Final Examination : Essay Question 1. “Critically analyse the CSR concept using examples from what you have read”
‘Corporate Social Responsibility’, abbreviated to CSR, is the concept that businesses have a social responsibility towards society that encompasses economic, legal, ethical and discretionary expectations. It goes on to highlight how a company can be deemed a ‘corporate citizen’ only if they fulfill the economic, legal, ethical and philanthropic expectations of their stakeholders, and involves corporate social responsiveness (the methods of achieving social issue objectives) as well as corporate social performance (the end result). This essay shall attempt to critically analyse the CSR concept by weighing in the advantages against the disadvantages and reaching a balanced conclusion.
One of the advantages of corporate social responsibility is business involvement: by addressing social issues, businesses can be a part of the solution and hence lead society. However, businesses may not be well equipped to be handling social issues especially on a larger scale, as was the case with Exxon Valdez. When the Exxon Valdez oil spill occurred, the company could not handle the situation on it’s own – it required the help of various other entities such as governments and NGO’s to clean the mess it made.
Another advantage of corporate social responsibility is the fact that it wards off future government intervention. If a company engages in CSR effectively, then governments will have no reason to intervene in the business of the organisation. However, it is worth considering that sometimes working with governments may lead to better results than working without them. This of course depends on the government in question. For example, if Shell opts to work with corrupt governments then social issues may not be taken care of with as much effect as if Shell worked with a government free of corruption.
CSR is not entirely advantageous: there are disadvantages also. One such disadvantage is the fact that the business power organisations have increases vastly. With increased power, businesses may be more tempted to abuse that power and this may lead to a reverse effect: social issues increasing rather than decreasing. At the same time however, the iron law of responsibility may apply – which states that businesses will lose their business power in case of any abuse of that power. Despite the iron law of responsibility – and even if businesses are eventually caught for contributing to social issues rather than to thir fixing – the damage will in all probability already be done. CEMEX, for example, eventually cleaned up after the smog incident in Davenport, California in 1999, though by the time they finished doing so people were affected by the carcinogens in the air.
Another disadvantage of CSR is the fact that it restricts the classic economic goal of profit maximisation, which Ian Davis highlighted in his article by quoting Milton Friedman’s statement ‘the business of business is business’. This is unlikely however, as the social contract has evolved in such a way that now the classic economic goal on it’s own is irrelevant. What’s more, social issues may actually lead to a business being more profitable due to a better image. CEMEX, for example, has enjoyed an increase in profits over time due to their CSR work.
In conclusion, after careful consideration of the advantages and disadvantages, it seems as though the advantages outweigh the disadvantages if one prioritises long term goals. Although profits may initially dip, CSR will eventually lead not only to betterment for stakeholders but also profitability in the long run.