During the course, we examine sustainable business and recognize the importance of corporate social responsibility (CSR) in advancing sustainable development. This paper examines the connection between CSR and business case concerns, addressing both the positive and negative effects of CSR. Upon reflection, it becomes evident that CSR has gained significant popularity in the business realm over the past decade.
The participation of companies in corporate social responsibility (CSR) is increasing as they place importance on ethical standards and take into account various stakeholders, such as the environment, society, customers, and employees. This change challenges the profit-driven mindset that only concentrates on shareholders’ financial concerns. Whether influenced by external pressure or not, business managers’ commitment to CSR sparks debates and inquiries regarding its underlying rationale.
There is much controversy surrounding the debate on the business case for corporate social responsibility (CSR). Existing literature and empirical studies do not agree on whether CSR has a direct benefit for businesses. When the advantages of CSR mainly help society rather than the responsible company, doubts arise about the legitimacy of its business case. This leads to uncertainty regarding managers’ interest in practicing social responsibility if it does not contribute to profitability.
From a traditional perspective, companies often view Corporate Social Responsibility (CSR) as conflicting with the profit-driven nature of business. Nonetheless, it is undeniable that CSR benefits, such as establishing a favorable reputation among the public and government, can contribute to gaining a competitive advantage. However, this perspective does not consider CSR as a positive means to profitability; instead, it represents an older approach characterized by simply “doing good to do good.” In contrast, the newer style of CSR known as “doing good to do well” embraces the Triple Bottom Line concept. This concept aims to achieve balance between financial, social, and environmental factors for long-term sustainability (Vogel 2005). The newer style acknowledges that CSR is integrated into the business model and can be utilized as a source for devising market strategies and gaining competitive advantage. Although this approach allows companies to be accountable while generating profits, it does not fully address the fundamental issue – making a compelling case for integrating CSR into business practices. In conclusion, I firmly believe that there are specific areas where CSR directly impacts organizational benefits and facilitates obtaining a competitive advantage.
Due to the growing awareness and concern for environmental and ethical issues, it has become essential for companies to prioritize social responsibility. This is because it can have a significant impact on their reputation, customer loyalty, employee morale (vogel 2005), as well as help prevent any scandals that could harm the company’s image in the eyes of the public, law courts, and media. Conversely, behaving irresponsibly can directly affect a company’s profitability. For instance, if a company is known for employing child labor, it will greatly diminish their customer base. By implementing Corporate Social Responsibility (CSR) practices, companies can discover new business solutions and opportunities to gain a competitive edge.
Sebhatu1 emphasizes the importance of corporate social responsibility (CSR) in today’s business world. It is no longer a choice but a vital requirement for companies to succeed. The evolving business landscape and the integration of financial and ethical aspects have made it essential for businesses to include CSR in their strategies. The notion of value orientation within the business case for CSR holds significant weight. By prioritizing customer satisfaction, companies can achieve a competitive edge and maintain long-term profitability.
Today, customer satisfaction is heavily influenced by the values that a company upholds. As businesses increasingly shift towards a values-based approach, the co-creation of values with corporate social responsibility (CSR) drives sustainable competition in the market for these companies (Enquist et al. 2008) (Edvardson & Enquist 2008). In order for a company to achieve financial profits through values, a new strategy must be implemented to harness the benefits of CSR value creation. This involves integrating CSR into the business model and aligning it with the overall business strategy.
Corporate responsibility is better understood as a component of corporate strategy (Enqusit et al., 2008). This approach views CSR not simply as charity, but as an integral part of a business model focused on values. However, even proactive philanthropy can still be a competitive advantage (Edvardson & Enquist, 2008). Nowadays, companies incorporate their CSR efforts and reports into their marketing strategies in order to create a positive public image. Unfortunately, the reputation of these companies is not always based on genuine CRM practices, and the use of CSR for image making can be misused.
There is a consensus that CSR is recognized as a possible way for modern companies to address ethical and environmental concerns and gain a competitive edge with customers. However, there is no evidence that ethical values always result in financial profits. Various literature and empirical studies suggest different connections between ethics and profits, ranging from positive to neutral to even negative. (Vogel 2005) Even companies that were pioneers in CSR, such as Body Shop and Ben & Jerry, have experienced financial challenges despite initial success.
Some companies, such as Control Data, Cummins Engine, Dayton-Hudson, and Levi Strauss, have filed for bankruptcy. However, many companies benefit financially from their value creation through Corporate Social Responsibility (CSR) (Vogel 2005). But can we always expect CSR to be responsible for a business’s financial growth or decline? “Just as firms that spend less on marketing may be just as profitable as those that spend more, there is no guarantee that more responsible firms will outperform less responsible ones. The profitability of investments in CSR varies” (Vogel 2005). It is important to consider that besides CSR, other internal and external factors of a business and its market environment also play significant roles in its success or decline. For example, a company may have an excellent ethical reputation but lose customers if its products or services are subpar. Since CSR involves reshaping the business model of a company, it must be effectively managed throughout all aspects of the company to ensure profitability.
The need for an integrated management system for SCR to support the company is reminiscent of TQM systems. Upon closer examination, many similarities can be observed between Quality and responsibility. In fact, the quality movement, which initially started as a choice to save businesses and increase productivity, is now being repeated in the corporate responsibility realm. Just like the integrated system approach of TQM, corporate responsibility in organizations is successful when there is a comprehensive responsibility management approach within the organization (Waddock, 2004). Among all the similarities between TQM and TRM, this paper focuses on two important issues related to the topic. It is believed that a significant discrepancy in CSR practices and performances stems from the lack of systems, tools, and standards that can make CSR practices more transparent, tangible, and manageable. This is also a contributing factor that makes drawing conclusions from different CSR practices challenging, such as the relationship between SCR practice and profitability mentioned in this text.
Measuring the intangible aspects of Corporate Social Responsibility (CSR) is made possible by the tools provided by TRM, such as the balanced scorecard or global reporting initiative (GRI). Additionally, ensuring adherence to codes of conduct, principles, or values of the company through Assurance Personnel and establishing responsibility management systems to demonstrate the connection between being responsible and company productivity are two common factors that contribute to a better understanding and application of CSR (Waddock, 2004).
Conclusion: There is ongoing debate regarding the business benefits of corporate social responsibility (CSR). While CSR can create business advantages and is generally seen as a competitive driver, there is no definitive proof that being ethical always leads to financial profits. Further theoretical and empirical studies are needed, along with the implementation of more standards and measures, in order to draw more conclusive conclusions. The trajectory of corporate responsibility is similar to that of quality.
Initially, quality was questioned in terms of productivity but eventually became a competitive advantage and is now essential for businesses to survive. Managing and integrating CSR with organizational strategy is crucial in order to reap its benefits. Total Responsibility Management (TRM) offers a systematic and effective approach for companies to implement CSR. In the future, being responsible will be a vital requirement for long-term business success and survival.
References
Edvardson B. And Enquist, B. (2008). Values-based service for sustainable Business. Routledge, UK.
Vogel, D J. (2005). Is There a Market for Virtue? THE BUSINESS CASE FOR CORPORATE SOCIAL RESPONSIBILITY California Management Review, 47(1), 55-67
Waddock S. And Bodwell C. (2004). Managing Responsibility: What Can Be Learned from the Quality Movement? California Management Review, 47(4), 19-45
Enquist, B. , Edwardson B. and Sebhatu. S. P. (2008). Corporate social responsibility for charity or for service business?. The asian journal of quality. 9(1), 25-37
