society in the present day economics of business is widely contested, since the strategic decisions of large organisation inevitably involves social as well as economic consequences (Mintzberg 2002), invariably there is no such thing in the agenda of most organisation as purely economic strategic decision any more. Yet many managers still find some element of Friedman ideas appealing. This is seen in most organisations action programme on CSR initiatives, that is- there is often little real substance to what some firms claim to do. Klein (2000) argued that in some instances, the amount spent promoting a firm CSR achievement is often more than the amount spent on the CSR activity itself. Furthermore if eventually organisations decide to commit to such initiative, the expenditure is often viewed as investment which will yield financial return in the near future (McWilliams and Siegel 2001).These long term benefit might not immediately show up on a firms financial statements, but this bank of goodwill on the part of the organisation can be of future benefit when the organisation come under public criticism or other image/reputational risk.

To illustrate this point, Ford Motors spent millions of dollars on an advertising campaign to convince parents that most 4-8years old children should rise in booster seats, which raise children in auto seats, so that adult seat belt fits better. The company gave away 1million such seats (Kiley 2001). The goodwill generated among customers, government regulators and consumer advocates from such effort might likely justify the investment someday. For this reason strategic CSR initiative as the above can result in those helped feeling grateful and indebted to the organisation and would reciprocate in various ways, by giving it their business , recommending it to others, asking government regulators to stay at bay and so on (Brenkert 1996).This makes good business sense as it is in line with Friedman(1962) organisation profit maximization concept -for owners of capital, by promoting societal CSR initiative.

Furthermore, far greater than the longterm financial security and profit maximization CSR provides for the firm are organisational considerations at the operational level. For instance business imperatives like cost and efficient work process seems to be the key drivers of CSR initiatives, that is- CSR initiative as environmental issues (energy savings, reduced CO2 emission etc) designed to reduce CO2 emission and global warming is also seen to businesses as an avenue to reduce cost (i.e the cost of maintaining fleet of delivery trucks). In a similar way, social issues focusing on good working environment and conditions, health and safety at work discussed previously all help to promote stability, security and efficiency within the workforce (Jones and Comfort 2005).

Another organisational motive in line with the above illustration result from the natural resource based view and dynamic capabilities application theory of a firm (Barney 1991). This theory maintains that the ability of a firm to perform better than its competitors depends on the interplay of human, organisational and physical resource over time. The rationale behind this theory entails that; resources, most likely - that will lead to competitive advantage are those that meet four criteria-VRIO(Value, Rare, Inimitable and Organisation). Based on this perspective some authors ( Petrick and Quinn2001) identified social resources which can be a source of competitive advantage such as the process of developing proper relationships with primary stakeholders as employees, customers, suppliers and communities using CSR initiatives.

In addition to the above in the CSR debate, there emerge alternative theoretical framework in the practice of legitimizing and economising the concept theories in the eyes of critical outside audiences. For this reason, the adoption of formal programmes of ethics is hard to deny that organisations increasingly try to influence ethical CSR practice within industries using formal CSR ethical programmes and policies (Weaver, Trevino etal 1999). Today the adoption of formal programme of ethics is popular in the contemporary business world, ie The DowJones Sustainable Index(ISO9000 and ISO9001), The Influential KLD Research and Analytics Inc(Domini 400 Social Index, DSI), Quality and Environmental Standards(ISO14000 and ISO14001) and others. Such programme involves the adoption of ethical codes to set organisational norms and guide concrete behaviour in CSR organisational practice. This involves formalised procedures for auditing and evaluating ethical standard (Godfrey 2005). Godfrey (2005) in his works on “The Relationship Between Corporate Philanthropy and Shareholders Wealth” posit that in most organisation, formal ethics programme described as the above is often adopted as some kind of risk management tool. The writer argues that-again, this make good business sense for managers on the consideration that – by improving the ethical climate of the organisation, managers may seek to avoid excessive costs associated with risks like employee theft, fraud and bribery. Likewise this ethics programmes often serve as small investment in preventive measures, which are deliberately made in order to avoid much greater liabilities in the court room (Trevino, Weaver etal 1999).

In addition to the aforementioned ethical considerations an organisation may adopt an ethics programme when powerful stakeholders like financiers threaten to discontinue their support to the organisation if it would not do so (Frooman 1999). Another plausible account of this demonstration may result from the coercive demands of institutional actors like the state or the profession (Professional Institutes or Chambers of Commerce) or from the examplinary behaviour of high status peers in the industry (Haveman 1993). By this, the organisation without such programmes, who look up to the state and these high status companies are likely to imitate these successful companies- again with coercive institutional pressure from the state, ethical falsibility on the part of organisations is most likely expected. This demonstrates that ethical considerations are mere ceremonial qualities by industry actors to legitimize their CSR potentials in the eyes of critical outside audience.

Overall, given this broad analysis explored on business and its relationship with the society, and considering the diverse links of CSR that cuts across a broad range of activities carried out by organisations - previously know under diffused labels as corporate philanthropy, corporate community involvement, ethics, sustainability management, cause related marketing as well as stakeholder integration, it is hard to deny that there has being nothing appealing to organisations on the notion of CSR (Oosterhout and Heugens 2006). For this reason if management leadership is interested in moving the CSR agenda forward, it will require management awareness in these subject areas, to help inform better judgement of the main issues on the concept to facilitate drastic organisational change initiative. In consequence, management must understand that- at the moment CSR drives companies, to achieve competitive advantage. They should understand that it is their behaviour that serves as a model and message – sender to all, in the course of driving this change programme forward, therefore their commitment is the key to reinforcing these values, alongside the commitment from other top management, ie marketing unit as well as the support of the board of directors(Lantos 2001). Similarly to implement this change programme,it is the role of management to innovate and communicate a few simple shared values and visions that form a common ground upon which CSR activities can stand, by proclaiming these values continuously and demonstrating devotion to it through (i)actions (ii)encouraging employees to invent and innovate new CSR ideas that conform to these values and visions and (iii) rewarding every attempt to advance these values and visions(Lantos 2001). Moreover, measurable and achievable goals should be set in each of the CSR activities, including expected benefits to every stakeholder.

Consequently, wide academic research studies exist to unearth the greater sentiment that continues to underpin business thinking why organisations get involve in CSR. However the previous discussion reveals the analogy that organisation, is extremely liberal in giving is misleading. Although it is expected of business to be liberal in their contribution to societal good - in the real world of business this is not so, what is commonsensical to remain competitive is how you make do with the resources and opportunities available to you, and not what would be the ideal practice in your actions. This is because businesses are formed for limited economic purpose and competitive market resources are so efficiently applied to business initiatives, that it would be impossible to attain fairness in CSR initiatives without making some other persons (shareholders) worse off. Nevertheless the verdict today is that CSR is increasingly expected from organisation by the society, and this can be rewarding for both societal stakeholders and the firm if a clear, strategic and measurable CSR agenda is put in place by the organisation as spelt out previously in the role of management leadership in moving the CSR agenda forward.


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