CORPORATE SOCIAL RESPONSIBILITY

The Body Shop- Their website maintains that “The only thing that will stay the same at The Body Shop is what we believe in - Profits With Principles. We strive to change everything else to maintain creative positive change. We at The Body Shop will continue to challenge ourselves, our industry, our staff and our customers”. The whole way they do business is dedicated to creating “profits with principles”. And this is why I fit them in Sethi’s 3rd category, “responsiveness”. On their website, it reads, “At The Body Shop, we believe business is about more than just the exchange of products and money. It’s about an exchange in experience, community action, and knowledge too. Because business is ultimately about human relationships.”

While there is obvious overlap in the goods produced by the firms, it is also recognized that there is overlap within Sethi’s Three-Stage Schema. For example, all three firms meet the characteristics of the first column, social obligation. However, Sara-Lee does not try to anticipate and prevent social problems, as characterized by The Body Shop, but the firm does avoid public stands on issues, and therefore could be seen to fit partially with the social responsibility category. It was necessary to place the firms within the prescribed categories, but overlap is present.

From a more objective viewpoint, there are several reasons why firms should practice CSR, many of which will be touched upon in this paper, such as: to balance corporate power with responsibility; discourage creation and imposition of government regulations; to help correct negative externalities, many of which are created by corporations; and a sense of moral obligation of firms to help society deal with its problems and to contribute to its welfare. In a world where 51 of the 100 largest economies in the world are corporations, it behooves these corporations to take on responsibilities that are similar to those of governments.

The business case for CSR is certainly difficult to present, but the debate and arguments are hard to ignore. Like-minded companies can form profitable long-term business relationships. Larger firms can stimulate smaller firms with whom they do business to implement a CSR approach. For example, some large automakers insist their suppliers be certified to environmental management systems standards. Other examples: Starbucks only purchases Fair Trade coffee from cooperatives that pass certification; The Body Shop does not test on animals, nor engages with suppliers that do animal testing, so to be a supplier of the Body Shop, requires a more socially responsible friendly approach.

The Case Against Corporate Social Responsibility

Corporate social responsibility, as all with all other ideas, has its detractors. Mostly, CSR is often criticised because it is believed that the first and foremost responsibility of an organisation is its financial responsibility to its shareholders. Supporters of this opinion believe that an organisation should do all it can (within the law) to maximise profit, and that CSR conflicts with this goal. Since CSR investments have uncertain outcomes, there is also the opinion that organisations that undertake CSR activities are placed at a disadvantage since addressing social issues comes at a cost to the company.

There are concerns that organisations are not equipped to deal with social issues, and in fact, corporate involvement in complex societal issues may make the situation worse. CSR is also criticised as being simply a marketing tool for organisations to gain publicity and that corporations undertake CSR activities out of selfish interests.

Also, corporations are being viewed with a degree of mistrust and suspicion which has caused more discussion within the CSR movement. For example, the collapse of ENRON in 2001 has raised many questions about the real validity of the many CSR activities that it had undertaken.

Before filing for bankruptcy in 2001, Enron Corporation was one of the largest integrated natural gas and electricity companies in the world. It marketed natural gas liquids worldwide and operated one of the largest natural gas transmission systems in the world, totaling more than 36,000 miles. It was also one of the largest independent developers and producers of electricity in the world, serving both industrial and emerging markets.

Following the company's collapse, Enron has become a by-word for corporate irresponsibility. The financial misrepresentation that covered-up the giant black hole at the heart of the company's finances have fuelled interest in how such corporations can be identified and held to account. This is made all the more challenging on account of that fact that - to some observers - Enron was doing the whole "social responsibility thing" with its CSR reporting, environmental and community programmes.

The firm projected itself as a highly profitable, growing company - an image which quickly turned out to be an elaborate mistruth. Enron's statements about profits were shown to be untrue, with massive debts concealed so that they didn't show up in the company's accounts.

Not only that, but the company was seen to have been extraordinarily active in political lobbying - with large numbers of legislators close to the company in one way or another. This fact had not been enough to save it, but raised questions about how appropriate such closeness between a corporate and the political system actually is.

The question on many lips concerned just how the situation could have evaded detection for so long. The firm's accountants, Andersons, were involved in the shredding of documents relating to Enron's accounts - a fact which suggests a significant degree of complicity.

From the point of view of the movement for corporate social responsibility, Enron represents a turning point in whether the movement can continue to take surface level assurances, and the apparent commitment to a responsible approach which applies to the peripheral issues without going to the heart of how the company does business.

The Enron last social and environmental report was rather light on the kind of measures that are increasingly being demanded. There was a lot of narrative, and a whole range of things that were at the early stages. The company was to take a comprehensive review of its stakeholders. The company was gearing up to address human rights and other issues. It did include a number of figures on environmental performance, and on health and safety records.

But there is a bigger challenge here. The move towards more robust social and environmental reporting will not quickly get to the point where its indicators pick up the deliberate actions at the top that typify this story. After all, what social reporters are trying to do is identify the core reporting data which will give a real picture of the health of the company - just like we already have in financial reporting. But financial reporting was not sufficiently transparent and robust to pick up on the Enron problem - how much more difficult for the hard-to-define measures of stakeholder engagement and social performance?

The main message from this is that expectations of company reporting need to be kept realistic. The CSR movement needs to be wary of promoting the achievements of companies when all they are doing is going through the motions.

In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles.)

Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia, descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters) Africa including Shell, Anglo American, SAB Miller, British American Tobacco, Diageo and others.

We should not think of "CSR" or "Sustainability" as a separate program or box on a company's org-chart. Instead, these concepts should be considered as strategic and management tools with specific utilities and benefits, such as:

•Antenna to assess and better understand stakeholder expectations and provide a credible level of transparency as well as anticipate and mitigate criticism
• Filter for identifying business risks, as well as indentifying opportunities in areas such as talent recruitment and retention, and opening new markets
•Driver to establish specific management goals and accountability within the organization, measure performance and maintain leadership, both in terms of reputation and operations
•Thread that weaves together seemingly disparate policies across various business functions and geographies thereby providing greater strategic and operational alignment across the entire company.

We need to shatter the preciousness of CSR. Companies are in fact in the "business of business." To this, Mr. Karnani and Milton Friedman would readily agree. But what must be understood is that the business of business is now everyone's business.

         

CSR does not just involve spending money to become socially responsible; it can also involve a change in accounting practices. Verification and reporting can also be important for obtaining and maintaining a firm’s license to operate, improving internal operations and building relationships. Communities, customers, investors, employees and their representatives, regulators and non-governmental organizations wishing to know about a firm and its activities are likely to consult the firm’s CSR verification reports. However, verification activities and reporting not done in a rigorous, professional manner, and not seen as credible, will undermine a firm’s credibility and reputation, thereby shutting doors to opportunities and diminishing profitability.

An increasing number of firms have responded to these concerns by devoting more resources to CSR. However, some companies’ managers have resisted, arguing that additional investment in CSR is inconsistent with their efforts to maximize profits. Investment in CSR promotes product differentiation at the product and firm levels. Some firms will produce goods or services with attributes or characteristics that signal to the consumer that the company is concerned about certain social issues. Also, many companies will try to establish a socially responsible corporate image. Both of these strategies will encourage consumers to believe that, by consuming the product, they are directly or indirectly supporting a cause.

CSR may affect a firm’s performance in more than one way. A more effective way for firms to approach CSR is through analyzing what gains can be made by strategically emphasizing a firms comparative advantages in some sectors over others.

Other studies have attempted to empirically measure certain specific aspects of CSR and other facets of corporate and consumer behaviour. In a study done by Brown and Dacin, “…our results also suggest that CSR associations have a significant influence on consumer responses to new products. The results of all three studies demonstrate that negative CSR associations ultimately can have a detrimental effect on overall product evaluations, whereas positive CSR associations can enhance the product evaluations” (Brown and Dacin, 80).

It is a tricky position for CEOs of companies to decide whether or not they should do CSR, and it is a difficult business decision to anticipate a consumer’s reaction to such practices. More and more, companies have to deal with the prevalence of CSR advocates, and to take their responsibility and role in society seriously. Perhaps this is the most conclusive argument that can be made in favor of CSR at this time. Ergo, firms that avoid this new business reality, do so at their own peril.

(WORD COUNT: 2567 WORDS)

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REFERENCES/BIBLIOGRAPHY

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