The Importance of Corporate Social Responsibility / Creating Social Value

Posted on December 16, 2016

The Importance of Corporate Social Responsibility

Corporate-Social-Responsibility-and-Creating-Social-Value

Corporate-Social-Responsibility-and-Creating-Social-Value

Corporate social responsibility describes practices undertaken by a business entity that seek to restore or maintain the environment in which the business operates.

This could mean taking care of the physical environment by

  • conserving resources,
  • limiting waste, and
  • switching to environmentally-friendly methods.

Corporate social responsibility can also mean seeing to the wellbeing of the community as a whole by sponsoring social programs, as people are just as valuable a resource as raw materials.

While it may seem obvious that a business concerned with long-term survival would prioritize maintaining the health of that upon which it depends for profit, corporate social responsibility is actually a fairly new concept.

The traditional view of the relationship between a business and the outside world is that business only makes a profit when it disregards all other elements of society.

While most corporations still cling to tradition, the number of businesses implement socially responsible practices is steadily growing as more people discover the numerous benefits that such activities can have on profitability.

The Relationship between the Corporate and Public Sphere

The number of socially-conscious businesses may be growing but the corporate world is still dominated by those that operate on the notion that profitability and social responsibility are diametrically opposed to one another.

It is easy to see why corporations have garnered such an unsavory reputation with the general public, especially in recent years, as technological advancements have increased our interconnectedness on an international scale, calling attention to issues that may have gone unnoticed in previous decades.

In other words, when something horrific happens, when an injustice is committed—we know about it. We can read about it with the click of a button or a tap of the finger, we can see pictures of the consequences, and hear the stories of survivors.

It touches us on an emotional level and evokes a stronger reaction than it would if we had simply known about it on a factual level. A more dramatic example of this disparity would be the difference between the reaction to hearing about a traffic jam on the radio and the reaction to being stuck in a traffic jam with a loved one bleeding out in the backseat. There might not even be any kind of response to the first situation, but the second one would cause a much stronger reaction, such as, “Oh my god, rally the helicopters! Gandalf, call the eagles!” In this case, the responses would range between “Let’s start a petition and have a rally!” and a more Fight Club-esque approach of “Burn it all down.”

Importance-of-Corporate-Social-Responsibility

This puts businesses in a difficult situation. Social responsibility and profitability have been seen as incompatible for far too long, with corporations obviously choosing the latter over the former.Their business practices reflect this, and the byproducts of such actions can range between infuriating unfairness and deadly devastation. The past several years have shone light on numerous corporate embarrassments:

  • the state of overseas factories, which, depending on the specific business, may employ children, barely pay their workers
  • Have such lax safety standards that entire facilities collapse and kill hundreds of people, as well as practices such as wage theft and fighting any attempts to pay their workers a living wage
  • Discrimination against and mistreatment of pregnant women and anyone who needs special considerations for any reason
  • Engaging in practices that they know hurt the environment and, by extension, the entire population and future generations
  • Impeding progress
  • Using their money and authority to influence the system in such a way that would be profitable for them, but extremely detrimental to others are just a few of the scandals that have made headlines.
For much of the general public, this knowledge has undermined any trust in corporations to the point of making business into the great villain of our time, a necessary, but parasitic, evil that only makes problems—a reputation that is largely justified, though the reality is perhaps not as cartoonishly evil as some might imagine.

 

This is the root of the problem:

  1. Corporate short-sightedness and stubbornness
  2. The belief of both members of the public and business leaders that corporations must cause harm to be effective. This is unfortunate and dangerous—without business, society would collapse, and businesses need reliable resources, such as people (both those who work for them and those buy from them) and raw materials, the treatment and availability of which affects productivity and profitability.
  3. If we want society to continue to exist, function, and improve, then there must be no disconnect between its foundational elements—people, business, and the world that both depend on for their existence. It is for this reason that corporate social responsibility or creating social value is of the utmost importance, as it is a business model that allows profitability and sustainability to exist within the same space by engaging in practices that generate revenue and improve the world at the same time.

Corporations: Agents of Positive Change?

The public’s distrust in “Big Business” is such that the idea that a corporation could do anything socially positive seems almost absurd, but in fact, businesses are uniquely qualified to engineer and implement programs to affect social change. A successful business is one that runs efficiently and that is effective; this means that they must be highly organized, with a competent staff and well-run bureaucracy. This is exactly what is needed to manage social programs, which tend to hemorrhage money and fizzle out before they can be truly effective.

A corporation not only has the resources to fund such endeavors, but the structure and staffing to be able to manage, administrate, and oversee socially responsible activities.

Additionally, businesses have instant access to the necessary manpower that is required for many projects. Instead of scrounging for volunteers, corporations can simply assign various tasks to their staff.

Corporate Social Responsibility: Benefits for Businesses

Of course, all businesses, including those that prioritize corporate social responsibility, are ultimately concerned with making money, as they should be.

For corporate social responsibility to continue gaining popularity, business leaders must be shown what they stand to gain by improving, rather than ignoring or disregarding, the world around them. While many businesses have avoided implementing CSR practices out of fear that the costs will take too much away from their profits,  CSR has actually proven to be quite lucrative. 

 

Promotes sustainability

Any business that wants to endure should be concerned about sustainability. Without the correct materials and without an appropriate market, a business will not last, regardless of the product or service being offered. A competent workforce, a reliable, preferably expanding, customer pool, and raw materials—these are the essentials for business and business leaders should be concerned about their deterioration. Global warming, the growing wealth disparity, the cost of higher education, the state of public schools, deforestation—all of these problems have repercussions on the corporate level.

For example, the rising cost of higher education means that it is harder for people to afford tuition, which limits the available workforce for the business looking to hire trained and competent employees. Additionally, because those with college educations tend to make more money, corporations are losing potential sources of revenue.

Better workforce and customer pool

Competent employees are essential to a business’s survival, as are consumers who have enough money to purchase goods and services.

Workplaces that are involved in effective community charity work, such as literacy programs, are making an investment in their possible future workforce, as well as their future consumers.

  1. Improving the community, whether it is by advancing healthcare initiatives, sponsoring scholastic and academic programs,
  2. Working with the homeless, or other similar actions
  3. Giving its members the tools they need to be successful, functional, and healthy adults is insurance that, in years to come, a business will have a thriving clientele and be staffed by qualified personnel—two elements that have a significantly positive impact on revenue.

Innovation

A socially responsible corporation looks at its methods, business practices, and products and asks, “How can we make this better?”

“Better” can mean

  • researching and switching to methods of resource extraction that are more environmentally friendly and more efficient
  • Improving employee health care
  • Taking steps to create a more productive and welcoming work environment
  • Using less material to create the same product
  • Developing new products that not only meet the evolving needs of customers, but that are more energy-efficient and less wasteful than previous product lines.

Innovation is essential to business development—staying ahead of the competition is the only way to maintain one’s place in the market—and it is a natural part of the framework of a corporation built at least in part on social responsibility.

Improves public image

Consumer activism has become quite popular in recent years. For much of the general public, it is difficult to see the suffering around the world and not want to do something to help.

Not everyone can join the Peace Corps or start a non-profit, so consumer activism becomes their vehicle for social change.

For this group, purchasing decisions are often made according to the character or practices of differing companies. People want to feel as if they are making difference; it makes them feel good about themselves, which is why companies with socially conscious policies often have an advantage over similar businesses that do not seem to adhere to any kind of ethical or moral code.

Consider the fanfare when a company decides to offer family leave or better maternity leave, two practices that European countries have had for quite some time.

In this current climate, a company that allows fathers to spend time with their newborns or that gives mothers adequate time to recover after they give birth is celebrated by the masses as if it was the corporate Mother Teresa. The company is bathed in mostly positive attention (there will always be at least one person or group to criticize policy changes as signs that the country is “going soft,” or that “Values” are being corroded, but pleasing everyone is impossible); they receive a great deal of exposure, introducing themselves to a larger pool of potential customers. This type of publicity steals customers from competitors and attracts new fans.

Increases profits

This is the crux of the matter—the question of profitability.

Misconceptions about the cost of being socially responsible are what keep some businesses from adopting CSR methods, as they fear that doing so would cut into their profits too much.

While there are some upfront costs, such as paying to set up the program or making business decisions that reject sources of short-term, but ultimately harmful or non-sustainable revenue streams, the long term monetary benefits of employing CSR methods vastly outweigh the initial costs.

 

CSR causes increased profitability in two ways—

  1. by eliminating or reducing costs that stem from excess waste, inefficient business practices,
  2. by attracting new customers.

For example, it has been shown repeatedly that  poor health has a negative impact on business by reducing productivity and increasing costs.  

Healthier work forces live longer, are more productive, miss less work, and are better employees in general, which is why implementing better health care policies, such as paid sick leave and great insurance, can be so lucrative. By investing in the health of employees, the company is really investing in its final product and its bottom line.

Conclusion

Our world is full of problems, some that threaten the foundation of society. Companies that choose to pay no attention to the world in which they operate are short-sighted at best and examples of supreme idiocy at worst.

Some thought must go into how policy decisions affect the communities and environments on which business depends, as ignoring such issues ultimately harms not just the people and the environment, but the corporation as well.


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