Corporate Social Responsibility For Sponsorship Opportunities: Contact: Philip Morgan 1-888-385-6831This document was prepared by PositiveRevolution LLC, For educational purposes. 2/16/2011
Corporate Social Responsibility Corporate Social Responsibility (CSR) is defined as the role, dutyand obligation of a business to provide service beneficial not only to thecompany itself but to the stakeholders as well. To define clearly, stakeholdersare groups of people that exert direct or indirect influence over a business andare also influenced by the actions made by the business. These people could bethe community, the consumers, the employees and other social groups that areeither directly or indirectly connected to the activities entered, created andmaintained by a company. Stakeholders invest time, capital and a personalrelationship with the company. The company in turn gives back to thestakeholders by providing excellent services and commendable outputproducts. The concept of CSR is not new to the business community. Infact, as early as the 1800’s, the economics of Adam Smith and the philosophyof John Locke have already pointed to the emergence of the model also knownas the minimalist business responsibility. Under this model, the value given tothe stakeholders is considered to be the sole responsibility of the company.Initially, the maximization of this value is said to be accomplished only by theefficient and productive delivery of products and services to the shareholders.But as business evolved and governments worked to protect the environmentand the people, using CSR as an embedded business model became necessaryto many companies. The CSR movement is pioneered by a coalition between avant-garde corporations, lobbyists, environmentalists, socially-consciousindividuals, progressive economists and other cause-oriented groups. It is abusiness evolution that points towards the search for valuation. CSR in itsentirety is a consensus among various social groups to bring good to theenvironment, the community and the business as a whole. As a whole, CSR tries to address the major problems thatcompanies face today. The economic, social, environmental and ethicalchallenges are just some of the issues that CSR is trying to deal with. Bycreating a culture of “doing good” and “being right”, companies are ensuredthat they gain not only their shareholders’ purchasing preferences but theshareholders’ trust as well.
Who are the stakeholders? CSR involves a very large scale of stakeholders. Under CSR, deliveringgoods and services does not end only with the target social group orcommunity. Because it is the duty and responsibility of the business to providea plethora of benefits such as community project support, environment-friendly processes, transparent financial disclosures and more opportunities forthe minority, companies are expected to provide for everyone and not just fortheir specific market group. If the primary customers of a banking business are made up ofprofessionals, income-earners and investors, it doesn’t mean that these groupsare the only stakeholders of the business. Everyone is a stakeholder; from theemployees, the owners, the people who live around the community up to thegroups indirectly connected to the company, CSR reaches out to everyone whois included in the web of interconnections a business creates.Necessity and not just Advocacy To follow the CSR model is to remember this phrase: necessity and notjust advocacy. Critics of the CSR model proposed that business philanthropy,whatever one may choose to call it, is still business. According to these critics,a business will give charity, compassion and generosity only if these activitiestranslate to the generation of more income. Adopting CSR in business is onlyacceptable if it leads to a surplus in demand and a steady increase in profit. On the other hand, the argument presented by CSR advocates points outthe flaw in this reasoning. According to Elizabeth Ness in her paper CorporateSocial Responsibility: “…since when did honesty go out of fashion? Since when did operating with basic decency and integrity move into the purview of the fashionista? And how can today’s money markets, which are increasingly remote from the wealth-generating activities (eg commodities and derivatives trading), retain stability if there is no basic underlying integrity?” Because social responsibility should be a part of an individual’s duty to hisown self and to the humanity as a whole, it goes without saying that a businessshould encompass this value as well. If stakeholders consider honesty, socialresponsibility and integrity as important core values, companies andbusinesses should assess their ways and listen to what their stakeholders valueas well.
BUSINESS ENVIRONMENT CSR SOCIETY CSR Convergence Diagram
CSR and Long-Term Business SuccessThe importance of CSR in a competitive market Increasing pressures from the recent global financial crisis and fromseveral governments taking measures to protect its environment and peoplehave led to the sudden rise of CSR. Because of the drastic fall in the financemarket and the increased competition between companies, avant-gardebusinesses implemented CSR to veer away from their competitors. Consumersvalue honesty, charity and competency and often use it as a guide in looking fora business to support. And in a steadily increasing competition betweencompanies and global brands, embedding CSR in the business model of acompany produces positive results not only for the company and but for theshareholders as well.Business Branding and Winning Customers In a competitive marketplace, companies look for ways to separatethemselves from the rest of the competition. By adopting CSR, building aunique brand and image in the minds of the customers is further improved.Several major brands such as McDonald’s and Adidas spend not only years butdecades to build a certain image in the eyes of consumers. By practicing CSRthrough supporting sports events, headlining feeding campaigns, creatingcharities and developing output-based community projects, both McDonald’sand Adidas indirectly say to the stakeholders that “for every hundred dollarsyou give, we give ten dollars back.” This mentality leads the customers toconsciously take part in the company’s advocacy by supporting not only itsproducts but its CSR endeavors as well.Risk Management A company’s image takes years, sometimes even decades, to develop andmarket effectively. Managing risks is an important corporate strategy employedby top-level companies to avoid the possible damage to its brand and reputation.Sometimes, incidents such as allegations of corruption, scandals, environmentalaccidents and intellectual dishonesty can instantly ruin the customers’ trust.Creating diversion and maintaining a “good” track record by adopting CSR canneutralize or reduce the damage done by these incidents.
Recruitment and Human Resources By gaining the trust of the community and the customers, a company withan embedded CSR plan inside its business model attracts potential employees. Acompany that proposes a clear and definite CSR plan to its employees and staffcan also gain the respect and dedication needed for a healthy workforce. CSRprovides a unique brand of service and identity instilled in the culture of thebusiness. Involving the workforce in cause-oriented activities such as treeplanting, fundraising, charity work and socially-relevant activities can changethe perception of the workforce regarding the company. This direct involvementleads to loyalty and a sense of belongingness within the company’s workgroup.Government Support and Incentives Companies are keen to avoid any interference from the government in theirbusinesses. By doing voluntary steps and actions to promote environmentalconcern, better employer-to-employee relations, equal opportunity and supportto charity, companies gain not only the support but also the trust of thegovernment and the customers. Potential customers can be transformed intoloyal buyers if they know that the business is doing its part in protecting theenvironment and helping people. Governments can also offer incentives such astax reduction and flexible working terms for companies maintaining a goodCSR implementation.Reduced Cost of Capital In the paper entitled “Does Corporate Social Responsibility Affect the Costof Capital?* (Ghoul et.al, 2010), the possibility of reducing a company’s cost ofequity by employing CSR as a central part of a company’s business plan isthoroughly observed. In the study that included 12,915 U.S. business firms andtook place from 1992-2007, the researchers concluded that CSR investmentscan enhance the value of a firm by simply reducing the cost of equity capital.Firms that have high CSR scores enjoyed significantly lower cost of equity intheir businesses compared to those with low or no CSR ratings. These findingssupport the argument that companies with socially-responsible products andpractices enjoy a higher valuation and lower business risk.
Spreading Positivity through Corporate Social Responsibility The need to adopt CSR as a working and active business plan involves acompany’s future. With the growing consciousness among stakeholders and affectedsocial groups regarding issues about ethical, environmental and social concerns,employing CSR in business proves to be a positive move that brings only positiveperceptions and results. Winning the loyalty and trust of stakeholders increases notonly the monetary benefits that a business enjoys. More importantly, by being a partof the community and the humanity as a whole, a company promoting CSR isassured to secure its long-term survival and existence. Four Pillars of Corporate Service ResponsibilityFocus – a company’s CSR programs should properly address a specific concernamong the shareholders and the community. Pointing out the exact issue to beaddressed and the best plan of action to solve this problem will lead to betterdistribution of resources and faster viewing of results. Objectives must be properlydefined to facilitate better resource allocation and avoid unwanted wavering ofattention.Commitment -- long-term support for the company’s CSR programs is required inorder to succeed in delivering the intended service. A business should prioritize itsCSR even in times of crisis and financial challenges. Making CSR a central part of acompany’s business plan will build a culture of commitment and loyalty to thestakeholders inside the firm and out to the community.Integration – CSR should be embedded and integrated into the business system andnot treated as a “bolt-on” activity employed only when the need arises. A culture ofdoing the “right and ethical thing” should be learned and practiced not only insidethe realm of the business but outside its four corners as well.Transparency – a company should have a transparent, open and balancedcommunication with its stakeholders. Allowing the community to know about theongoing activities, current plans and future endeavors of the company is necessary tobuild a strong relationship with people. Building trust is very important in anybusiness and transparency forms a stronger trust coming from the employees, thecustomers and the community.
Informing Stakeholders: Let people know that you care It is very important to let stakeholders know that you are promoting CSR-related advocacies and activities. Most of the time, stakeholders are not aware ofthe steps many companies are taking to promote the overall well-being of thecommunity. By involving its customers, employees and the community, a businessraises the awareness level of these social groups. This increase in awareness willlead to involvement and support and a change of perception among yourmanagement and your shareholders.Cause-Related Marketing: Reaching out to your Shareholders A company should not hide its CSR endeavors behind the backroom. Incontrast, it is very important to market your CSR-related plans to gain the supportand respect of the customers and the community. Raising the shareholders’ level ofinvolvement and awareness is what measures an effective, well-perceived and well-received social duty and responsibility. You can reap all the benefits provided byCSR if people know that you are doing the habit of “doing good” and you have aculture of “being good”.Using media and the Internet to spread the message Modern technology offers a wide array of resources for you to reach out to yourshareholders. Different forms of media such as television, radio and the internetoffers an alternative where you can rapidly and instantly spread your message to awide audience. Sharing news, activities, ongoing projects and future plansinvolving the community can be achieved through the use of media communication.Proper orientation is also perceived to be the best way in promoting cause-relatedmarketing. Among the mentioned modes of communication, the Internet is considered to bethe most dynamic of all. Unlike in television, radio & newspapers where peopleengage in a one-way mode of communication (target groups can receiveinformation but cannot give information back instantly), the Internet provides anarena where two-way communications can proliferate. In social networking sites,Internet users can view information and instantly react if there are concernsinvolving the subject. Dialogues between the company and its shareholders arequickly established and trends about important issues can be easily understood.
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Notes and References:1. Johnson Douglas, et.al., “Corporate Social Responsibility: It’s about long term business success.”2. Strugatch, Warren, “Turning Values into Valuation: Can Corporate Social Responsibility survive hard times and emerge intact?”, www.emeraldinsight.com/0262-1711.htm3 Quairel-Lanoizelee, Francoise, “Are competition and corporate social responsibility compatible? The myth of sustainable competitive advantage.”, www.emeraldinsight.com/1746-5680.htm4. Ness, Elizabeth. “Corporate Social Responsibility.”5. Green, Todd. and Peloza, John. “How does corporate social responsibility create value for consumers?” www.emeraldinsight.com/0736-3761.htm6. Ghoul, Sadok, et.al. “Does Corporate Social Responsibility Affect the Cost of Capital?”.2010