Many people believe that businesses should accept and abide by four types of reponsibility – economic, legal, ethical, and philanthropic – which are collectively known as corporate social responsibility. To varying degrees, the four types are required, expected, and/or desired by society. Furthermore, those responsibilities must be fulfilled simultaneously so that organisations can claim to be realising the core meaning of CSR. First of all, business have a responsibility to be economically viable so that they can provide a return on investment for their owners, create jobs for the community, and contribute goods and services to the economy. The economy is influenced by the ways in which organisations relate to their stakeholders, their customers, their employees, their suppliers, their competitors, the community, and even the natural environment. For example, in nations with corrupt businesses and industries, the negative effects often pervade the entire society. Transperancy International, a German organisation dedicated to curbing national and international corruption, has conducted research on the effects of business and government corruption on a country’s economic growth and prospects. The organisation reports that corruption reduces economic growth, inhibits foreign investment, and often channels investments and funds into “pet projects” that may create little benefit other than high returns to the corrupt decision makers. Thus, although business and society may be theoretically distinct, business has the opportunity to have a real economic impact on many people.
Secondly, companies are required to obey laws and regulations that specify what is responsible business conduct. Society enforces its expectations regarding the behaviour of business through the legal system. If a business chooses to behave in a way that customers, special-interest groups, or other businesses perceive as irresponsible, these groups may ask their elected representatives to draft legislation or regulate the firm’s behaviour, or they may sue the firm in a court of law in an effort to force it to “play by the rules.” For example, many businesses have complained that Microsoft Corporation effectively had a monopoly in the computer operating system and Web browser markets and that the company acted illegally to maintain this dominance. Their complaints were validated in 2000 when US District Judge Thomas Penfield Jackson ruled in a federal lawsuit that Microsoft had indeed used anticompetitive tactics to maintain its Windows monopoly in operating-system software and to attempt to dominate the Web browser market by illegally building its Internet Explorer Web browser into its Windows operating system. Microsoft, which vehemently denied the charges, appealed that decision. The election of George W.Bush and a court of appeal’s ruling to overturn Jackson’s decision shifted the focus to settlement talks, away from an earlier suggestion to break up the company. However in the first quarter of 2004, Microsoft has been fined $200 million for their unethical and illegal action.
Thirdly, beyond the economic and legal dimensions of social responsibility, companies must decide what they consider to be just, fair, and right – the realm of business ethics. Business ethics refers to the principles and standars that guide behaviour in the world of business. These principles are determined and expected by the public, government regulators, special-interest groups, consumers, industry, and individual organisations. The most basic of these principles have been codified into laws and regulations to require that companies conduct themselves in ways that conform to society’s expectations. Many firms and industries have chosen to go beyond these basic laws in an effort to act reponsibly. The Direct Selling Association (DSA), for example, has established a code of ethics that applies to all individual and company members of the association. Because direct selling, such as door-to-door selling, involves personal contact with consumers, there are many ethical issues that can arise. For this reason, the DSA code directs the association’s members to go beyond the legal standards of conduct in areas such as product representation, appropriate ways of contacting consumers, and warranties and guarantees. In addition, the DSA actively works with government agencies and consumer groups to ensure that ethical standars are pervasive in the direct selling industry. The world Federation of Direct Sellling Associations (WFDSA) also maintains a code of conduct that provides guadiance for direct sellers around the world, in countries as diverse as Turkey, Argentina, Canada, Finland, Korea, and Poland.
Companies realising the importance of CSR, in particular business ethics ought to encourage ethical behaviour and discourage undesirable conduct by eliminating unethical persons and improving the firm’s ethical standards. An organisation should develope an organisational complaince program by establishing, communicating, and monitoring ethical values and legal requirements that characterise its history, culture, industry, and operating environment. A strong compliance program includes a written code of conduct, an ethics officer to oversee the program, and formal ethics training. Codes of conduct are formal statements that describe what a company expects of its employees. Ethics officers are usually responsible for developing and implementing code of conduct, providing a confidential service to answer questions about ethical issues, and providing ethics training. Ethics training educated employees about firm’s policies, expectations, and resources available for ethical and legal advice; laws and regulations; and general standards.
A company needs an effective ethics program to ensure that all employees understand the firm’s values and comply with policies and codes of conduct that create its ethical climate. Effective implementation requires that companies consistently enforce standards and punish those who violate codes of conduct. An effectively implemented program should help reduce the potential for misconduct as well as the possibility for penaltied and negative public reaction misconduct occur despite a firm’s best efforts to prevent it. Ethical concerns should be incorporated into the strategic planning process. The firm must develope a mechanism for assessing its progress in making ethical decisions that contribute to its efforts to be a decent organisation which doesn’t underestimate the importance of ethical issues.
Finally, corporate social responsibility includes another element that is called philanthropic activities which promote human welfare and goodwill. Increasing the welfare of community permits organisations to make reputation as a responsible company among the members of community. By making voluntary donations of money, time, and other resources, companies can contribute to their communities and society and improve the quality of life. For example, Hitachi Ltd. of Tokyo established the Hitachi Foundation, a nonprofit philanthropic organisation that invest in increasing the well-being of underserved people and communities. With assests of $38 million, the foundation is considered a pioneer of global corporate citizenship. Although Hitachi is not required to support the community, similar corporate actions are increasingly desired and expected by people around the world.
Many organisations have skillfully used their resources and core competencies to address the needs of employees, customers, business partners, the community and society, and the natural environment. In order to pursue strategic philanthropy successfully, organisations must weigh the costs and benefits associated with planning and implementing it as a corporate priority. The benefits of strategic philanthropy are closely aligned with benefits obtained from overall implementation of CSR. Businesses that engage in strategic philanthropy often gain tax advantage. Research suggest that they may also enjoy improved productiviy, employee commitment and morale, reduced turnover and greater customer loyalty and satisfaction. Research indicates that implementation of CSR has a positive influence on financial performance. In the future, many companies will devote more resources to understand how strategic philanthropy can be developed and integrated to support their core competencies.
Another vital point is that the implementation of strategic philanthropy is impossible without the support of top management. To integrate strategic philanthropy into the organisation successfully, the efforts must fit with the company’s mission, values and resources. Organisations must also understand stakeholder expectations and propensity to support such activities for mutual benefit. This process relies on the feedback of stakeholders in improving and learning how to better integrate the strategic philanthropy objectives with other organisational goals. In addition, companies will need to evaluate philanthropic efforts and assess how these results should be communicated to stakeholders.
In particular, as it is necessary for any process in business, companies should generate reports for evaluation by which they could manifest their awareness of CSR which is called Social Audits. More companies around the globe are beginning to audit their social performance and report the results of those assessments as a means of demonstrationg their commitment to corporate social responsibility. Accorting to Investor Responsibility Centre, 61 percent of S&P 500 companies have published as assessment of their environmental impact, and many more firms have announced their intention to provide enviromental reports in the future. Social audits is an tool to fulfil social responsibilities of organisations by which they can claim to be realising the concept of CSR. In addition, regular audits permit stockholders and investors to judge whether a firm is achieving the goals it has established and whether it abides by the values it has specified as important. Moreover, it allows stakeholders to influence the organisation’s behaviour. Some investors, for example, are using their rights as stockholders to encourage companies to modify their plans and policies to address specific social issues.
The process of social auditing can also help an organisation identify potential risks and liabilities and improve its compliance with the law. The auditing process provides a mechanism to assess risks and detect problems, thereby presenting an opportunity to resolve such issues before they result in negative publicity or even fines or expensive litigation. For example, an audit might uncover operational practices that could endanger public health or harm the natural environment. Furthermore, the audit report may help to document the firm’s compliance with legal requirements as well as to demonstrate its progress in areas of previous noncompliance, including the systems implemented to reduce the likelihood of recurrence. Stake holders, including government regulators, may look more favourably on a company that identifies such problems through audit, especially when the firm publicly reports the problems, demonstrated that it is attempting to resolve them, and implemenets systems that will reduce the likelihood of their recurrence.
In conclusion, four elements of corporate social responsibility were assumed that there was a natural progression from economic to philanthropic responsibilities, meaning that a firm had to be economically viable before it could properly consider the other three elements. Today, the transition between the elements is viewed in a more holistic fashion, with all four responsibilities being seen as related and integrated in a comprehensive social responsibility approach. Therefore, organisations are expected to simultaneously fulfill all four elements of corporate social responsibility - economic, legal, ethical, and philanthorpic - to be able to claim that they realise the concept of Corporate Social Responsibility. To conduct activities for one element and neglect another might not be enough to maintain the brand and the corporate success of any given organisation.
REFERENCES
“How Business Rates: By the Numbers”. Business Week, February 11, 2004, pp.148-149
“Corporate Social Responsibility – What does it mean?” Available :
http://www.mallenbaker.net/csr/CSRfiles/definition.html
Beesley, M.E.(1986). Corporate social responsibility a reassessment.London: Croom Helm
Hargreaves, B.J.A (1975). Business survival and social change.London : Associated Business
Programmes
North, K. (1997). Environmental business management an introduction.Geneva: I.L.O.
