ExecutiveSummaryCorporate Social Responsibility is abusiness approach that contributes to sustainability through economic, socialand environmental benefits to both the external and internal stakeholders. Dr.Archie N. Carroll, a business management author, and professor, developedCarroll’s pyramid of CSR, which contained legal, economic, ethical, andphilanthropic responsibilities. The CSR pyramid affirms that corporations haveto take part in decisions, activities, and policies that satisfy the four components of the pyramid. The threefundamental principles that comprise the CSR include transparency,accountability, and sustainability.
Moreover, the integration of CSR intostrategic management needs familiarity with the kind of social responsibilitiesthat a company may deal with. Strategicmanagement helps to give a corporation the competitive lead in the market sincea corporation that includes social responsibilities into its business operationswould be in a good position to sell moreof its products that its competitors. IntroductionCorporate Social Responsibility (CSR) is acompany’s initiatives to assess and take charge for its impacts on the socialand environmental wellbeing. CSR usually applies to the effort that surpasseswhat would be needed by the environmentalregulators and protection organizations. CSR is often referred to as ‘corporatecitizenry’ and involves the sustenance of short-term costs that may notnecessarily offer instant monetarybenefits to a firm but rather promote constructivesocial and environmental changes. Therefore, CSR operates as a self-regulatory mechanismthat firms use to monitor and ensure thattheir business operations comply with the law, ethical standards, and federal or global norms. A company’s implementation of theCSR may transcend the compliance and statutorynecessities as it may involve activities that seem to further some social goodthat is beyond the business welfare of the company and what the law requires ofthem.
In realms like environmental or labor regulations, business owners candecide to comply with the laws, transcendwhat the law requires, or not to comply with the law at all. For instance, certain firms can either choose to embracegender equality and promote fairness among the male and female workers or hirethe disabled workers as well (Bhaduri& Selarka, 2016, p. 11).
The main aim of implementing CSR shouldthus go beyond increasing the profit margins and shareholder trust in thecompany. Companies can take responsibility for their corporate actions toenhance their public relations with their business partners and external stakeholdersthereby boosting their public image. In addition,CSR leads to high ethical standards that help companies minimize business andlegal risks that may lead to lawsuits, losses, and a damaged reputation.
Therefore,the CSR strategies help companies tocontribute positively to the environment and both the external and internalstakeholders such as customers, employees, investors, and the society (Carroll, 2008, p. 20). Historyof CSR The history of CSR dates backcenturies ago as it can be traced back to 1700 BC when King Hammurabi ofMesopotamia introduced a code that required construction workers and in keepersto ensure that they erected stable structures, as they would be put to death iftheir negligence caused death or injury to other people. Industrialization has impactedbusiness, environment and the society in several ways. By 1920, the discussionsaround social responsibilities of companies had advanced into what was referredthen as the start of the modern CSR movement.
However, the Great Depression andthe Second World War contributed to the failure of the concept of CSR becominga serious topic of discussion among the business leaders until the year 1950 (Carroll, 2008, p. 21). Accordingto Smith (2011, p.1), the concept ofCSR came into the spotlight after Frank Abrams, who is the Chairperson for theboard for Standard Oil in New Jersey published a piece in the Harvard BusinessReview. Abrams claimed that it was his company’s duty to conduct the affairs ofthe company to uphold a just and effectivebalance amongst the claims of directly interested entities.
In addition, Abrams claimed that it his companies mandate to maintain a harmoniousbalance amongst the external and internal stakeholders and the community as awhole. Smith (2011, p.1) noted that inthe year 1953, Howard Bowen made the first noteworthy scholarly contribution inthe modern CSR movement by writing the book entitled “The SocialResponsibilities of the Businessman.” In the manuscript, Bowen suggested the definitionof the CSR to be the duties of companies to pursue the policies and make verdictswhile carrying out the activities that have desirable objectives and principlesto the society. In the following years, the definitions of CSR, practices tiedto it, and its adoption expanded enormously. The philosophies like managementas a trustee, ethics and the sense of balance between organization and societybecame popular (Smith,2011, p.2) Mostcommissioned studies into the modern CSR movement helped to recognize that abalance between the social and economic interests was a crucial factor (Bhaduri & Selarka, 2016, p.
13). After Bowen’s noteworthy contribution, anothersignificant contribution to the CSR definitions was by William Fredrick. He claimedthat social responsibility infers a public posture towards the community’seconomic and human resources and a readiness to accept that the resources are exploitedfor comprehensive social ends and not just for the interests of private individualsand company (Bhaduri & Selarka, 2016, p. 14). The 1970s marked a momentous growthin the concept of CSR by incorporating new ideas such as social awareness,social performance, and social responsibilities. Milton Friedman, an Americaneconomist, argued that the social responsibility of corporations is to utilize itsresources while taking part in activities that enhance its profit margins aslong as they follow the law (Carroll,2008, p.28).
Other philosophical scholars continued to refine the conceptsof CSR and claimed that a socially accountablecompany is one whose executive staff manages to balance multiple interests. This implies that rather than focusing on bigger profit margins, the socially responsibleforms can consider the workers, suppliers, dealers, local community, and theentire nation. Dr. Archie N. Carroll, who is a business management author andprofessor, developed the Carroll’spyramid of CSR, which was widely accepted in the decades following the 1970sbecause it addressed the full range of obligations that businesses have tosociety. The 4 areas that made up a CSRpyramid were legal, economic, ethical, and philanthropic facets (Carroll, 2008, p.
28).Economicand legal responsibilityThe first social responsibility of a business as described by Carroll is the economic responsibility, whereby corporationsproduce goods and services that the society requires and sells them at aprofit. While a firm pursues its economicresponsibilities, the society expects themto fulfill their legal responsibilitiessuch as operating their activities within the required legal framework (Rahim,2013, p.27).
Even though the economic and legal duties entailparticular ethical and formal standards, otherbehaviors and activities are not technically enforced by the law but are still expected of a firm by the community. Complyingwith the regulations and legal framework helps in protecting the consumers andend users who depend on a corporation to stay honest about the goods that itsells and the stockholders who may lose profit if the firm is reprimanded for illegal undertakings (Rahim, 2013, p.28).Ethicalresponsibility Most societies hold that laws areessential for the operation of a businessbut not sufficient. Besides abiding the law, a firm’s ethical responsibilities mayinclude the management of waste through recycling and minimizing their carbonfootprint in the environment(Gerde, 2013, p. 17).
Even though the ethical responsibilitiesare often regulated cities, states, and federal governments, a firm can chooseto go beyond what the law requires and introduce policies that help insustaining the world for the future generation. Other ethical responsibilitiesinvolve advertisements, whereby companies have to ensure that their customersmake informed decisions when making purchases (Gerde, 2013, p. 18). Additionally,proper treatment of workers also counts as an ethical responsibility thatcompanies have to uphold.
Companies can also offer more than the minimum wagesand minimum safety precautions for the employees, offer other benefits and insurance resources that help in buildinga clean and safe workplace for the workers to operate. Therefore, taking on theethical responsibilities infer that firms are willing to embrace the norms andstandards that are not coded in the law.In addition to the community’s expectations on ethicalperformance, there also exist universal principles of moral philosophy likehuman rights and utilitarianism that guide the decisions made by a companyalong with the practices and undertakings (Gerde, 2013, p. 19).Philanthropicresponsibility Philanthropic responsibility involvesthe promotion of the welfare of other human beings by being a good corporatecitizen. Corporate philanthropy comprises all the forms of business giving andembraces a firm’s voluntary and discretionary activities.
Philanthropy may not actually be a company’s responsibility, but it is usually expected of firmsin the world today and is also part of the daily expectations of the public (Amaeshi, Nnodim & Osuji, 2013,p. 41).The philanthropic activities are guided by a company’s desire to take part inthe social activities that are not delegated,not stipulated the law, and are not usuallyexpected of corporations in an ethical perspective.
Some companiesreadily take part in the philanthropic activities out of an ethical motivation because they want to dothe right thing for the society. Some of the philanthropicactivities may include gifts of financial resources, donations of either goodsor services, volunteering by workers, and community development (Amaeshi, Nnodim & Osuji, 2013,p. 41). Most companies, unfortunately,participate in philanthropical activities as a practical way of demonstratingtheir good citizenry in a bid to improve their reputation. However, the maindifference between the philanthropic and ethical categories in the model isthat philanthropy is not necessarily expectedin the ethical sense. The communityexpects gifts from corporations but would not label companies as unethical onthe basis of their philanthropical patterns or whether the companies are donatinggifts at the required level. Therefore, philanthropy is more of a voluntaryinitiative on a business’ part (Madrakhimova, 2013, p.
113). Even though ethical responsibilitieshave been shown as a separate category the pyramid of CSR, it is a factor thatpermeates through all the other categoriesin the whole pyramid. For instance, in the economic responsibility category, thepyramid indirectly assumes a capitalistic society that where the pursuit for bigger profit margins is seen as a legitimatequest (Madrakhimova, 2013, p. 114). Capitalism is thus an economic system that deemsit ethically appropriate that business owners value a return on their investments.
In the legal responsibility category,it is noted that laws and regulationswere made using ethical reasoning since most lawswere developed out of ethical issues such as a concern for consumers’safety, employees’ welfare, and the natural environment. The philanthropicresponsibilities, in the other hand, are always motivated by the corporationsthat strive to do the right things and not just to be seen as good corporatecitizens (Madrakhimova, 2013, p. 115). Tensionsand trade-offs As corporations strive to operateadequately within the required economic, legal, ethical and philanthropicalframework, tensions and trade-offs would eventually arise.
This implies that how a company chooses to balancethe various responsibilities would help in defining their CSR orientation andreputation (Sun, Stewart& Pollard, 2010, p.96). The economic responsibilities of the business owners would require a carefultrade-off between the short and long-term productivity. In the pursuit of theshort-term goals, a corporation’s expenditure on the legal, ethical, and philanthropicresponsibilities may unvaryingly conflict with the responsibilities and obligations of the shareholders. As corporations would expend the resources on the responsibilities that form part of the primaryinterests of the shareholders, challenges to find easy fixes that bringlong-term benefits may arise leading to the principle of trade-offs andtensions (Sun, Stewart& Pollard, 2010, p.96).Thepyramid as an integrated system The Pyramid of CSR was intended to be viewed from a stakeholder’s perspectivewhere the focus would be on the whole system and not the various components.
TheCSR pyramid affirms that corporations have to take part in decisions,activities, and policies that satisfy the 4components of the pyramid. Therefore, thepyramid should not be interpreted to meanthat businesses are expected to fulfill their social duties in some successive or hierarchical manner starting fromthe base, but rather they are expected to accomplish all the duties simultaneously.This means that the order of the 4 categories portrays their fundamental natureto the corporation’s operation in the society. As portrayed in the pyramid, the economic and legal duties arerequired while the ethical and philanthropic dutiesare merely expected or desired (Carroll, 2008, p.38).ThePrinciples of CSR The uncertainty revolving around thenature of the CSR activities, makes ithard to define the CSR.
3 fundamental principlescomprise the CSR activities and areemployed in its definition. The first principleis sustainability, which is concerned with the effect of the actions that arecurrently being taken in relation to the future. When resources are used in the present day, they would bedepleted leaving limited resources for the future generations. In addition, as the resources get depleted, the cost of acquiring new resources keepsincreasing making the operative costs ofmost corporations to rise (Smith,2011, p.
22). The sustainability principle thus impliesthat the society has to ensure that the industries only use the resources to alevel that they can be renewed. Sustainabilitycan be defined based on the carrying capacity of the environment withdescriptions of input and output models of resource usage. Sustainabilityprinciple requires corporations to reduce their carbon footprint in the environment and engage in activities that helpto replenish the depleted resources. For instance, the paper industry would require all the companies that use trees tomanufacture paper and pulp to plant new trees to replace the harvested ones (Smith, 2011, p.23). Using the lens of CSR to view acorporation as part of a wider socio-economicsystem infers that the impacts of its actions have to be considered to measurecosts and the benefits it brings presently and for the future state of theindustry.
The metrics of sustainability would thus evaluate the rate at whichresources are used by a company relatedto the rate at which they are replenished.The operations that are not sustainable can thusbe accommodated for by the development ofjustifiable operations or by making plansfor the future that do not require the resources that are quickly being depleted. Companies thus aim atincreasing their efficiency to utilize the available resources efficiently withthe future generation in mind (Gerde,2013, p. 40).Accountabilityprinciple Accountability deals with acorporation’s awareness of its activities that influence the externalenvironment and thus being responsible for the impacts of its activities. The accountability principle entailsthe quantification of the impacts of theaction undertaken, both internally and externally. The principle involves reporting the quantifications of the effects tothe affected parties.
This means thatorganizations have to report to both theinternal and external stakeholders the impact of the actions undertaken by the organizations and the manner in which theyaffect them. The accountability principle warrants the recognition that the organizations are part of a broader societalsystem and thus has a duty of care to every element of the network rather thanjust to the business owners of the company (Aras & Crowther, 2007, p.14).Besides accepting responsibility for theiractions, organizations have to recognize that the external stakeholders havethe authority to affect the manner in which the activities of companies are undertaken and the role in determiningwhether or not the actions are justifiable. Therefore, accountabilityresponsibility requires the development of suitable metrics of ecologicalperformance and the reportage of actionsof the company.
This requires costs onthe part of the company in the development, recording, and reporting of performances that present benefits that surpassthe costs involved (Aras& Crowther, 2007, p.15).TransparencyprincipleAs a principle, transparency means thatthe external influence of the activities of a company can be determined from its reportage and relevantfacts that are not hidden within that commentary.
Therefore, all the impacts of the activitiesof the firm inclusive of the external ones should be open to all by using theinformation offered by the firm’s reporting mechanisms. Transparency isespecially crucial to the external users of information provided by other firms, as they do not have the knowledge accessible to their internal users. Transparency thus stems from the accountabilityand sustainability principles and is also a part of the processes of recognizingresponsibility on the company’s part for the external impacts of the actionsundertaken (Aras , 2007, p.15). Argumentsagainst CSR Most critics claim that organizationshave to focus on accumulating profits while letting the government ornon-governmental organizations handle thesocial and environmental problems.
Therefore, the first argument against CSR isthat the primary function of acorporation is to probe into the economic viability of its business operationsand let the government and other concerned parties look after the society.Secondly, another argument against CSR is that firms are meant to create andprovide products and services rather than handling the welfare activities (Zu, 2008, p. 41). This is because it is argued that the corporations do not have the expertise requiredto handle the social problems because the more managers get engrossed in theperformance of social responsibilities, the more they ignore their managerialduties. Moreover, skeptics argue that engaging in social responsibilitiesincurs much cost for companies and so would have to increase the price of theirproducts or services. This presents aproblem because while some other customers may be ready to pay more money for goodsfrom a socially responsible company, other customers may not be (Zu, 2008, p. 42).
Argumentsfor CSRThe main argumentfor CSR is that it is the correct thing to do since corporations have created most of society’s issues such as pollution andlow wages that lead to poverty. Furthermore, corporations have the resources that are required to solve thesociety’s problems and so should put them to good use. Secondly, scholars arguethat corporations should adopt CSRbecause it protects the interests of the stakeholders (May, Cheney & Roper, 2007, p.155).The workforce in all nations around the world has become united into laborunions that demand the protection of the rights of their members from thebusiness enterprises.
Therefore, to gainthe support of its workers, it has become necessary for the organizations tocater to the welfare of their employees using CSR. This implies that the firms that assume their socialresponsibilities suffer huge losses inthe short and long-term while the firms thatfulfill their social obligations benefit from the possibility of a long-termsurvival (May, Cheney& Roper, 2007, p. 155). The third argument for CSR revolves aroundself-enlightenment, whereby the increase in the level of awareness thatcompanies are makings of the society, they get driven to work for social good. Managersand executive members of corporations thus create public prospects by willinglysetting and following their social responsibilities and standards that guidethem (Rendtorff, 2009, p. 155).
Fourth,CSR helps corporations avoid the government’s regulations since non-conformanceto the social norms attracts legislative restrictions. Fifth, corporations have access to resources that theycan utilize for resolving social problems because they are the making of a society and thus have to serve interests ofthe society. Sixth, the management ofmost companies is shifting towards professionalism that contributes to thesocial orientation of the businesses. The ethics of professionalism often bindsthe managers to social values and the growing concern for the society (Rendtorff, 2009, p. 155). CSRand strategic management The integration of CSR intostrategic management needs proper awareness of the kinds of socialresponsibilities that a corporation may deal with.The economic responsibilities form a major part of the social responsibilities, and so the corporation is requiredto offer products at affordable prices to the society. Strategic managementhelps to give a firm the competitive lead in the market since a company that includessocial responsibilities into its operations would be in a good position to sell more of its products that its competitors.
Themission statement is one of the most crucialoutputs of a strategic management process and helps to find out what the corporationoffers to the market. The mission statement is also a reflection of the ethicaland moral values of the corporation. Therefore,in the formulation of the mission statement, the genuine concerns of both theinternal and external stakeholders have to be considered (Werther & Chandler, 2010, n.p). There are numerous stages in theintegration process of CSR in the strategic management process of companies. First,the managers have to incorporate the ethical principles into the shared organizationalculture.
Secondly, an analysis of the corporation’s current status would becarried out to determine the type of social responsibility that is more attunedto its main activities, both internally and externally. CSR is relevant totoday’s business challenges because it helps provide long-term permanent solutions.For instance, a company’s success in the market depends on its public image,which also depends on its socialresponsibility programs.
Secondly, media visibility comes from the benefitsthat corporations give to the community using their CSR. The media coveragewould help to build the company’s public image that helps in the sale of its products and services (Werther & Chandler, 2010, n.p).