Corporate Social Responsibility Practices in Perspective

Corporate social responsibility can be defined as the full integration of the economic, social, and environmental considerations into the broader executive decision-making processes of companies and corporate.

Practically speaking, corporate social responsibility is interpreted as the action taken to limit unemployment, discrimination and pollution ant this is certainly doing good but also avoiding evil. What defines a corporate social responsibility is not necessarily the exclusion of profit as an outcome but rather its exclusion as a primary motive.

As an example, a company may decide to keep open an unprofitable plant for longer than economical necessary in order to avoid mass unemployment to be rewarded later by a loyal workforce that increases the productivity and as a result making the plant profitable once again.

In order to decide on the merits and demerits of the corporate social responsibility concept one should take a balanced view and consider both advantages and disadvantages of such a program. Some of these are discussed below.

Advantages

Most of the advantages of a properly implements corporate social responsibility program can be reflected in the strategic benefits that corporations will derive from it. These advantages generally include an improved financial performance of the corporation resulting in increased profitability because of operational efficiency increases.

Another very important benefit is the improved relations that a corporate social responsibility program will result in respect of the investment community and the resultant improvement in access to capital which will normally reduce the cost of capital for the company.

A good corporate social responsibility program normally enhances the employee relationships that normally results in an improvement in human resource activities such as talent acquisition, talent development, talent retention and the general motivation of the workforce to ensure maximum innovation and productivity with the associated improvements in profits and sustainability.

Improved relationships with the communities in which an organization operates will normally result in an enhancement of their license to operate there. This is ideally achieved by the implementation of a good corporate social responsibility program.

A company brand and reputation that adds significant value to the bottom line is something that any company could only dream about. One benefit that a corporate social responsibility program brings is undoubtedly to enhance the brand as well as the company reputation.

Disadvantages

On the other hand Friedman stipulates that corporate social responsibility can never coincide with generating profits. He supports this view by referring to the opinion that that corporations are said to be an "artificial person", as such it cannot have moral responsibilities like real people. He goes further to say that if corporations are accepting social responsibilities it means that they will not have profits as the only goal of their business activity. This means that political means not market mechanism will be used as the appropriate way to allocate scarce resources by the business.

Another argument against corporate social responsibility is that since CSR can only be at the expense of financial gain, this prevents companies to engage in CSR programs.

Some opponents to the corporate social responsibility concept argue that, in cases where company profits and social interests are properly aligned, the introduction of a corporate social responsibility program is irrelevant as companies that merely focus on increasing their own profits will inevitably improve the social wellbeing, making a corporate social responsibility program superfluous.

Others argue that under social conditions where corporate goals and profits are in direct opposition to the social welfare goals, the implementation of a corporate social responsibility program will nearly all the time be futile as companies are unlikely to do something in the interest of the social welfare and against shareholder interests, making a corporate social responsibility program a pipedream.

Conclusion

There are many different ways in which a company can improve its sustainability and the long term wealth of its shareholders. To blindly invest in any program, including a corporate social responsibility program is not what one would expect from any good business executive.

The investment or not in a corporate social responsibility program should be based on the particular and specific social, economic and financial situation prevalent at the time. This should be assessed against the strategic and operational goals of the company. With this information available a proper due diligence should be conducted for and against the investment, just as with any other major investment that a corporation will invest in.