This essay discusses the concept of Corporate Social Responsibility. Along with this, this essay analyzes and critically discusses the benefits of implementing the initiatives of the CSR for bottom line of company using the information from Journal Articles on Corporate Social Responsibility: Doing well by doing good and The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice.
Corporate social responsibility is the economical, social, ethical, legal, and environmental responsibility of the corporate houses. The fair and effective execution of the strategies, activities, policies in corporate social responsibility by the firms improves the bottom line of the organizations (Lund-Thomsen and Lindgreen, 2014). The bottom line is the net earnings of any company after deducting all the cost and expenses. The specific benefit of the implementing the corporate social responsibility policies is improvement in the economic and financial performance or bottom line of the company. The benefits of implementing CSR initiatives sometime may be seen clearly (Carroll and Shabana, 2010). The benefits from the CSR initiatives for bottom line of the company can be categorized into four categories such as reduction in the risk and cost of the company, competitive advantage to company, reputation and legitimacy and win-win outcomes.
The effective execution of CSR initiatives by the companies helps in reducing their cost and risk associated with their operation. The demand by the stakeholders poses challenges and threats to the organization, which the organization can reduce by performing its social and environmental responsibility (Carroll and Shabana, 2010). This serves economical benefit to the company by reducing the cost and increasing the revenue. Apart from this, the equal employment opportunity and equal treatment with employees improve the productivity of employees that reduce the overall cost and risk to organizations.
Attaining competitive advantage:
Every company wants to experience competitive advantage over their competitors. The execution of the CSR initiatives develop strong relation of the company with customers that provides competitive advantage edge to company. Werther and Chandler (2005) argued that organizations undertake actions that are socially desirable, can improve their reputation and establish strong relationship with customers. The philanthropy provides companies with the competitive advantage to through aligning the market or external demand with the competence of companies. The match between the demand and competency of the companies provides them with the competitive edge over their competitors. Along with this, companies improve their competitiveness by improving the relation with government and nonprofit organizations (Islam et al, 2011). For instance, McDonald’s provides support to Ronald McDonald House Charity. Along with this, organizations may align their core competencies and capabilities with their philanthropy activities. For example, McKinsey and Co. provides consulting services to nonprofit organization free of cost in the field of education, social, cultural and environmental field (Carroll and Shabana, 2010). At the same time, Home Depot Inc. is providing service to the communities devastated by Hurricane Katrina.
Developing reputation and Legitimacy:
Firms may maintain and improve their reputation and legitimacy by showing their engagement in the CSR activities. Smith argued that activities and policies of the corporate social responsibility of companies attract skilled and talented employees, investors, and consumers. Companies are using cause marketing for meeting the profit goal of company as well as meeting the needs of stakeholders in society (Carroll and Shabana, 2010). For example, General Mills Inc. donated 1.5 million USD to the customers purchased Yoplait Yoghurt. The company donated only to the customers sent Pink Lid to company. The company ran this policy for helping people having breast cancer by its Breast Cancer Initiatives. Chen et al (2008) argues that corporate social responsibility initiatives may be tools of the legitimization. They argued that the firms having negative performance in the field of environmental responsibility and product safety rely on the charity for maintaining and building their legitimacy. By developing trust and managing their dependency, firms may make strong legitimacy for them. The CSR initiatives of organizations streamlined towards meeting the desires of society improve the reputation and image of the company, which in turn may contribute in the competitive advantage to company.
Win-win outcome through creating synergetic value:
Synergetic value can be created by reconciling the differing demands of stakeholders. Porter and Kramer (2002) argued that corporate philanthropy improves the competitiveness of the companies but at the same time it meets the needs of the stakeholders. For example, charitable contribution for education may improve the quality and skills of the human resources for firms. Wheeler et al (2003) said that a Novo Group adopted win-win perspective that helped in pursuing its business of genetic modification and yet it has effective relation with stakeholders. Apart from this, it provides and publishes environmental and social reports at high rate. At the same time, in contrast, Monsanto experienced various issues in operation of its business as it neglected the demands and desires of the stakeholders. The win-win perspective was developed with an aim to meet the demand of stakeholders but at the same time to make the firms able to effective operation of their businesses. The policies and investment of the companies in CSR initiatives depends on the economic, social, and environmental policies of the country (Spence, 2011). The stakeholders are divided into three categories, which are minor stakeholders, emerging stakeholders, and key stakeholders. The management has to consider which stakeholders have to be put in which category and which category must be provided with more importance (Falck and Heblich, 2007).
From the above analysis, it can be concluded that the corporate social responsibility is the legal, social, economical, and environmental responsibility of the organization, which helps the organization in achieving sustainable development. The implementation of initiatives and activities of corporate social responsibility is beneficial for the bottom line of businesses. The implantation of the CSR initiatives provides competitive advantage to the firms, as every organization wants to be competitive in the market. The CSR initiatives also help the companies in improving their reputation and legitimacy. Furthermore, the CSR implementation provides economical benefit to the companies by increasing their profitability and sales revenue and reducing the cost and risk to the company.
Werther, W., & Chandler, D. (2005) Strategic corporate social responsibility as global brand insurance. Business Horizons, 48(4), 317?324.
Porter, M., & Kramer, M. (2002) The competitive advantage of corporate philanthropy. Harvard Business Review, 80(9), 48?58.
Chen, J.C., Patten, D.M. and Roberts, R. (2008) Corporatecharitable contributions: a corporate social performance or legitimacy strategy? Journal of Business Ethics, 82, pp. 131–144.
Wheeler, C., Colbert, B. and Freeman, R.E. (2003) Focusing on value: reconciling corporate social responsibility, sustainability and a stakeholder approach in a network world. Journal of General Management, 28(3), pp. 1–28.
Lund-Thomsen, P., & Lindgreen, A. (2014) Corporate social responsibility in global value chains: Where are we now and where are we going?. Journal of Business Ethics, 123(1), 11-22.
Carroll, A. B., & Shabana, K. M. (2010) The business case for corporate social responsibility: A review of concepts, research and practice. International journal of management reviews, 12(1), 85-105.
Islam, M. T., Rahman, M. M., & Ali, M. I. (2011) Competitive Intelligence System in SMEs of Bangladesh: A sense making approach. Journal of Business & Economics, 3(2), 180.
Spence, D. B. (2011) Corporate social responsibility in the oil and gas industry: The importance of reputational risk. Chi.-Kent L. Rev., 86, 59.
Falck, O., & Heblich, S. (2007). Corporate social responsibility: Doing well by doing good. Business Horizons, 50(3), 247-254.