Pros and Cons of Corporate Responsibility

Pros and Cons of Corporate Responsibility
Any business is conducted in a social environment, therefore it is equally unprofitable to ignore the interests of society from a political, cultural, and economic point of view. The long-term interests of companies cannot be realized without adequate financial stability in public circles, which is especially important for large corporations and monopolies. The only way to survive in the face of acute social problems is to introduce measures to ensure such stability.

Taking into account the interests of the consumer as much as possible, companies gain support from them, increasing their own ability to survive. As noted by business analysts, skillful business organization, aimed at solving social problems, can allow the company to significantly increase its profits. However, this approach can also be considered from another point of view.

Defining the Concept

Corporate social responsibility definition implies certain contributions made by commercial organizations in the formation of various social relations. These relationships are always business initiatives and go beyond the limits of statutory duties. Based on this understanding of CSR, corporate governance is a system and process of relationships, as well as a set of principles, rules, and procedures for interaction between the owners (shareholders) of a company, its board of directors, its management and other interested parties inside and outside the enterprise.

The hierarchy of corporate governance CSR tools can be represented as follows:
  1. Mission and Values, Code of Conduct;
  2. The company's strategy, including the goals of sustainable development (economic, environmental and social);
  3. The concept of non-financial risk management and stakeholder engagement;
  4. Corporate social responsibility and sustainable development activities;
  5. Social (sustainable development) reporting;
  6. Communications (PR, Internet, intersectoral partnership).

Corporate Social Responsibility Example

In developed Western countries, government social programs operate effectively, and capital is focused on strategic objectives. For example, in the United States, the GoGreen environmental movement is popular. The basis of the ideology of such movements is the introduction of "green technologies", reducing the amount of waste and the involvement of as many people as possible in one-time actions.

What Are the Advantages of This Approach

Socially responsible companies receive a number of tangible benefits, including:
  1. lower operating costs;
  2. increase sales;
  3. attraction and retention of clientele;
  4. increase employee productivity and improve the quality of their work;
  5. additional opportunities to attract and retain staff, reducing the need for supervisory functions;
  6. as well as expanding access to capital, which ultimately leads to improved financial performance.
Let’s analyze these factors in detail.

Social activity and equity. Social investment programs provide real returns to both those to whom they are addressed and those who initiate them. Information about the degree of social activity of the company is important for investors who consider the results of the company in terms of shareholder value. Simply put, the market takes into account this factor in the value of shares; therefore, companies with a high level of corporate responsibility can more likely rely on capitalization growth than companies that ignore this factor.

Social activity of the company has an impact on consumers. Most buyers declare that they will buy the products of those companies that contribute to solving social problems. Thus, social activity increases product awareness and gives marketing advantages.

Social activity of the company affects the reduction of costs and interaction with the authorities. This is a strategic resource for industries that are closely monitored by the state (banks, insurance companies, utilities, and healthcare). Investing in improving social conditions can bring good dividends when regulatory approval is needed to complete a strategic step (for example, a merger). Transnational companies in developing countries often use charity to obtain the favor of the authorities. For example, if the state is not able to support health care, large companies can take over partial support in exchange for contracts.

A well-thought-out social responsibility policy can lead to a reduction in pressure from the inspection bodies. Publication of principles and policies in relation to workers, the environment, in relations with suppliers gives an answer to the government, what is the company's approach to these issues. An important role is played by a regular social audit.

Good neighborly relations with the local community allow the company to become recognizable in its territory, reduce risks, increase the rating. The active social initiative of the company turns it into a citizen of society, which enjoys all the advantages of its citizenship. If the region has solved the problems of employment, education, health care, and improvement of cities and towns, this means minimizing investment risks. Providing assistance to local communities in these areas is one of the priorities of the social policies of large companies, which contributes to an increase in the investment rating of the region and, ultimately, of the companies themselves. Such a position in a crisis can mitigate the forced increase in prices for the company's products, reduces the risks of possible social upheaval, which is very important for investors.

The Same Thing but from a Different Angle

Despite the seeming ideality and correctness, corporate social responsibility has its drawbacks:
  1. Violation of the principles of profit maximization.
  2. The increase in production costs due to increased social spending.
  3. The inability to ensure a high level of accountability to society.
  4. Lack of ability to solve social problems, that is, inability to satisfy social needs, lack of professionalism in corporate social responsibility jobs. A company cannot call itself socially responsible if it has created a cool project for children, but its employees work in terrible conditions and do not receive wages on time.
  5. The use of social responsibility for promotional purposes only.
  6. Increased production costs.
  7. Investing in the social sphere is often ineffective.
Currently, all the problems in terms of social responsibility can be divided into three groups: the interaction between the state and business, between business and society and the self-organization of business. Fears are caused by the fact that a large number of business leaders indicate that the legal rights of their enterprises have been violated during the past few years. Enterprises take on social responsibility in part because the state itself is not in a position to provide social services to the population with high quality, and this affects their own economic efficiency.

For this reason, the business does not consider it necessary to spend money on social programs. Or it spends but gets confused in terms, meaning by CSR actions that are much narrower than corporate and social responsibility. This is not always becoming an integral part of corporate governance. In most cases, it serves as an integral part of the work on public relations. The latter is not focused on the systematic sustainable development of the regions but on charitable or even one-time actions.

Afterword

In the formation of an active social development strategy, business should combine efforts with the state and public organizations. The competitiveness and productivity of the business itself will depend on the success of these efforts. Business must take into account the interests of the participants in the production process and bear its part of the responsibility for solving growing problems in the social and labor sphere. Otherwise, this will affect the position of firms. Social polarization and destabilization will increase, which will require large financial resources for its resolution. This will lead to high taxation in the first place of commercial structures, which will reduce competitiveness, worsen the economic situation and further exacerbate social problems.

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