Corporate Social Responsibility also Known As: corporate responsibility, Arevalo, J.A and Aravind, D (2010).
Responsible in business is good business, according to Idar Kreutzer, CEO Storebrand (2005) “We are committed to creating economic value, but we are not indifferent to how we do it. Progressive businesses are gaining competitive advantage by responding to societal signals. We prosper by helping society to prosper.”
There is growing recognition of the significant effect the activities of the private sector have—on employees, customers, communities, the environment, competitors, business partners, investors, shareholders, governments and others. It is also becoming increasingly clear that firms can contribute to their own wealth and to overall societal wealth by considering the effect they have on the world at large when making decisions. Business opinion polls and corporate behavior both show increased levels of understanding of the link between responsible business and good business. Also, investors and financial markets are beginning to see that CSR activities that integrate broader societal concerns into business strategy and performance are evidence of good management. In addition to building trust with the community and giving firms an edge in attracting good customers and employees, acting responsibly towards workers and others in society can help build value for firms and their shareholders.
Businesses are an integral part of the communities in which they operate. Good executives know that their long-term success is based on continued good relations with a wide range of individuals, groups and institutions. Smart firms know that business can’t succeed in societies that are failing, whether this is due to social or environmental challenges, or governance problems. Moreover, the general public has high expectations of the private sector in terms of responsible behavior. Consumers expect goods and services to reflect socially and environmentally responsible business behavior at competitive prices. Shareholders also are searching for enhanced financial performance that integrates social and environmental considerations, both in terms of risk and opportunities. Governments, too, are becoming aware of the national competitive advantages to be won from a responsible business sector. At the same time, leading industry associations, such as the World Business Council for Sustainable Development, have also suggested that countries as well as companies might gain a competitive advantage from corporate social responsibility. In much of the developing world, governments and business understand that their respective competitive positions and access to capital, increasingly depends on being seen to respect the highest global standards. Even companies which may have a good reputation can risk losing their hard-earned name when they fail to put systematic approaches in place to ensure continued positive performance. The effect of a tarnished reputation often extends far beyond that one firm: entire sectors and, indeed, nations can suffer. Hardly a month goes by without some example of a major corporation suffering a reduced market position as a result of questionable behavior, with many others subsequently finding themselves to be a part of the collateral damage. These firms frequently expend considerable time and money attempting to regain their reputation, with mixed results.
Defined by the International Standards Organization (ISO, 2007), as cited from Dodds and Kuehnel (2010) social responsibility is the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that contributes to sustainable development, health and the welfare of society. All this activities takes into account from the expectations of stakeholders and compliance with applicable law and consistent with international norms of behavior and its integrated throughout the organization and practiced in its relationships. CSR is typically described as self-regulation that is part of a corporation's business model and strategic plan. In a perfect world, CSR means that a business monitors itself to make sure it adheres to legal, ethical, environmental, and international standards across its operations. The more visible aspect of CSR is a corporation's willingness to promote and support community, national, and global causes. Corporations do this through corporate philanthropy,cause related marketing, and sponsorships. CSR aspires to honor people, planet or profits.
Potential benefits of implementing a CSR approach
1. Better anticipation and management of an ever-expanding spectrum of risk. Effectively managing governance, legal, social, environmental, economic and other risks in an increasingly complex market environment, with greater oversight and stakeholder scrutiny of corporate activities, can improve the security of supply and overall market stability. Considering the interests of parties concerned about a firm’s impact is one way of better anticipating and managing risk.
2. Improved reputation management. Organizations that perform well with regard to CSR can build their reputation, while those that perform poorly can damage brand and company value when exposed. Reputation, or brand equity, is founded on values such as trust, credibility, reliability, quality and consistency. Even for firms that do not have direct retail exposure through brands, their reputation for addressing CSR issues as a supply chain partner, both good and bad and its can be crucial commercially.
3. Enhanced ability to recruit, develop and retain staff. This can be the direct result of pride in the company’s products and practices, or of introducing improved human resources practices, such as “family-friendly” policies. It can also be the indirect result of programs and activities that improve employee morale and loyalty. Employees are not only front-line sources of ideas for improved performance, but are champions of a company for which they are proud to work.
4. Improved innovation, competitiveness and market positioning. CSR is as much about seizing opportunity as avoiding risk. Drawing feedback from diverse stakeholders can be a rich source of ideas for new products, processes and markets, resulting in competitive advantages. For example, a firm may become certified to environmental and social standards so it can become a supplier to particular retailers. The history of good business has always been one of being alert to trends, innovation, and responding to markets. Increasingly, mainstream advertising features the environmental or social benefits of products (e.g., hybrid cars, unleaded petrol, ethically produced coffee, wind turbines, etc.).
5. Enhanced operational efficiencies and cost savings. These flow in particular from improved efficiencies identified through a systematic approach to management that includes continuous improvement. For example, assessing the environmental and energy aspects of an operation can reveal opportunities for turning waste streams into revenue streams (wood chips into particle board, for example) and for system-wide reductions in energy use, and costs.
6. Improved ability to attract and build effective and efficient supply chain relationships. A firm is vulnerable to the weakest link in its supply chain. Like-minded companies can form profitable long-term business relationships by improving standards, and thereby reducing risks. Larger firms can stimulate smaller firms with whom they do business to implement a CSR approach. For example, some large apparel retailers require their suppliers to comply with worker codes and standards.
7. Enhanced ability to address change. A company with its “ear to the ground” through regular stakeholder dialogue is in a better position to anticipate and respond to regulatory, economic, social and environmental changes that may occur. Increasingly, firms use CSR as radar to detect evolving trends in the market.
The Ten CSR Principles - UNGC
United Nation Global Compact (UNGC), launched in July 2000, as a policy platform and a practical framework for companies that are committed to sustainability and responsible business practices (UNGC, 2007). The UN Global Compact's ten principles derived from human rights, labor, environmental and anti-corruption. The UNGC asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environmental and anti-corruption:
- Businesses should support and respect the protection of internationally proclaimed human rights;
- make sure that they are not complicit in human rights abuses.
- Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.
- the elimination of all forms of forced and compulsory labor.
- the effective abolition of child labor.
- the elimination of discrimination in respect of employment and occupation.
- Businesses should support a precautionary approach to environmental challenges.
- undertake initiatives to promote greater environmental responsibility.
- encourage the development and diffusion of environmentally friendly technologies.
- Businesses should work against corruption in all its forms, including extortion and bribery.
UNGC (2007), www.unglobalcompact.org
There is much controversy about Corporate Social Responsibility. Proponents say that there is a strong business case to be made for CSR; while critics maintain that the only responsibility business has is to make profits for its shareholders. It must be recognized up front that CSR still creates a degree of confusion and controversy. Is the promotion and implementation of socially and environmentally preferable corporate conducts a function of business or government? Is the implementation of CSR practices a cost or a value-enhancer? Is it just public relations? In part, the problem stems from definitional issues, and a perception in some quarters that CSR is more about philanthropy, rather than “doing business” and responding to shareholder interests.
A lot of CSR issues has highlighted from researcher. From one CSR issues, some claim that CSR, as defined here as the voluntary actions by a company to address economic, social, and environmental impacts to the business operations and the concerns of its principal stakeholders, CSR looks to helps companies to meet objectives that produce long term profits. From another, it is claimed that CSR is a step toward a decent society because companies are doing what is ethically correct, Arevalo and Aravind (2010). It is argued, what happens when CSR-driven firms experience significant, even turbulent discontinuities within their systems? How do they communicate the obstacles to their CSR efforts, and what are their strategic plans to cope with these uncertain times? In Malaysia, American companies continue to be heavily involved in Penang. More than 56 percent of foreign investors in transport equipment manufacturing chose Penang as their manufacturing base, Cheng and Jamilah (2010). From the period of January to September 2008, Penang remained the most popular location for investors to base their manufacturing plant for export-oriented industry of scientific and measuring equipment. Since high-tech production began in Malaysia in the early 1970s, the most serious environmental problem has been the disposal of toxic industrial waste and the absence of social security during the Asian financial crisis of the late 1990s, (Nautilus Institute for Security and Sustainable Development, 2002) as cited from Cheng and Jamilah (2010). Issues from their research based on two main established MNCs based in Penang, namely Agilent Technologies (Malaysia) Sdn. Bhd. and Intel Technology Sdn Bhd that focuses on how stakeholders’ relationship is incorporated in CSR approach based on the internal and external aspects of CSR; the concerns of CSR (primary and secondary stakeholders)
The other issue is about focusing on the perceptions of executives on responsibility of corporation to the society in Malaysia from view of Islamic concepts and the opinions from Malaysian Managers, Chamhuri and Md Tareq (2009). As their studies from Islamic worldview, start with the concept of Oneness of God, who dominates the heaven, earth and inside the earth. God sends messengers from first day of the earth and His final messenger is Mohammad. Islam accepts that Jesus and Moses were the apostles of Allah, and they were in the right path. However, Mohammad is messenger for the whole universe and Allah sends Quran as a guideline to solve the entire human problem. Islam represents itself not only as a religion but also a complete code of life. Quran discusses about literature, law, economics, socialization, politics as well as Jihad. But the meaning of Quran is not like other books, rather it is completely unique. They need to relate to the time of the Prophet to understand the Quran, but most people look the verse itself. In fact, the Quran provides the theoretical framework while the Prophet is the practical example of Quran. The background of their present research focuses on the beauty of Islam linked with CSR. The values and principles that have been central to Islam since the time of the holy Prophet Mohammed may serve as foundation for the notion of CSR similar to those in the West.
CSR challenges is how to continue the activities under current economic crisis, did the companies ready for this time. Under challenging financial and economic crisis how are firms’ corporate responsibility and CSR maturing strategies being affected? As Cheng and Jamilah (2010) look into Malaysian government’s challenges how to stand on CSR is that all organisations including MNCs in the country should take account of the economic, social and environmental impacts of their activities on stakeholders.
As Chamhuri and Md Tareq (2009), they looked CSR challenges from Islamic parameters in their study as Farz-Wajib (obligatory). According to the Islam, there are some orders given by Allah, which are mandatory to all Muslims, and they are known as Farz or Wajib. If anyone believes in Allah, s/he has no option to avoid such type of obligations. For example, Prayer (Salat) five times a day, compulsory donation (Zakat) belong to Farz-Wajib. A weight of five was given for such cases. Sunnah-Nafal (better to do). When any duty or order came from His Messenger, it is known as Sunnah-Nafal. Islam encourages doing such order or direction. But the Muslim has an option not to do such direction. One of the examples is planting of tree. A weight of four was given to such cases. Makru (no comment, preference not to do). When any direction comes from Ulama (Islamic scholars) on the bases of contemporary situations, and it is either not prohibited by Allah nor by His Apostle, it is called Makru. Islam discourages such activities but not entirely prohibits them. On one of the examples is smoking. A weight of three was given for such cases. Sagira Guna (small sin). When any prohibition comes from the Ulama on the basis of contemporary situation after analysis of the Quranic verses and the Hadith of Mohammad, it is called Sagira Guna. A weight of two was given for such cases. Kabira Guna (big sin). When any prohibition is made by Allah or His Apostle, according to Islam it is Haram (strictly prohibited). For example, a murder of the innocent is Kabira Guna. A weight of one was given for such cases.
Another challenge in CSR is how organizations continuing their effort in CSR during turbulent time. Researcher examines the CSR challenges following two questions:
- Under challenging financial and economic conditions how are firms’ corporate responsibility and CSR maturing strategies being affected?
- What are the reported obstacles and consequential impacts for continuing to build longer-term sustainability and stability?
This study has done by Arevalo and Aravind (2010). Their study to seek an understanding of the impact the current economic crisis has had on the CSR strategies of US organizations.
According to Arevalo and Aravind (2010), there are some sectors that are actually using the crisis as an opportunity for improving their current CSR efforts. Some of the companies suggested that challenging times such as the present should be cause for embracing, not rejecting the socially responsible practices. These companies were likely doing well with regard to CSR even before the crisis. This prompts the conclusion that at least some companies who were progressing in the CSR arena will continue to do so or better in their CSR efforts and others who were not progressing will be negatively affected in their CSR efforts by the current economic and financial crisis. If we stop thinking of the poor as victims or as a burden, and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunities will open up, Chamhuri Siwar and Md Tareq Hossain (2009). Four billion poor can be the engine of the next round of global trade and prosperity.
As resulted from Cheng and Jamilah studies from 2 MNC’s companies, they found both of companies consider the internal and external aspects of CSR important for their operations. These MNCs believe that the external aspects of CSR: social responsibility and new opportunities, community relations, consumer relations, supplier relations and natural environment, internal aspects of CSR: physical environment, working conditions, minorities/diversity, organizational structure and management style, communication and transparency, industrial relations and education and training and in accordance with the internally and externally aspect which is ethics awareness.
From my point of view CSR efforts is looking good from organizations commitment through human rights, labor standards, the environmental and anti-corruption, but all of this activities not very clear define because of CSR is self-regulation, CSR activities working without enforcement but only guidance from principles such as UNGC or ISO. My arguments is when organizations cause damage to the environments or pollutions to the river or forestry, their CSR is about giving scholarship to the student, this is not related to what they have done. Their organizations look-like very kind of efforts but they are continuously making damage and pollution to the environment. They leave damaged what they have done to other parties such as government to examine and repair the damaged, my opinion; this is unfair CSR efforts, such as they give sweet in front but through rubbish from behind. My suggestions is what they have cause damaged they should repair it back as their CSR efforts, such like pollution to the river, the organization should use their efforts to make water treatment and ensure the river back to the normal stream. Case for example from several years ago when SYABAS (Syarikat Bekalan Air Selangor) stopped their operation due to water pollution in their dam, the victim is Selangor people whose suffered from shortage of clean water but the manufacturer that cause damaged did not make any efforts to the pollution that what they have done.