Corporate Social Responsibility
Corporate Social Responsibility
Organizations operate with the aim of realizing a financial return. The return is referred to as the profit, and it is the primary source of income for the owners and investors of a business (McLaughlin, 2016). Profit is also used to meet the organization’s expenses, for the growth and expansion of the business, and to measure the success of the business. From a financial perspective, profit is the total number of sales less the total costs incurred by the organisation (McLaughlin, 2016).
CSR and its Importance
Corporate Social Responsibility (CSR) is a term used to refer to business practices that involve initiatives that are beneficial to the society. Odumeru and Ogbonna (2014) defined CSR as the approaches applied by organizations to achieve commercial success by honouring ethical values, natural environment protection, and respecting communities and people. CSR relates to the social, economic, and legal practices applied by organizations to deal with societal and environmental issues (Carroll, 2016).
CSR is important to organisations because it allows the creation of value for customers and other stakeholders. For instance, CSR encourages philanthropic responsibilities, whereby organizations contribute resources like infrastructure and health as well as clean water to improve quality of life. Under legal responsibilities, organizations ensure that set laws, rules, and regulations are followed later (Carroll, 2016).
Activities that businesses carry out to be called corporately and socially responsible organizations include dealing with societal and environmental issues, protecting the environment, and ensuring that ethical values are honored (Carroll, 2016). Also, organizations that use best practices to reduce environmental risks and promote sustainable growth could be considered as corporately and socially responsible. Examples of corporate and socially responsible organizations include Microsoft and the World Bank Group. For instance, Microsoft practices good CSR under Microsoft YouthSpark to create opportunities for the youth, including education, entrepreneurship, and employment opportunities (Dhoul, 2015). In addition, the company fights malaria and other diseases in developing countries as part of its CSR. The World Bank Group on the other hand has invested in environmental and natural resources development, agriculture, infrastructure, public administration, health, and education (Dhoul, 2015).
Profit is the main objective for a business
Economist Milton Friedman pointed out that main purpose of any business is to profit maximization for its owner. In support, Dwivedi (2010) pointed out that businesses are formed with the intent of making profits, which is essential for the survival and growth of the enterprise. Profits are used to create the surplus required for business expansion and diversification and to cover production costs. Although profit maximization is the main objective of a business, the business should also concentrate on satisfying different stakeholders such as employees and consumers among others (Dwivedi, 2010)).
Line Profit and CSR
The primary purpose of a business is profit maximization for its owners while at the same time maintaining CSR. For example, the adoption of CSR can make the organisation more profitable, especially when they invest in socially and ethically reasonable practices, including environmental conservation and investing in projects that benefit society. Subsequently, best practices can increase sales revenues by acquiring new customers and minimizing operation costs (Odemilin, Samy, & Bampton, 2013).
Advantages and Disadvantages of Focusing on CSR
Although profit maximization plays an integral role in the success of businesses, it results in the exploitation of employees, unethical malpractices, and environmental costs that affect society (Odemilin et al., 2013). The table below provides the pros and cons of focusing on CSR.
Cost/benefits of Engaging in CSR
Organizations such as Wal-Mart have engaged in CSR and the benefits experienced include the creation of awareness of the environment, helping engage consumers in new ways, and saving costs. For example, with the adoption of green warehousing and technology, Walmart has reduced operational costs related to environmental waste and energy use. For example, the company has saved more than $26 million annually in fuel costs (Sprinkle & Maines, 2010). For a company Like Microsoft, CSR has been beneficial as it has increased profits and reduces costs of operations (Dhoul, 2015). The adoption of CSR by organizations can thus be beneficial because the efforts may result in cost savings and efficiencies across the supply chain. For example, sustainable practices and other green practices can reduce chemicals (Sprinkle & Maines, 2010). The costs for engaging in CSR include increased expenditures by an organisation and following set rules and regulations (Carroll, 2016).
Both profits and CSR are important to the welfare of an organisation. However, organizations have to focus on maintaining CSR, while at the same time ensuring profit maximization for its owners. Organizations that are socially and ethically responsible solve societal and environmental issues, protect the environment, and make sure that ethical values are honored. The benefits of CSR are greater compared to profit making. Companies could also engage in CSR because the benefits are better compared to the costs incurred.
Carroll, A B. (2016) ‘Carroll’s pyramid of CSR: taking another look’, International Journal of Corporate Social Responsibility, vol. 1, no. 3. Pp. 1-8.
Dhoul, T. (2015). Five of the Best Socially Responsible Companies to Work for. [Online]
Dwivedi, D. N. (2010). Principles of economics. New Delhi: Vikas Publishing House Pvt. Ltd.
Kielmas, M. (2014). Pros & cons of corporate social responsibility. [Online]
McLaughlin, E. (2016). The purpose is profit: The truth about starting and building your own business. Austin, Texas : Greenleaf Book Group Press.
Odemilin, E.G., Samy, M., & Bampton, R. (2013). Corporate Social Responsibility. Strategy for sustainable business success. An analysis of 20 selected British companies. Leeds Metropolitan University.
Odumeru, J., & Ogbonna, I. G. (2014). Transformational vs. Transactional Leadership Theories: Evidence in Literature. International Review of Management and Business Research, vol. 2, no. 2, pp. 355-361.
Sprinkle, G. B., & Maines, L. A. (2010). The benefits and costs of corporate social responsibility. Business Horizons, vol. 53, no. 5, pp. 445-453.