what is corporate social responsibility (csr)?
Traditionally, it was believed that the responsibility of the management was to maximize profits for their shareholders. This view, still shared by monetarists holds that the goal of any corporation is to follow the laws and legislation of the country where it operates, and then should maximize the profits. This principle, advocated in the shareholder value, holds that the management has the responsibility to earn money for the shareholders and then let them decide what to do with it. This way, the responsibilities of the management are reduced to economic and legal responsibilities. This view is considered a classical view towards social responsibility. The “shareholder value” considers the shareholders as the only stakeholders. The main purpose of the shareholder value is to concentrate on making profit and maximizing wealth for shareholders. To do so, the shareholder value rejects using resources in assets for other stakeholders, as this could minimize the profitability of the company, as this expenditure could represent a cost that has an indirect impact on the consumer, who is forced to pay higher prices for the same asset. This idea led to a concentration on making constant profits for shareholders, even by making short-term gains.
But the new trend is the socioeconomic view advocated in the stakeholder value. This concept holds that companies have a moral responsibility to the larger society. This concept is best expressed in the CSR (corporate social responsibility). CSR is a business concept that is based on stakeholder value. It means instead of concentrating on short-term gains dictated by a shareholder value system, it concentrates on taking the interests of different stakeholders or interest groups into consideration. Thus, CSR is a concept or even a business model requiring companies to have a radical change in strategy. This strategy is best expressed in the way that there is more to a company than return on investment and profit maximization as all companies are also part of a bigger community. It means that every company consists of a community of people operating in a social and natural environment and therefore, companies should consider their environmental and social impacts. From a strategic point of view, this attitude makes perfect sense as we all operate in different systems and all our actions will have reactions.
Looking at the integration of social responsibilities into companies’ policies, corporations do not have only economic and legal responsibilities but they should also have ethical and philanthropic responsibilities to this calculation. This approach could lead to tensions and trade-offs as different interest groups might have different expectations and interests. This strategy of the integration of social responsibilities is called CSR. CSR encompasses the economic, legal, ethical, and discretionary (philanthropic) expectations that society has of organizations. The main challenge is to balance these different responsibilities. For example, the economic responsibility to shareholders requires a careful trade-off between establishing short term and long-term profitability. In the short run, any expenses on ethical and philanthropic responsibilities will appear to conflict with the economic responsibilities towards shareholders. But in the long run, concentrating on the needs of other stakeholders will result in long-range advantages for the company. To achieve this goal and practice stakeholder value, the concept of CSR (corporate social responsibility) was created.
Traditionally, the general assumption used to be that resources spent for ethical and philanthropic purposes might reduce profitability. But lately it has been assumed that social activity can create economic profits and therefore companies should try to establish such a favorable position. There are arguments for the integration of social responsibility in the company’s policies. These include meeting public expectations, having a better public image and discouraging further governmental regulation. There are also arguments against the integration of social responsibility in company’s policies. These comprise the violation of profit maximization principle, lack of skills to implement ethical rules within the company, and lack of accountability.
There are different terms for corporate social responsibility such as corporate sustainability, sustainable business, corporate conscience, corporate citizenship, conscious capitalism, responsible business, corporate sustainability, sustainable business, corporate conscience, corporate citizenship, conscious capitalism, or responsible business.
There are different definitions of CSR as well. One definition of CSR describes it as a strategy of integrating social concerns, environmental concerns, ethical concerns, human rights concerns, and consumer concerns into business operations. Following this definition, we see a clear parting from the narrow sense of shareholder value approach. One important aspect of CSR is sustainability which means that CSR does not involve the integration of policies for mere regulatory prerequisites but, CSR should become a strategic approach to business management, creating sustainable value to develop relationships. In an ideal case, CSR should not only integrate policies for mere regulatory aspects
but moreover, it should involve a strategic approach to business management creating sustainable value to develop relationships.
In its modern version, CSR has been an important topic since the 1950s, but there are evidences of the involvement of companies to help certain groups of the society, community or other stakeholders go back to hundreds of years. Generally, CSR is the implementation of private self regulation on an international level.
The concept of CSR has gone through major changes. It started with the integration of CSR as an internal organizational policy or as a corporate ethic strategy. After the introduction of various international laws, many companies have started to go beyond individual or even industry-wide initiatives. This way CSR has gone through a corporate self-regulation to mandatory schemes at regional, national and even transnational levels. This way CSR has moved from a traditional approach (allocating profits to different CSR projects) to a contemporary approach (creating values by CSR and integrating them in business practice to generate profits). CSR has different characteristics. These include:
• Voluntary nature: CSR is a voluntary tool that goes beyond legislation.
• Managing externalities: CSR is used to reduce negative public image and scandals or even completely prevent them.
• Multiple stakeholder orientation: CSR takes the stakeholder value into account by targeting different stakeholders such as employees,
consumers, suppliers, and others.
• Social and economic alignment: Although profitability should be one of the areas of concentrations of CSR, CSR should go beyond shareholders and profitability orientation as it should be aligned with social parameters
• Practices and values: CSR should become underlying values of different business practices and strategies.
• Beyond philanthropy: CSR should be integrated into the core business strategy of a company. CSR policies should have different dimensions. These dimensions include:
• The environmental dimension: This dimension includes the way the company treats and respects the environment.
• The social dimension: This dimension deals with the relationship between business and society.
• The economic dimension: This dimension describes socio-economic or financial aspects of the company, including the way the company interprets CSR in terms of a business operation.
• The stakeholder dimension: This dimension defines stakeholders or stakeholder groups, the company takes into consideration.
• The voluntariness dimension: This dimension expands on the voluntary actions regarding social activities that are not prescribed by law.
• The human rights dimension: This dimension explains how far the company respects the human rights issues. One of the main challenges of a company that wants to introduce and integrate CSR into its core activities is to determine what these CSR strategies should be. To start, some of these principles could be:
• To be impartial and honest
• To meet certain moral standards
• To take environmental ethics seriously
• To forbid all forms of discrimination
• To support diversity and inclusiveness
• To respect human rights In my opinion, one of the major challenges facing CSR is that it should be created as a value system that all members of an organization truly believe in and it should never be used as a mere marketing tool for companies. Only this way, CSR will have a chance to make a major impact and help communities.