CSR - arguments for and against

1. Table of Contents
2. Part 2. ............................................................................................................ 2
2.1 Introduction...................................................................................................................... 2
2.2 Brief History of CSR........................................................................................................ 2
2.3 Why CSR?........................................................................................................................ 3
2.3.1 Arguments “For”....................................................................................................... 4
2.3.2 Arguments “Against”................................................................................................ 6
2.4 The way forward… is to engage and embrace CSR ........................................................ 8
2.4.1 Cost Savings.............................................................................................................. 8
2.4.2 Brand Differentiation................................................................................................ 9
2.4.3 Customer Engagement.............................................................................................. 9
2.4.4 CSR doesn’t pay ....................................................................................................... 9
2.5 Conclusion...................................................................................................................... 10
References.......................................................................................................... 11

BMOM5203 - Assignment 1 – P1 a, b, c & P2 Nor Helmee Bin Abd Halim
2
2. Part 2.
2.1 Introduction
Corporate Social Responsibility is a management concept whereby companies integrate social and
environmental concerns in their business operations and interactions with their stakeholders.
Similarly, Kiran and Sharma (2011), found the concept of CSR has been reinforced with the
introduction of globalization and liberalization. Many world-renowned companies are actively
supporting and promoting the concept of CSR.
CSR is generally seen as being the means through which a society reaches a balance of
economic, environmental and social imperatives, while at the same time addressing the
expectations of stockholders and stakeholders. In a simple term, CSR refers to a business practice
that involves participating in initiatives that benefit society and at the same time taking it as an
opportunity to earn profits (Nicole Fallon. 2014).
2.2 Brief History of CSR
There is no firm date when CSR takes place, but it is believed it started in the eighteenth century
by Adam Smith, a renowned Scottish philosopher and economist. He wrote and incredible book
that represents the birth of free-market economic “The Wealth of Nations” which was published
on March 9, 1776. (Andrew Beattie. n.d). He expressed that the free interaction of organizations
and the public would meet the needs and desires of society. This responsibility is called Corporate
Social Responsibility (CSR). It is then evolved from the 1950s and further expanded during 1970s
in line with the growing of economies.
In an article wrote by Thomas S. Coleman (2013) for Becker Friedman Institute, he
challenged that not all economists are in agreement with Adam Smith. Another famous personality
in the development of corporate social responsibility, Milton Friedman is not in favor of the idea
of CSR. He states that a corporation’s purpose is to maximize returns to its shareholder and that it
does not have responsibilities to society as a whole. In other words, business simply has one

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responsibility and that is to increase profits for its shareholders. Milton Friedman is a prominent
American Economist and a Nobel Prize winner who was once an adviser to President Reagan.
2.3 Why CSR?
Today, CSR is becoming more mainstream as forward-thinking organizations embed sustainability
into core business operations to create shared value for business and society. Sustainability is the
concept that organizations that are socially responsible will outperform their competitors by
concentrating on society’s problem, which means organizations have moral, ethical and
philanthropic (love of humanity) responsibilities in addition to its main responsibility which is
making profits. The modern definition of CSR is rooted in Archie Carroll’s “Pyramid of Corporate
Social Responsibility”, depicted in Figure 4.1. In this pyramid a corporation has four types of
responsibilities.
Figure 4.1 – Pyramid of Corporate Social Responsibility

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Brief explanation of each component starts with the first and most obvious responsibility
of a corporation, economical responsibilities to be profitable. The second is the legal responsibility
to obey the laws set forth by society. The third, which is closely linked to the second, is the ethical
responsibility. The third level explains the corporation is doing what is right, even when business
is not compelled to do so by law. And the forth is the philanthropic responsibility which is also
called the discretionary responsibility. It is best described by the resources contributed by
corporations toward social, educational, recreational and/or cultural purposes.
People, however, understand and accept the importance of CSR but also debate the degree
and kinds of social responsibility that organizations should engage in. (Drea DeFoe. 2013). In the
succeeding sections will discuss CSR common arguments “for” and arguments “against”, and
lastly the choice to make whether to defend or agree to against the idea of CSR. The analysis is
grounded in empirical studies by academia and business practitioners.
2.3.1 Arguments “For”
Engaging CSR has a lot of benefits not only to the organizations, but also to several other
environments as well. Some of the points why the organization is engaging CSR is as follows:
Addressing social problems, CSR as a social innovation process - The rise of the modern
corporation created and continues to create many social problems like health, pollution,
environmental hazards, poor waste management, poverty, inequality (age, gender, race),
obesity, occupational stress, crimes and many more. Therefore, the corporate world should
assume responsibility for addressing these problems.
In a review on “CSR in the Innovation Process” by Hockerts and Morsing (2008), they
provided an example of Unilever using CSR as an opportunity to connect its products with
consumers to do business and at the same time tackling social problems. An example of the
social innovation by initiatives Unilever is the Lifebuoy soap to reduce child mortality of
diarrhea in India. The challenges in India are illiteracy, rural masses not reached by mass-
media, and perceptions that if hands look clean they are clean. Unilever initiated the largest

5
rural health and hygiene education by visiting communities and schools to reach broad masses.
In order to help lower income households the soap is sold in 18-gram bars, enough for one
person to wash their hands once a day for 10 weeks. This is one of the great examples of a big
corporation contributing to the society and at the same time gain profits.
Positive corporate/public image and generate long run profits - Any organization can create
a favorable corporate image by engaging in social activities. An organization that seeks to
enhance corporate and public image gain more customers, wider market share, better
employees and less attrition. Internally, employees feel self of belonging and proud to be part
of the family. While socially responsible businesses tend to have more and secure long run
profits. It is the typical outcome of strong community relationships which then improved
corporate image.
It has been argued by Milton Friedman (1970) that as an economic organization,
corporations should prefer profit and wealth for the sake of shareholders, however many
authors include Shuqin (2014), Kiran & Sharma (2011), Virvilaite & Daubaraite (2011) and
many others agree that organizations properly practicing CSR contribute to the increase of
profit and wealth and, at the same time improve, maintain the corporate image of the
organization or increase the visibility of the organization.
Shuqin (2014) in his research mentioned that consumers and corporate image have a major
impact in determining company’s profit. Companies with good corporate/public image will
prolong consumer’s loyalty to the company’s product, indirectly attract others and therefore
increase profitability of the company. Shuqin also referred Phillip Kotler (2004)’s research to
substantiate his findings. Phillip Kotler (2014) pointed out that CSR should organically
integrate into business operations and strategy, by fulfilling our social responsibility, which
help corporations obtain the following: increased sales and market share, strengthened brand
positioning, enhanced corporate image and clout, increased ability to attract, motivate and
retain employees, decreased operating costs, and increased appeal to investors and financial
analyst.

6
Better internal environment – involvement from social responsible company creates a fuller
character of liveliness in the community and at the same time able to attract and hold existing
skilled employees. In a news published in 2008, reported that BT employees supported CSR
implementation within their organization by attending CSR activities and from the internal
survey conducted, two-thirds of BT employees said CSR Week help to engage them with the
company and the same time help to improve the attraction, retention, motivation and
engagement. (Personnel Today “Green scheme with staff retention”. 2008)
Meanwhile, many studies have described the advantages of CSR in the areas like corporate
image, enhance marketplace, improve profits and the other important field which has been
covered by Yusri and Amran (2012) is the CSR involvement in Human Resource Management
(HRM) practices. Company engaging CSR helps to keep up employee morale and to appeal
and retain talented employees in the company. Employees feel self of belonging and of course
proud of themselves when working for famous and well known company which CSR
contribution is one of the reasons.
The ethical obligation - organization should be socially responsible because responsible
actions are one of the business ethics. Sok Bung et al. (2015) commented on their research that,
previous studies, researchers have discussed how institutional drivers, such as political,
financial, educational, labor-related and cultural systems motivate and force the practice of
CSR. Today, in a recent work found out that organizational leaders play the most important
part to encourage CSR. For example, as cited by Sok Bung et al. who referred Angus-Leppan
at al. (2010) stated that leadership behaviors strongly reinforce and inspire employee’s attitudes
toward CSR and its successful practice.
2.3.2 Arguments “Against”
Today, the doctrine of CSR has been borne across the work by businesses, business establishments,
NGOs as well as governments. However, some researchers are not in the agreement with the above
due to a few reasons.

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Deviation from organization main objective - taking on social and moral issues is not
economically viable. Corporations should focus on earning a profit for their shareholders and
leave the social issues to others. This statement refers to the assertion made by Milton Friedman
(1970) who obviously not in favor of CSR engagement.
In other findings, Shiqun (2014), states that some corporate leaders identify CSR simply
with a social denotation and strongly agree with the idea that corporations are not charity
originations and have no obligation to resolve societal problems; as a result, charity is a burden
on corporations. Therefore, the social issues are the responsibility of governments and not by
corporations.
Shiqun also mentioned that an important reason is that there really exist inherent
contradictions between making profits and fulfilling other social responsibilities; and referring
to a quotation by Solomon (1993) said “there is a contradiction between an endogenous ability
to profit and the company’s distribution to society”.
CSR will increase operating cost, costly – CSR implementation and activities come with costs
on it. According to Shiqun (2014), CSR will increase operating costs, which include the costs
of improving the working condition of the staff, guaranteeing and increasing employee
benefits, and replacing environmental protection equipment. All these factors will decrease the
profit margins of corporations.
In the study conducted by Shiqun (2014) mentioned that when all corporations have to
perform related social responsibility, logically they have the same competitive cost because of
the performance of CSR. But in the reality, there exist contradictions between CSR and profit,
and this means that some corporations can make profit without performing CSR, while other
corporations performing related CSR make no profits and the costs of performing CSR will
increase.
Henderson (2009) in his research titled “Misguided Corporate Virtue: The Case Against
CSR, And The True Role Of Business Today” also commented that the adoption of CSR within

8
enterprise will tend to bring higher costs and impaired performance. Managers have to take
account of a wider range of goals and concerns, and involve themselves in new processes of
“multiple stakeholder engagement”. The new systems involved in implementing CSR are
liable to add to costs as is required by CSR.
More duty and responsibility which leads to lack of accountability - those who are most
capable should address social issues. Those in the corporate world are not equipped to deal
with social problems. There are no direct lines of CSR accountability of the business sector to
the public. Political representatives, government is the one held accountable for their actions.
According to Antonio Argandona (2011), society expects of demands certain behavior
“responsible” from all those who belong to it. It includes individuals and organizations,
politicians, managers, property owners, firms, political parties, NGOs, etc. It is not the only
organizations obligation or responsibility that they must fulfill for example curbing social
issues. The primary reasons why companies engage CSR is because:
1. It creates a moral duty as acting responsibly is part of companies’ contribution.
2. Meeting those expectations or demands is a good citizenship obligation
3. CSR prevents harm or brings benefits to the companies
As such, the governments should hold the accountability and cannot leave the duty to
organizations or companies alone.
2.4 The way forward… is to engage and embrace CSR
Based on the studies of CSR arguments for and against above, organizations who are socially
responsible has better competitive advantages. Some reasons why companies should indulge more
in CSR is as follows:
2.4.1 Cost Savings

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One of the easiest places for a company to start engaging in CSR is to use it as a way to cut costs.
For example, a General Mills initiative on cost savings by installing 240 square meters of solar
panels during fiscal 2014, to reduce diesel consumption related to water heating and decrease
related GHG emissions. According to its 2015 CSR report, the system is projected to save about
US$50, 000 annually. The other cost savings initiative is upgrading to LED lights, another source
of energy savings in the facility. (General Mill. 2015).
2.4.2 Brand Differentiation
Brand differentiation was one of the primary reason companies embraced CSR. For example,
Coca-Cola introduces new cola drink with fewer calories and less sugar named “Coca-Cola Life”
in support of social issue “anti-obesity” campaign. (The Guardian. “Coca-cola Life”. 2014). In this
example, Coca-Cola innovates its popular cola drink by reducing the sugar content for a less
calories to fulfill customer’s shift to healthiness. Although its rival Pepsi Co is also launching
similar cola drink with less sugar, but Coca-Cola in general is using this opportunity to be different
with the rest of its competitors and stay competitive in the marketplace.
2.4.3 Customer Engagement
Engaging CSR is about publicity. Using CSR can help organization engage with customers in new
ways. An example of such engagement is encouraging family togetherness campaign organized
by Nestlé Malaysia called Bonanza Hari Keluarga Malaysia Nestlé. (Nestlé. “In Society”. 2013).
The campaign is not only for customer engagement but also benefit the society in promoting family
togetherness.
2.4.4 CSR doesn’t pay
According to David Vogel (2008), in his article called “CSR Doesn’t Pay” indicated that the
common belief always that corporate responsibility “pays” in engaging CSR activities. That is not
really true as for most firms, most of the time, CSR is largely irrelevant to their financial

10
performance. Mainstream investors still rarely consider a firm’s CSR record in deciding which
shares to buy, sell or hold. Starbuck provides a good example of the limited importance of CSR to
financial performance. The firm enjoys a strong CSR reputation due to its generous labor policies
and its commitment to improve the earnings and environmental practices of coffee growers in
developing countries.
2.5 Conclusion
Undertaking socially responsible initiatives are truly a win-win situation. It’s not only making an
organization appeal to socially conscious consumers and employees, but it makes a real difference
to the world. Organizations engage seriously in welfare activities indeed producing favorable
results to not only organization but the society as well.
[Word counts - 3297]

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