Essay, 6 pages (1500 words)

History of the strategic implications of csr management essay

In contrast to generations ago, the access to information and the increased visibility of business actions has enabled consumers to become more aware of businesses and their activities (Pohle, 2008).Because of this increased visibility, the value of consumer perception to businesses has exponentially increased, as it has become clear that what a business stands for as a corporation can be an extremely important component in being successful (Smith, 2012). Studies have shown that that consumers’ willingness to buy, work for, recommend and invest in a company is driven mostly by their perception of their company, rather than their perception of the products (smith, 2012)In pursue of determining the most reputable companies in the world, Reputation Institute, a private global consulting firm concluded that Microsoft was the company with the best CSR and reputation. In 2012, Microsoft’s reported revenue of $73.7 billion had increased by $3.76 billion from the previous year, representing an increase of 5.10 % in revenue. In response to Google’s positive revenue growth, Dan Bross, senior director at Microsoft added that, “consumers are more likely to engage with companies and brands that they respect and trust. Our CSR efforts have a direct and positive impact on people in our own backyard and around the world, and in turn, their ongoing engagement with us contributes to Microsoft’s business success.”Furthermore, because the information on CSR is ambiguous and incomplete, combined with the lack of measurement methodology, it is difficult to make an absolute statement of certainty regarding the causality between CSR and financial performance. However, research studies have shown that organisations who engage in CSR benefit from superior long term financial performance, and that the financial benefits gained from CSR are substantially higher for companies operating in industries with ‘higher institutional norms of CSR’ Additionally, it can be posited that CSR is a strategic resource with a declining value, as the more a company engages in CSR, the less financially effective it will be as additionally CSR policies are implemented. Thus, it can be said that there is a positive there is a positive relationship between CSR and profitability, but companies must manage their social engagements to maximise profabilitythere is a positive relationship between CSR and profitability, as thoseWhile many businesses have profited by integrating CSR within their strategic core of business, the idea that CSR will always lead to superior financial performance is incorrect and obscure. The Classical or economic view of social responsibility has become a central argument against the idea of CSR, as it is a concept that states organisations only social responsibility is to maximise profits and to serve the interests of shareholders. Within this view, it is believed that profitable businesses can benefit society in multiple dimensions as they can increase social welfare, improve economic growth, produce goods and services that are highly valued and provide jobs .However, when businesses act socially responsible, they sacrifice profits and divert there attention away from their true purpose of profit maximisation. Additionally, when no revenue growth is achieved by acting socially responsible, unnecessary costs are accumulated, and therefore have to be passed down to consumers in the form of higher prices or absorbed by the company. Either way, the outcome is negative; profit maximisation is not achieved.Conversely, While there is conflicting evidence denouncing the effectiveness of CSR in improving financial performance, it has been argued that corporate social responsibility can be used as a reputation insurance mechanism, and that organisations actively engage in CSR to protect the value of their company. Firms can be categorised by the level of CSR they engage in, which include Irresponsible, responsible and good firms (Minor, 2009). Negative or abnormal business shock such as oil spills or manufacturing problems can have a huge negative effect on the firm’s reputation and market value. However, the extent of that impact depends on the firms CSR reputation, as companies with higher CSR reputation will absorb less financial damage and reputable loss as well as experience such events less frequently. Thus, by protecting the value of the business, CSR can act as a platform for revenue growth and differentiation.Furthermore, contrary to the notion mentioned before that corporate image and reputation can have a significant effect on consumer buying behaviours, investors are not necessarily concerned with the social responsibility of companies, as there decision to fund a business is made on the basis their ability to generate and maximise profits. Despite being consistently vilified by the media and labelled as an “outlaw”, Exxon Mobil had experienced the highest return on equity of any oil company in the mid 2000’s, and are still successfully generating profits. Another example is the aptitude of tobacco, alcohol and gambling companies (known for their lack of social responsibility and virtue) to attract large investors.Investors are attracted to profitable returns, and thus direct their funding towards reliable and profitable organisations, regardless if they’re socially responsible or not. Business that sacrifice profits in the name of social benevolence and consistently engage in CSR without providing a positive financial return will be punished or abandoned by investors. Companies such as Cummins engine, Dayton-Hudson, Levi Strauss, Polaroid, Marks & Spencer, Body shop international and Ben & Jerry’s, had experienced an escalation of negative consequences as a result of their excessive engagement in CSR. As such, they had either lost their investors, experienced low sale, abandon their social activities or experienced business failure.The implantation of CSR into the core activities of a business can result in an improvement in multiple dimensions of the organisation. For example, Wal-Mart has made substantial cost savings by switching to greener packaging methods. Dow chemical has lowered their energy costs by reducing their carbon emission levels, “McDonalds employs more human slaughtering techniques which prevents costly worker injuries and yields more meat”, and Starbuck have reduced improved employment relations by giving employees health insurance and greater flexibility. In these situations, businesses have reduced costs and benefited societ.These businesses are “doing well by doing good”the businesses have benefited society and increased their ability to maximise profits.However, such profitable oppurtinities may now always be present and when organisations decide to act socially responsible without considering the interests of investors,Companies that act socially responsible are more transparent, carry less risk and have a greater brand image. As such, the company will benefit by its increase amplitude to attract and retain employees. While the costs of meeting employee expectations may be severe, the benefits almost always outweigh the costs, as better working conditions and practises can result in increased work productivity and a reduction in work errors, turnover rates, recruitment costs and training costs. This increased employee efficiency can lead to greater overall profits.Thus, when such savings are generatred, revenue growth and differentiationBusinesses are not compatible in acting socially responsible, as that is a responbility that should be shifted towards goverments, as they have more power to influence change.Businesses need to be careful when they engage in CSR as they must find a delicate balance between serving the the interests of investors and consumers.Businesses primary purpose is to maximise profits and serve the interests of shareholdersIf major investors are lost because of themangements incompetence to directly serve their interests, the business will not be able to function effectively with minimal resources.As such, the idea to act socially responsible should be made if there is a gurantee in positive revenue growth.http://puu.sh/2BJl0http://www92.homepage.villanova.edu/nancy.heck/Articles/Case%20Against%20Social%20Responsibility%20WSJ%208-23-10.pdfhttp://hettingern.people.cofc.edu/Business_and_Consumer_Ethics_SP_08/Friedman_Soc_Resp_Bus_Increase_Profits.htmIf a business wants to maximise profit, it cannot be concerned with corporateSocial responsibilityhttp://www.mit.edu/~cflammer/CSR_CFP.pdfAs such, to maximising profabilility, companies have begun developing their image and reputation through the implications of acting socially responsible.To respond to this increased visibility, companies have begun conducting their business activities with greater transparency through the implications of acting socially responsible which can lead to long term probability and success.http://responsiblebusiness.haas.berkeley.edu/documents/FinalPaperonCSR_PDFII.pdfhttp://epsa.treasury.gov.au/documents/1268/PDF/04_CSR.pdfhttp://hettingern.people.cofc.edu/Business_and_Consumer_Ethics_SP_08/Friedman_Soc_Resp_Bus_Increase_Profits.htmhttp://www.mit.edu/~cflammer/CSR_CFP.pdfhttp://www.mallenbaker.net/csr/against.phphttp://responsiblebusiness.haas.berkeley.edu/documents/FinalPaperonCSR_PDFII.pdfhttp://, the socio-economic model is the view that organisation’s social responsibility goes beyond making profits, and acting in ways that benefits, improves and protects society’s welfare. Businesses have adopted this view because they believe they have a responsibility to society, as it has allowed their formation and support them by purchasing their goods and services.One reason for why CSR should be adopted is that it can help businesses gain small but significant competitive advantages over competitors. For example, within the oil markets, companies that have engaged in socially responsible acts appear to be more favoured by governmentshttp://www-935.ibm.com/services/au/gbs/pdf/csr_re.pdfhttp:// have a power and influence that insome cases exceeds that of governments. But they alsohave challenges that emerge with that power and with theincreasing impact of their activities

the responsibility to actin a way that considers not only economic goals, but thatrespond to the social and environmental demands, also raisethrough their past actuation. If organizations don’t promote thesustainable development of the communities where theyoperate, they will generate more imbalances that, probably,sooner or later, will have a negative impact on their economicperformance. To act in a social and responsible way can be apath to a cycle, were social performance and economicperformance influence, one each other, in a positive way,contributing to a sustainable developmentPohle, G., & Hittner, J. (2008). Attaining sustainable growth through corporate social responsibility. IBM Institute for Business Value.Minor, D. B. (2010). Corporate social responsibility as reputation insurance: theory and evidence. UC Berkeley Working Paper.

Smith, J.(2012, December 10).The World’s Most Reputable Companies.Forbes.com. Retrieved April 13, 2013 from www.forbes.com

Flammer, C. (2012). Does Corporate Social Responsibility Lead to Superior Financial Performance? A Regression Discontinuity Approach. A Regression Discontinuity Approach (September 13, 2012).

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