Cynics_Might_Dismiss_‘Corporate_Social_Responsibility’_as_Mere_‘Public_Relations’,_but_They_Are_Wrong._‘Discuss’

Cynics might dismiss ‘Corporate Social Responsibility’ as mere ‘public relations’, but they are wrong. ‘Discuss’ According to Wikipedia, corporate social responsibility is defined as a form of corporate self-regulation integrated into a business model, whereby business takes responsibility for the impact which its activities make on the environment, consumers, employees, local community, stakeholders and all other sectors of the public sphere. From researching the various aspects of corporate social responsibility, I am torn between weather it is right for a firm to engage in this practice or if it would be serving society better by having the sole objective of generating profits and letting the government worry about the social costs of business activity. While I agree with Milton Friedman that the primary responsibility of a corporate executive is to the individuals who own the corporation, I also feel that it is simply not enough for the government to be the only group of people expected to carry out the functions needed for a society to flourish. I don’t completely agree with Friedman when he says that social responsibilities are the responsibilities of individuals and not of business because it is ultimately large corporations which are responsible for the destruction of the environment and the employment of millions of people around the world. Without socially aware business leaders (e.g. Andrew Carnegie and Henry Ford) many people would be living in extremely harsh and difficult circumstances because in some countries governments have failed to take any responsibility from a social point of view, and as a result the existence of corporate social responsibility has taken on a hugely important role. An example of a socially responsible firm is Green Mountain Coffee Roasters which is based in Vermont, Canada. This company has helped people in countries such as Peru and Mexico to become employed and escape the widespread poverty prevalent in both countries. ‘In 1997, GMCR funded construction of a "beneficio and hydro" plant for 16 coffee-farming families in Peru. Then in 1998, the Company provided funding for a Coffee Kids micro-lending project in Huautsco, Veracruz, Mexico. This project has already grown to include over 270 participants.’ Without companies like Green Mountain Coffee Roasters, people living in unfortunate situations such as those in Peru and Mexico would have very few opportunities to gain employment and escape the tough conditions which they are forced to live under. As explained in ‘Business and Society’ a business has many responsibilities: economic, legal and social. “The challenge for management is the blending of these responsibilities into a comprehensive corporate strategy while not losing sight of any of its obligations.” It is clear that the above coffee company has managed to get the mix between generating profits and been socially responsible just right as it “transports about 20 million pounds of coffee annually all over the United States” while also picking up awards frequently for its efforts to protect the environment “Green Mountain’s idle-reduction education efforts helped to earn the company a 2005-2006 Vermont Governor’s Award for Environmental Excellence and Pollution Prevention.” Business leaders such as Robert Stiller (founder and chairman of Green Mountain Coffee Roasters) believe that business has a responsibility to society which goes beyond or works with its efforts to generate profits. Due to examples like the one above, I feel that it is possible for firms to be socially responsible while also being able to earn large profits, prospering even in the face of tough competition from firms which are not socially aware. While Friedman is right to point out that many firms use ‘the cloak of social responsibility’ for their own benefit I also think that it is still possible for firms to be successful while being socially responsible as well. I feel that the arguments for corporate social responsibility outweigh the arguments against it because by engaging in corporate social responsibility the firm helps to improve the infrastructure of the community which in turn helps the firm as it benefits from gaining well-educated and skilled workers as well as discouraging the government from implementing strict regulations. The government won’t feel a need to impose restrictions because it will see that the firm is engaging in socially responsible behaviour. Freedom is the most desirable good for the firm and since regulations would add economic costs and restrict flexibility in terms of decision making, taking part in socially responsible deeds will be a small price to pay. Also, behaving in a socially responsible manner can help a corporation to avoid additional taxation from the government. A firms license to operate often hinges on whether it is capable of convincing the government and the wider public that it will deal with issues relating to diversity, equality, health and safety, and the environment in a convincing, comprehensive manner. If a corporation is successful in dealing with these issues, the government will not feel compelled to impose strict regulations or increase taxes. If the corporation acts in a socially responsible way, the government will more than likely look on it in a favourable manner and may even help to reduce the firms costs in the form of grants or even by reducing the tax which the business has to pay. Engaging in corporate social responsibility may be a necessary step towards building a culture within the firm of not taking part in actions which may jeopardize its reputation in the future. By consistently ‘doing the right thing’ and avoiding the temptation to increase profits by engaging in morally corrupt and illegal activity the firm will not have to worry about future corruption scandals emerging. Being a responsible and trustworthy firm will enhance the reputation of the business and increase the chances of people investing in it. Proper management of the firm, particularly by the chief executive, will offset risks such as corruption scandals and ensure that the firm has a solid foundation to build on in the future and enhance its prospects of being a stable and successful firm. While Friedman was right to point out that the primary responsibility of the corporate executive is to the individuals who own the corporation, I feel that by engaging in corporate social responsibility the corporate executive can actually enhance the firms reputation as well as the reputations of the people who own the corporation. For example, it is possible for companies to separate themselves from their competitors if they can benefit from high levels of consumer loyalty through corporate social responsibility. This loyal fan base comes through ‘building a reputation for integrity and best practice.’ This reputation will help the firm to become more dominant in the market, as loyal consumers will still be willing to purchase the companies products, even if they are more expensive than those goods and services produced by their competitors. Hence brand differentiation will become very important and beneficial to the firm as the brand will become associated with people who concern themselves with looking after socially important causes such as environmental issues and community well-being. An example of corporate social responsibility being successful can be seen in the Fair Trade brand. People are prepared to purchase Fair Trade products because they know that the money which they spend is used to help the people who produce these materials in the developing countries where they are made. ‘this labelling, marketing and advocacy initiative seeks to ensure that producers in developing countries receive more of the profits from the price paid by consumers.’ Even though the Fair Trade products are more expensive than many identical goods produced by other companies, people are still prepared to purchase items with the Fair Trade logo because they recognise that their money is going to a worthy cause rather than into the pockets of wealthy businessmen who are only concerned with earning money for themselves and their corporations. The Fair Trade logo is an example of brand differentiation which works very well, as many people are happy to forego a fraction of their disposable income for that feeling of contentment they gain from purchasing a Fair Trade product, a feeling which they would not get if they bought a product of similar or perhaps superior quality from a firm which does not take its social responsibilities seriously. By engaging in corporate social responsibility a firm can improve its prospects of attaining high quality and motivated staff. If the people employed by the firm see that it is making efforts to help the local community through activities such as fundraising or community volunteering, they will take pride in the fact that they are associated with these activities and will be willing to work harder. Taking social responsibilities seriously will help the firm as it will improve the opinions of its staff. Engaging in a positive way with the local community is one way for the firm to improve its chances of recruiting and then retaining its employees. I believe that taking part in corporate social responsibility can help the firm, as it is one way of ‘promoting desirable business ends.’ Taking social responsibilities seriously will help the business to motivate its staff because they will be driven to increase the firms productivity if they believe that the profits gained go towards something more than lining the pockets of the owners. Having a relaxed attitude towards its social responsibilities can be detrimental towards the firms chances of being successful. It can be argued that it is essential for a corporation to be socially responsible as, according to ‘The Iron Law of Responsibility’, ‘In the long run, those who do not use power in ways that society considers responsible will tend to lose it.’ In my opinion the above law is used to explain how it is expected that business will take responsibility for the impact of its activities on not only the environment but also on consumers, staff, shareholders, communities and all other members of the public sphere which may be affected by these activities in one way or another. It seems to me that it is completely fair and justified to have these expectations as successful corporations will have more than enough money to compensate causes which are affected by business activity (particularly the environment). As already pointed out earlier, Friedman was correct in saying that the corporate executives primary responsibility is to those people who own the corporation. However, sometimes it may be necessary to forego extra profits by spending more money on socially responsible causes as the company will then be left to its own vices and public figures won’t feel compelled to watch over the firms actions. Friedman was right when he concluded that “Social responsibilities are the responsibilities of individuals and not of business” but it is important to realise that if a business concentrates solely on its own well-being it won’t be long before people begin to rebel against it if it shows a clear disregard for important social issues such as the health and safety of its employees. An example of people rebelling against a large corporation can be seen in the ‘Boycott Killer Coke!’ campaign. Although Coca-Cola still enjoys huge profits, it is important to note that people do boycott their products because of the disregard which the corporation has shown towards its workers in Columbia. While this boycott has not made a hugely significant dent in the profits enjoyed by Coca-Cola, it is possible that the company could enjoy larger profits if it treated its staff with more respect and dignity in developing countries as people wouldn’t be inclined to boycott the corporation. Even though I would personally advocate corporations to be as socially responsible as possible, i do acknowledge that there are some drawbacks to the concept, pointed out mainly by Milton Friedman. According to Friedman the corporate executive should concentrate mainly on pleasing the individuals who own the corporation. Usually this task is carried out by generating as much profits as possible for the corporation. In order to attain such a high level of profit, the corporate executive may not be able to take socially responsible actions such as not increasing the price of a certain good for fear that an increase in price may lead to inflation. Friedman effectively points out how the corporate executive usually has to spend someone else’s money in order to pursue a general social cause which may not be of interest to the people whose money he/she is actually spending. The book ‘Business and Society’ defines corporate executives as individuals who ‘see themselves as stewards/trustees who act in the public’s interest.’ I feel that this definition contradicts how Friedman sees these people, as he believes that they are meant to primarily act in the owner of the corporations interest. As the people who are responsible for the corporations money and the returns of stockholders, it is very difficult for the corporate executive to commit wholeheartedly to the corporations social responsibilities because he/she knows that if too much money is spent on pursuing some social causes which the stockholders and the owners do not fully agree with then it is very possible that the corporate executive may actually be fired for not acting in the corporations best interests. Sometimes, however, it is very easy for the corporate executive to decide to invest in socially responsible projects. As pointed out by Friedman, it may in fact be of long-term interest to a corporation which is a major employer in a small community to invest money into amenities in the local area for that community or to help improve its government. By making such investments, it may become easier for the corporation to attract high-quality employees or maybe to even train individuals to become skilled workers. Another benefit could be that the firm might reduce its wage bill by investing in the local community. Such socially responsible investment would be welcome because it would help the firm to increase profits in the long-run due to the building of a secure and stable community infrastructure. However it can be argued that the corporation is not really acting in a socially responsible manner, but rather in a way in which to increase its own profitability. In essence the firm is, in Friedmans words, using ‘the cloak of social responsibility’ to achieve its own selfish ambitions. Still though, it is acting in a socially responsible manner while intelligently managing to achieve its own benefits. In my opinion this is completely acceptable as it benefits both society and the corporation in question. Essentially everyone involved is a winner and there will be no complaints from government or trade unions. As stated in ‘Business and Society’, ‘Social Responsibility requires companies to balance the benefits to be gained against the costs of achieving those benefits.’ The unenviable task of weighing the potential benefits against the potential costs lies with the corporate executive of the Corporation. The corporation will decide whether the corporate executive has been successful in his/her dealings based on how and if the benefits gained are greater than the costs of achieving the benefits. As a result, I believe that it is perfectly reasonable to assume that the corporate executive will be hesitant to engage freely in socially responsible acts due to the fact that he/she may possibly lose the job. Therefore social causes may not be pursued and the corporation may point out that it is the governments job to act in a socially responsible manner and not business’. Friedman states in his book ‘Capitalism and Freedom’ that there is one social responsibility for business and that is “to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game” which effectively means that the responsibility of business is to take part in open competition without using tools such as deception or fraud to gain an unfair advantage over rivals. I believe that this is correct to a certain degree but I also think that sometimes it is necessary for a corporation to look beyond its own means and invest in socially responsible causes because it is not enough to expect the government alone to look after these problems. Overall, I believe that corporate social responsibility is definitely not mere ‘public relations’ because we rely on corporations for essential basic needs such as job creation and community well-being. Corporate social responsibility is hugely important, particularly today, as without it many communities would not be in the good conditions they are in today and serious social issues such as environmental pollution would be out of control. In short, I believe that Corporate Social Responsibility is vital in the modern world. Bibliography: Textbook – Business and Society Essay – The Social Responsibility of business is to increase its profits (Milton Friedman) Socially Responsible Business: http://www.virtueventures.com/setypology/index.php'id=SRB&lm=1 Corporate Social Responsibility: http://en.wikipedia.org/wiki/Corporate_social_responsibility Green Mountain Coffee Roasters: http://www.epa.gov/region1/dieselcollaborative/pdf/GrMtnSmartwaySS.pdf Corporate Social Responsibility: http://www6.miami.edu/ethics/pdf_files/csr_guide.pdf Fair Trade: http://www.tradeforum.org/news/fullstory.php/aid/1031 Boycott Killer Coke!: http://www.colombiasolidarity.org/node/10