Corporate Social Responsibility (CSR) has been a concept widely debated upon the corporate world due to the different points which must be given consideration with, yet it holds true that in today’s world, corporate social responsibility, defined as all aspects of business behavior and impact on society, is on every corporate agenda (Ogrizek 2002, 215). Some perceive CSR as an added cost to the corporation, while other corporations see CSR as an asset as it gives additional value on how people perceive them as a corporation and as a group of employers.
Its remains to be continuously vague as people give different feedbacks and perceptions about it. Over the years, as the conceptualization of CSR has developed, it has become evident that CSR encompasses a variety of elements ranging from values and philosophies to societal and environmental issues, business strategies and the relationship between business and society. (Decker 2004, 713). This evolution of perceptions has made the corporations’ consideration of CSR much harder and complicated and the scope of CSR has gone beyond the traditional concepts and constructs which are presently recognized.
“The scope of CSR is much broader than charitable activities, philanthropy and community involvement. It embraces business practices, including environmental management systems, human resources policy and strategic investment for a sustainable future. ” (Ogrizek 2002, 216). Globalization, fair trade, community participation, Non-Governmental Organizations, Local Government involvement, sustainable development, and Stakeholder Management, are some concepts which need to be further clarified in order to fully understand the concept of Corporate Social Responsibility and how it currently works.
The further study and analysis of Corporate Social Responsibility is imperative in the attempt to make the interactions and the relationship between the different dynamics of corporations and the global population work smoother and better. The perception of CSR as means to further the ultimate goal of human development and sustainable development, rather than as a means for a corporation to fulfill its ethical responsibilities to comply by the international standards must also be considered by corporations.
Globalization, The increase of surplus products from different first world countries has led to the search of new market for the first world. This has caused the sudden increase of Multi National Corporations (MNC) gearing towards expansion in different countries particularly in the third world wherein surplus could generally be sold in compromised prices and the cost of workforce is relatively cheaper than in the first world.
For some institutions and Non-governmental Organizations this is viewed upon as a form of exploitation of intellectual and skills capacity of the Third World Population which has been fortified by the World Trade Organization (WTO). This perception has led to the continuous struggle of Non-Governmental Organizations and the increase in pressure for more socially responsible considerations in the management of the workforce.
While a corporation gains in cheaper labor and larger market areas, globalization has also compromised corporations to be more socially responsible not only in terms of managing their employees but in advocating for sustainable development and child and human development orientation. “Globalization has increased the calls for corporations to use firms’ resources to help alleviate wide variety of social problems. The pharmaceutical industry, for example, is asked to donate free drugs and vaccines to Third World nations where the afflicted cannot pay.
Firms engaged in manufacturing are encouraged to apply developed nation’s laws and norms to issues such as child labor and environmental pollution in less developed countries regardless of local laws or customs. ” (Hillman A. and Keim G. 2001, 125). International political activists have widely contributed to this induced corporate orientation through accessible communication brought about by globalization itself. “Thanks to this underground public opinion network it is much easier for activists to create worldwide coalitions than in the past.
The international mobilization at recent anti-globalization demonstrations in Seattle, Prague and Genoa, against the G8 summits and international financial institutions such as the World Bank and the IMF, put quite a lot of pressure on European governments and the Commission to define their socio-cultural policy within the globalization debate. ” (Ogrizek 2002, 217). Although demonstrations have caused international corporations and organizations to be more socially responsible in consideration to their employees and stakeholders, corporations still have not achieve considerable development in terms of gearing towards fair trade.
Due to this, much protest and debate has risen from the use of CSR as means of covering up the ill-effects of global capitalism and globalization. Fair trade Fair trade is one of the major factors considered in Corporate Social Responsibility. It is the equality in the exchange between the buyer and the supplier. There is however a thin line between “fair trade” and “ethical trade”, and it must be clearly emphasized that there is a distinction between the two concepts which involve the orientation of the corporations.
Ethical trade is to be considered as the basic ethics of any corporation which offers its products or services to the market. Fair trade on the other hand, focuses mainly on the product and the development the corporation could give the stakeholders. As Strong discussed, “fair trade represents an approach to the buyer-supplier transaction that aims at equality of change recognizing the power discrepancy between the developed and developing words. (Strong 1996, 32).
Fair trade is the recognition of the discrepancy between the economic capacities of both the developed and developing nations and tilting the balance towards the development of the Third World. Ultimately, the objective is to maximize the return to the supplier rather than the margin of the buyer, within an agreed development structure. (Barratt Brown 1993, n. p). This is basically trade basically biased towards the development of the Third World or developing countries which are the main suppliers or the sources of raw materials, cheap labor, and cheaper service sectors.
Barratt Brown (1993) cites the practices which identifies the distinction of fair trade such as direct purchasing from producers; transparent and long-term trading partnerships; co-operation not competition; agreed prices, usually set ahead of market minimums; focus on development and technical assistance via the payment to suppliers of agreed social premium (often 10 percent or more of the cost price of goods); and provision of market information.
Direct purchasing from producers discourages the existence of “middlemen” who prey on the suppliers by asking for rock-bottom prices which they bloat once they quote the price they give to the buyers. Transparent and long-term trading partnerships encourage development and transfer of the technology to the developing countries which serve as host to the Multinational Corporations (MNCs). Cooperation instead of competition policies foster and encourage the mutual development of both developing country and the MNCs.
Set prices, determined ahead of market minimums ensures the existence and the equal distribution of profits which fosters progression rather than repression of the stakeholders. The focus on development and technical assistance via the payment to suppliers of agreed social premium, ensures the gain of the lesser developed and the consideration to their capacity as a less developed nation. Provision of market information fosters and establishes trust between the corporation and the stakeholder producer of the products.
Fair trade contracts will typically include specific employer codes of conduct setting out terms for fair pay for workers and acceptable working conditions. (Nicholls 2002, 6) International demand for fairly traded goods has been standing out in the market as the demand for fairly traded goods has increased due to constant information and orientation about fair trade brought about by local and international progressive Non-Governmental Organizations. The global market for fair trade goods in 1999 stood at over $400 million and pned nearly 300 producer organizations (Raynolds 2000, 297-309).
Community Participation Community involvement or community participation is crucial in the conduct of Corporate Social Responsibility programs or projects. Since in the conduct of projects or programs, the consumers of a corporations’ produce – whether the produce be solid products or services – are mainly the ones defining the market flow and who compose the communities, there must also be a clear consideration and understanding of their opinions and perceptions of the communities in the conduct of projects or programs to avoid conflicts between the corporation and the communities.
There are however, different levels of participation such as direct participation wherein the community members are the one defining the program for themselves; collaboration, wherein both the corporation and the community members define the programs which they will both undergo; Consultation, wherein the community members are merely asked whether they like the project or not, and is more of project validation; and persuasion, wherein the community is asked to accept the project the corporation has planned to conduct.
The consideration of community involvement is however costly, since a high level of commitment towards community involvement must be supported adequate resources and a relational culture. ( Ruff Hewitt 2002, 2). For in the conduct of such project considering community involvement, different project feasibility studies, focused group discussions, surveys forums, and programs must be primarily be conducted before the actual implementation to yield better results in participatory development.
Corporations which give utmost recognition to the role of the communities gain a higher level of trust and higher market values for their products. As in the case of Home Depot Canada wherein the consumers take it considered it as their retailer of choice. (Government of Canada 2002, 17)
Non-Governmental Organizations (NGO) play major roles in Corporate Social Responsibility. Since Non-Governmental Organizations are generally caused oriented and progressive, they are perceived as unbiased and considered as a group with a perspective different from a corporation.
Thus in some countries, the existence of partner NGO’s and the consideration of their standpoints are required before the conduct of any project or implementation of any program. Local non-governmental organizations (NGOs) or trade unions are often asked to take part in setting up and monitoring contracts, as well as helping direct the micro-economic development projects that spring from the social premium. (Nicholls 2002, 7).
The context or the cause of the NGOs who would be consulted or be participants in the projects must be considered in doing projects. For example, a corporation with a project which would be largely affecting the environment should tap NGOs which are for the cause of the environment such as the green peace or any other local NGO present which is for the same cause. NGOs could also help the corporation engaging in CSR to enter a particular area or they may also serve as the corporations’ main partners in engaging in Corporate Social Responsibility.
In the case of The Home Depot Corporation in Canada, wherein they built homes for the homeless and other infrastructures, they tapped organizations such as the Habitat for Humanity, KaBOOM! , and Ice Dreams, for their Corporate Social Responsibility of building the . Habitat for Humanity is an international non-profit organization which calls for volunteers coming from corporations, and the community who would be the future homeowners, to work together by pooling resources and manpower to build homes. KaBOOM! is a non-profit NGO which builds safe and accessible playgrounds for the children in the community.
Ice Dreams is an initiative to build back outdoor rinks in Canada for Ice Skating, which Home Depot Canada made in partnership with Go for Green, a Canadian non-profit organization which encourages outdoor physical activities and environmental stewardships. (Government of Canada CSR Case Study: The Home Depot 2002, 5) The involvement of NGOs also has its negative points when it comes to Corporate Social Responsibility. In some countries, Local Corporations and Multi-National Corporations create their own “pseudo-Non-Governmental Organizations” to validate some of their programs without any dissenting opinions.
The vague definition of the concept NGO has largely contributed to the incidence of such corruption. Such circumstances must be avoided in order to gain corporate credibility and proper monitoring and conduct must be perceived as the proper way. Government Involvement The involvement of the government in Corporate Social Responsibility is also important. Since the government has the mandate and the power to create policies and also the responsibility to pursue and if necessary intervene in case there are some corporate flops which involve violations in government policies with regards to the protection of the environment and its citizens.
Constant communication, as well as collaboration or partnerships with the government, is necessary for possible recognition and reputation building. This should be crucial in making a proactive approach to crisis management. As in the case of the Canadian Pacific Railway which built its reputation with constant collaboration with the government. “In 2000, CPR began what was to become a productive partnership with the Federation of Canadian Municipalities and the Canadian Association of Municipal Administrators (CAMA), and organization that represents professional municipal managers.
This led to FCM and CPR signing a memorandum of understanding (MOU) in May 2001 committing the organizations to develop a collaborative process through which municipalities and railway could work to reduce the costly intervention of courts and regulators in the resolution of community-based disputes and to engage other industry players in turning the model into an industry –wide standard. The new CPR-FCM model was first tested on a housing development proposal next to CPR’s mainline in Brandon, Manitoba.
Based on this and other successful pilot projects in 2001, elements of CPR’s dispute resolution and proximity management models became the basis for developing industry wide standard. ” (Government of Canada, CSR Case Study: Canadian Pacific Railway, Re-engaging with communities 2002, 6) Lessons could be learned from different cases of corporations which made efforts to collaborate with the government and got the better end of it. The pro-activity of Corporate Social Responsibility efforts would greatly work better if done in cooperation with the government or other legal institutions.
Sustainable development is defined as development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs. Corporate sustainability is the capacity of an enterprise to maintain economic prosperity in the context of environmental responsibility and social stewardship. It is a business approach that creates long-term stakeholder value by embracing opportunities and managing risks deriving from economic, social and environmental developments. (Sahay 2004, 2)
Sustainable development basically means ensuring the maximum utilization of natural resources for the use of future generations. Since most if not all of the natural resources utilized by the human population is hardly renewable, the need for sustainable development arises and thus the strong determination of corporations to pursue such course in their Corporate Social Responsibility ordeal. This need is further strengthened by the existence of current climate and environmental changes.
The environment is a business concern all over the globe as some of the environmental impacts, such as global warming (DeCanio 1992), ozone depletion (Morisette 1989, 793-820), acid rain (Rycroft 1988) etc do not observe geographical boundaries. Since the cause of such huge environmental degradation is mainly due to abuse of some local, multi or trans – national corporation preying on third world countries. Sustainable Development is pushed for by most corporations to establish trust with the Third World Countries in which they plan to establish their network of companies.
Corporate reputation is an intangible asset that is related to marketing and financial performance. The social, economic, and global environment of the 1990’s has resulted in environmental performance becoming an increasingly important component of a company’s reputation. (Miles and Covin 2000, 299)
The increase for corporate consideration for the environment has also pushed corporations to be more cautious in the conduct of their activities and their environmental impacts in order to maintain a good reputational advantage, and maintain their current market.
Presently in the Philippines, a Third World Country in Southeast Asia, a struggle between some citizens and their government is present due to the proposed economic agreement between them and Japan. The citizens of this country denounce in the existence of such economic policy wherein Japan would dump their toxic wastes in the Third World Country in exchange for some jobs within their country.
Such fiasco contributes to the mistrust of some stakeholders and other communities towards some international corporation. Stakeholder Management Stakeholders are those without whose participation, the corporation cannot survive (Clarkson 1995). This definition however, very narrow, since stakeholders are not only those who are of use to the corporation, but rather all individuals who are affected or have been affected by the corporations’ operations.
While not all community residents are employees, suppliers, customers or investors, they do provide various forms of important infrastructure for the firm and in turn are impacted directly by tax revenues and physical environmental protection (or degradation). (Hillman and Keim 2001, 126). Importance of these stakeholders which hold no stock or position in the corporation much be given due recognition, since, although these individuals do not hold anything in the corporation, it is them which are availing the corporations produce or services.
As narrow as the initial definition of stakeholders maybe, Clarkson (1995, 107) also asserts that “ the survival and continuing profitability of the corporation depends upon its ability to fulfill its economic and social purpose, which is to create and distribute wealth or value sufficient to ensure that each primary stakeholder group continues as part of the corporation’s stakeholder system”.
Thus, it maybe perceived that, although some corporations attempt to provide social services only for their shareholders whom they consider as their primary stakeholders, they still give value to the communities and individuals affected, since they consider the consumers as those who control the market and at some point define the direction of their corporation. Purchasing a quality product at a reasonable price is a consumer objective. If desired value is not delivered, fewer products will be purchased.
This, in turn, affects present and future expectations resulting in lower stock prices, possibly leading to lay-offs, reductions in purchases of inputs from suppliers, and lower taxes being paid by the firm, etc. – negative consequences for all primary stakeholders. ( Hillman and Keim 2001, 127). Thus it is important to consider the welfare not only individuals or group which contribute financially directly to the firm, but the individuals who are affected and are using the produce or the firm’s services.
It must then be considered that, stakeholders are not only those who would be affected once a corporation falls, individuals who are affected by the corporation through existence should also be considered as stakeholders as well. Advantage Engaging in Corporate Social Responsibility has its advantages and disadvantages. Although its disadvantages are compensated by its advantages since most of the disadvantages are merely the costs which a corporation pays for conducting socially responsible programs or projects.
While CSR is usually motivated by a business’ desire to “do the right thing”, it does, in fact also offer a valuable opportunity to raise a business’ profile and brand. Early and rigorous adoption of a CSR program means that even small businesses can simply and efficiently differentiate themselves from their competitors and provides a first mover advantage over competition. (Ashtrust Briefing, Corporate Social Responsibility and Environmental Reporting a Question of Risk or Reward? )
In some countries such as South Africa, they view Corporate Responsibility as positive to their produce and have embraced initiatives and considered them as Corporate Social Investment (CSI). As particular to the context of their country, more consumers prefer corporations which exist responsibly in their corporations. Reputation building. Aside from the awareness of consumers on corporations’ environmental impacts strongly pushing corporations to be more cautious in their reputations.
Engaging in CSR is a proactive approach in managing different crises; it establishes credibility and builds good reputation for the corporation which means an added value in advertising and preference of market consumers. In the United States and United Kingdom, political activists have changed the perception of corporations and have somewhat pushed them to the thought of doing the right thing to save their faces, as exposes of some activists groups have made more people concerned about the societal and environmental impacts of huge corporations.
The failure of Enron and Nike’s sweat shops have boosted the people’s awareness over the performance of big corporations as such. Initiatives led in recent years against ‘superbrands’ like Nike, Shell, McDonald’s, Starbucks and Pepsi by activists in the USA and Europe have made companies concerned about promoting positive corporate image to the world, and made them rethink the values their brands represent to an online public that is becoming more and more likely to boycott brands that seem to be uncaring.
In addition, the rise of popular anti-brand sentiment in North America and Europe has made people more aware of the immense influence brands have in their daily lives. (Irwin 2003, 303)
A company which is properly managed and has an efficient workforce will definitely be stronger and successful. Hence the existence of such individuals with skill and capabilities working for the corporation is highly important. A corporation’s Social Performance largely contributes to attracting quality workforce for a corporation.
Social identity theory suggests that job applicants have higher self-images when working for socially responsive firms over their less responsive counterparts. (Greening and Turban 2000, 254). This realization, leads to the tilt of corporations to move towards greater socially responsible functioning. Many firms now realize the importance of attracting and retaining highly skilled, quality employees as a necessary component of their competitive advantage (Pfeffer, 1994; Teece, 1998; Turban & Greening, 1997).
Also, socially responsible corporations’ employees also function efficiently than other corporations less socially responsive.
Off-balance sheet intangible assets such as corporate image and reputation are becoming more important contributors to overall organizational performance ( Lusch and Harvey 1994). Thus, those corporations which are more socially responsible also yield better results and profits due to the performance of their workforce or employees. Furthermore, firms that produce superior quality products use truthful advertising, act in a socially and environmentally responsible manner, ad have a history of fulfilling their obligations to various stakeholder groups are creating reputational advantage ( Covin and Miles 2000, 300).
Home Depot. The Home Depot Corporation Canada, is the world’s largest home improvement retailer and the largest retail chain in the USA. Founded in 1978, it has since then expanded into having more than 250, 000 associates in 1436 locations. Home Depot specializes in building materials lawn and garden improvement, and other home improvement supplies. Most of their stores offer between 40,000 and 50,000 different home improvement products. Home Depot also owns EXPO Design Center, a one-stop design and decorating retailer; Maintenance Warehouse; Apex Supply Company; Your “Other” Warehouse; and Home Depot Landscape Supply.
Due to the current well publicized Boycotts against products being made in sweatshops with poor working conditions, the pressure for retailers to screen and avoid products which are anti-Human Rights. Consumer groups, NGO’s and other civil society groups remain keen on these products made in inhumane environments. With these conditions Home Depot started to build rapport with their consumers starting with a Corporate Social Responsibility activity wherein they incorporated their employees as one of the main actors in the program.
They creates the Team Depot Program in which employees of Home Depot work together on projects which benefit communities and address social issues such as environmental problems, at-risk youth and affordable housing. In 2001, Home Depot employees donated 6 million hours to community service. Home Depot created group dynamics within the ranks of their employees wherein each retail outlet is assigned 2 hours per week wherein each outlet is able to select the issues or projects which are particularly important for them. Team depot’s CSR operation depends mainly on their employees’ volunteerism.
Home Depot presents to their employees who are active enough awards and recognitions, for their participation and their involvement in their program. Home Depot also partnered with other Non-governmental Organizations such as the Habitat for Humanity, which they have supported since 1989 through donations of building materials. They’ve also partnered with the Multiple Sclerosis (MS) Society of Canada, wherein they help raise money for research and support services for individuals with MS; and KaBOOM! In which they help build and fix playgrounds for depressed areas, where, a large part of the areas’ population are children.
Home Depot was also active with Go for Green a Canadian non-profit organization which encourages outdoor physical activities and environmental stewardship, wherein Home Depot was in charge of helping build outdoor skating rinks and information dissemination. In the mid-1980’s through some consultants, Home Depot also began to touch on disaster prevention, which added on as the fourth to their focus areas following: 1) affordable housing; 2)environment; 3) youth at risk. and 4) disaster preparedness and relief. Home Depot also made efforts to incorporate their corporate goals and Objectives with the goals and objectives of their CSR project.
Home depots major program areas, are mainly the communities which Home Depot employees and customers live. It has also made donations to community causes such as affordable housing, safe areas for children to spend their time while they learn, some programs for forestry and ecology and environmental protection such as donations to NGOs and other programs of the Team Depot. They also disseminate information about disasters and provide food and water to the rescue teams during disasters. Home depot also advocated for recycling and making safe and environment friendly waste disposal.
Home depot also ensured their suppliers’ compliance with health and safety regulations as well as environmental programs which ensures that their products are environment friendly. Home Depot also gives consideration to their employees’ individual and holistic growth. They offer a web-based learning program for all their employees to increase their product knowledge and eligibility for new positions. They’ve also tried to eliminate gender gaps by making positions for woman in management positions. Home Depot also extended health care benefits to part-time employees.
Home Depot has gained a lot from their active CSR programs, according to Home Depot’s executive vice president for human resources, CSR helps the corporation become the neighbor of choice, the retailer of choice, the investment of choice and the employer of choice. This active involvement of Home Depot has also made it easier for the corporation to obtain permits from the municipalities to open new stores. Concern for environmental issues has also made the corporation a retailer of choice since more consumers become aware of environmental and social concerns.
The corporations venue for human development and respect for their employees and their given benefits increase morale and the retention of good quality employees, and thus boosts their corporation’s performance. All the success of the corporations CSR programs may be attributed to the strong senior management of the corporation, the continuous voluntary effort of Team Depot and the successful recognition programs for the volunteers of their CSR coupled with the thorough embedding of their values to their employees. Conclusions:
Corporate Social Responsibility must always be treated as an advantage rather as a disadvantage, for there is no such thing as loss as long as the goal of the corporation in helping other people, communities, and countries is true and as long as there are no strings attached except for social benefits the corporation receives. The corporation’s mission, vision and goal must well be defined and emphasized in a corporation as well as there must be enough education done in order for stakeholders, stockholders and the communities to thoroughly understand the main goals of the corporation.
It must also be understood that, there must be thorough investigation, and community study done before implementing any social actions in any area. Proper consultation with communities through the help of community development workers and community members themselves and not their bureaucratic representatives – who often times offer corrupt responses, due to their parvenu characteristics – should be done. Although the existence of the governments influences must never be taken out of the consideration.
Identification of a specific area’s context and the thorough integration is a critical part in studying communities in feasibility studies. It must also be always taken into consideration that in dealing with communities, the orientation should always be from the people towards the people, since most, if not all of a corporation’s gains come from the people and thus its programs and must benefit the people as well.
Impacts of globalization on businesses might be big, as this means a corporation’s better growth, yet it must always be considered that the growth of businesses would also mean some impacts on the people and the environment. Fair trade must always be considered and carefully thought off, taking advantage of Third World Countries or Developing Countries might make a great deal of impacts to a corporation considering today’s fast transfer of data and very responsive mobilization of individuals and activists who often times sensationalize a corporation’s follies, in their attempt to shut down capitalism and global imperialism.
At the same time, coordination and cooperation with NGOs is still critical, since they might be of good use, serving as a pool of new ideas for socially responsible actions.
Ashtrust Briefing. Corporate Social Responsibility and Environmental Reporting: A question of risk or reward?
Clarkson M. 1995. A stakeholder framework for analyzing
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