What Is The Corporate Social Responsibility For Reputation And Performance?
The concept of corporate social responsibility is a critical factor in businesses that has significant effects on its performance and reputation. Corporate responsibility is a call to action that considers doing right to the environment where a company operates. By large, it focuses on the ethical and moral obligation to an environment where a business derives profits in the process of its operation. The concept is both a requirement by law and also an act that has to be done for any company with ethical values in its functioning. Apart from giving back to the society, social responsibility by firms initiates growth in reputation as well as improved performance in a firm.
Three theories present the case for corporate social responsibility and the different approaches to its execution. The theories include the instrumental theory, political theory, integrative theory, and ethical theories in corporate social responsibility (Lelwala, 2015). Instrumental theory relates to the notion that a corporation is perceived as an instrument for wealth creation, where the social activities attached to it aim at achieving profits to a firm. On the other hand, the political theory concerns itself with responsible use of power in society to remain responsible to legal requirements (Mallin, Farag & Ow-Yong, 2014). The integrative theory relates to focus on the satisfaction of social demands while the ethical theories refer to the responsibility of corporations to society. All these work well towards a firm’s reputation and performance.
The theory suggests the use of social activities towards driving revenues for a firm. CSR is driven by the need for communities to remain responsible to the environment and impacting the lives of individuals positively. The economic responsibility of companies is to make money, and the social activities in its responsibilities have to remain on the trend too. In this case, firms need to concentrate on the corporate social responsibilities that shape their financial growth.
Hence, a firm working in the legal system has to focus on the business responsibility that defends the community initiative in courts at no fee. In this case, they do so to attract a good reputation for itself through donating their skills and time in court for a particular community issue (Cahan, Chen, Chen, & Nguyen, 2014). Such matters might be cases of land grabbing of public land used by children in play or the presence of a factory that has grave consequences to the society. Consequently, such a law firm gains a good standing with a society where it eventually gains a proper financial gain leading to increased performance and reputation (Du, Bhattacharya, & Sen, 2010). Therefore, a firm in the process manages to handle its economic responsibility.
Further, they increase the economic capability of society to get involved in its production and consumption of products. In this respect, businesses stand a high chance of receiving assistance from a community and gaining the best personnel for business undertakings. Apart from creating a positive image for the firm, the action leads to great consequences to the performance of a firm both in profitability and brand name growth (Unerman, 2008). Corporate social responsibility works positively as a marketing tool for organization core activities.
In the process of carrying out the social responsibilities, enterprises manage to sell out their products and services in a manner that appeals to the customers thus growing its reputation and ability to handle several issues in operation. For instance, a construction company taking part in a disaster aftermath by building houses for the affected individuals as a social giving creates a good name through a strong construction project composed of an attractive housing. Consequently, such an action advertises its offering to the market thus increasing its ability to participate in society actions boosting the same.
Finally, apart from the creation of a good reputation, social giving given directly to the employees affects the loyalty levels of employees leading to increased business performance. Satisfied employees tend to develop a liking for an organization thus reducing the employee turnover rate (Vanhamme & Grobben, 2009). As a result, workers focus more on the ability to perform better to earn more for the firm and themselves through better working relation. Consequently, they end up giving their best to the society increasing the ability to compete others in the society.
The legal aspect of the corporate social responsibility refers to the adherence of rules and responsibilities given to a firm through government policies that task their participation as a proactive duty. The government has the mandate of checking whether companies are adhering to the same and the non-compliant ones risk being phased off and rated negatively thus affecting its reputation (Br?nn, & Vrioni, 2001). Consequently, firms have to behave positively by participating in social responsibilities that affect the general public.
For example, a manufacturing plant with a factory near areas of settlement has to remain responsible for participating in activities that promote protection and purification of water sources from where they benefit from the water used in production. Besides, one should concern itself in activities that reduce pollution and continuously focus on this and other charitable activities such as sponsoring children to school using the proceeds from its revenues.
Consequently, such a firm would be building a positive image for itself as well as remaining in line with the legal requirements of a given legislation on social responsibility. According to Branco and Rodrigues (2006), such rules have to be obeyed to obtain a good standing with the government and the society that serves as the consumers for products. Failure to do so results in distorted relationships with the government that consequently results in difficulties in operation and eventually closure on the inability to comply accompanied with considerable fines. Therefore, the legal responsibilities associated with social giving assists in developing a good image for a firm and hence the reputation which increases the performance financially.
Government and the general society are more inclined to do business with organizations that adhere to the regulations set by the authority and the expectations of society. McWilliams, Siegel & Wright, (2006) suggest that participating in social giving improves the likelihood of a firm participating in government tendering process as well as getting support from the society through the purchase of products. Apart from creating awareness to the community, the move assists in developing the notion of compliance to the regulations and societal expectations which in return boost the business of organizations.
The government through regulations limits companies that do not comply with regulations from doing business in the society. Therefore, abiding by the provisions in any given environment through community participation builds a good rapport and ease of doing things (Moir, 2001). A company failing to comply and impact communities risk facing resistance from the community which leads to subsequent closure and losses for a firm. Hence, it is evident that participating in social events leads to a good reputation not only with the government but also with the individuals in the society.
The Ethical Responsibility
The theory of ethical responsibility refers to the willing nature of a business to participate in social activities to the environment under an area of operation towards creating a good rapport hence developing a good reputation. The good reputation and engagement with the society develop into a fostered good rating and a high ability to attract customers and employees who are satisfied with its internal operation. The situation occurs due to ethical reasoning where a firm concentrates on a social giving with or without a prompt by the law in any given case (Zadek, Evans & Pruzan, 2013). The theory relates to the existence of a coherent corporate culture that perceives the business itself as a citizen in the society where it is obligated to remain beneficial to the same community supporting its business model. A classic example of such an activity involves a company concerned with the creation of drinks in the market which uses a considerable amount of water in its production.
According to Vitell (2015), such a firm is not mandated by law to provide clean water to the society but can opt to do so in good faith towards assisting the community. A firm can decide to give back to the society by constructing water points run by the company where the locals benefit from clean water initiative that goes a long way to benefit the society at no fee (Bowen, 2013). Consequently, such a firm would be behaving ethically as there is no compelling factor to its activities from the laws in the industry but rather carries out the activity in good faith due to proper ethics in its management. Eventually, such a firm gains a good reputation which brings more business to its entity thus increasing its performance in the market and the ability of the society to cooperate in its production activities.
At times, companies involve themselves in ethical dilemmas. In such a case, the concept of social responsibility acts positively in creating a good name and building a high reputation through a turn-around strategy. For instance, a company involved in child labor which decides to change its operation can participate in organized events aimed at creating advocacy for the education of children and discouraging the society from child labor (Fleming, Roberts & Garsten, 2013). Besides, it can engage in school projects by building and contributing immensely to the development of education in expressing its willingness to correct the ethical issues previously present in the case. As a result, an enterprise ends up promoting the change and adoption of values that relate to the society’s expectations thus gaining increased performance due to perception change in the society.
Philanthropy refers to a social giving out of free will to assist a society irrespective of whether the effects drive positive revenues to society. In this case, the social activity done does not have to be related to the core business model of an enterprise working in a given area (Bowen, 2013). For instance, a manufacturing firm choosing to participate in a social activity aimed at assisting a community hit by floods by donating foodstuff, makeshift tents for housing and medical services does so as a philanthropic move. In this respect, the activities done do not relate to its business but are done as part of the social responsibility to the society in reaction to a current issue that affects the society (Baumann-Pauly, Wickert, Spence, & Scherer, 2013).
Besides, the assistance has no relation to its profitability but rather occurs as a social giving where a firm spends its resources towards solving a crisis in a given area of operation. The government does not require task firms to participate in such activities as they are not related to its core business and harms caused in its production process. However, the social giving goes a long way towards creating a strong reputation for the company which gains favor with the people by solving a crucial issue that affects the individuals in the long run. Eventually, such a move leads to increased performance in a business where employees are happy to remain in such a firm coupled with the good relationship prompting members of the society participating in the business as consumers.
Besides, corporate social responsibility in such a case promotes the good image of a firm thereby yielding in positive recruitment and retention activities that give a firm the best employees towards production (Zadek, Evans & Pruzan, 2013). Employees love to work with companies that are responsible to their environment and respect the individuals involved in its production. As such, a firm ends up spending less on the recruitment and selection as there would be a high level of loyalty by the employees thus saving costs for the firm. Eventually, the good reputation created through the provision of the proper working environment and the sustainable ventures in the society boost a good rating and reputation to a firm thus increasing the performance of an enterprise.
Moreover, corporate social responsibility increases a good reputation attached to a given brand which acts positively in marketing businesses. CSR is a core contributor to the profitability of a company through brand name spread and recognition. A firm participating in a philanthropic activity creates awareness of its name in the society which translates into the adoption of a substantial marketing opportunity to its products thus translates into an improved performance for the business model (Bowen, 2013). At the same time, such a firm would be favored by the government given its active participation and thus benefit from the possibility of doing business with the government.
Social giving presents businesses with the opportunity to adhere to regulations, create social relations, make profits, and contribute towards philanthropic activities. All these factors contribute to their positive growth in reputation and business performance. The business environment is growing at a faster rate thus prompting for increased strategies through corporate social giving to act as a marketing tool towards posterity. The instances cited in the paper present the best practices that affect the theories related to corporate social responsibilities. Social responsibilities opportunities present avenues for cost saving as the venture retain employees and increase the business opportunities for business. Companies stand to benefit from the positive contribution to the society which builds relationships and more engagement for posterity. Therefore, businesses need to utilize the opportunity created by CSR towards business growth.
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