On the tracking thread toward understanding the concept and aspects of a sustainable business in this course, the inclusive wide concept of corporate social responsibility is an key approach which feeds sustainable development pattern. This paper aims to look at the CSR concept in relation to business case issue and argue the business case of CSR in different positive or negative perspectives. Reflection on business case of CSR Social corporate responsibility is the fashion of business world for the recent decade.
Increasingly companies are getting involved with CSR and try to regulate themselves to the ethical standards and care about all the stakeholders namely environment, society, Customers, employees rather than only the financial share holders perspectives and interests. This commitment to the CSR from the business managers -no matter under the pressure of groups or in the absence of pressure groups- has a contrast with the money making philosophy of business which requires maximation of profits. This is where the argument emerges and the business case of CSR is questioned.
In fact debates on business case of corporate social responsibility is one the most controversial issues of CSR. The literatures and empirical studies haven’t come to a common agreement if there is a business case for the CSR or not. I think when the benefits of CSR goes only to the society rather that to the company or the business which is socially responsible, the business case of CSR would be under a question mark. In terms of profitability this fact justifies if managers are not interested in being socially responsible to some extent.
From a classic approach, companies tendency to SCR is against the pure profitable logic of a business nature and it`s just a virtue. However the benefits of CSR such as good reputation in public or government is not deniable towards competitive advantage but still this approach doesn’t see CSR an positive effective mean to profitability. This is the old style of CSR which is mainly expressed by ”doing good to do good”. On the other hand the new style of CSR stating “doing good to do well”, focuses on the core concept of Triple bottom line which requires an equilibrium between financial, social and environmental factors to be sustained. Vogel 2005) Sebhatu says the old style perspective believes that CSR can play a more important role to financial profitability rather looking at CSR as a virtue generator. CSR in new style is involved with the business model and a source to create market strategy and competitive advantage. This new style can help the companies to be responsible and profitable but it doesn’t solve the fundamental problem; the business case of CSR. Generally I think there are some areas that CSR can have a direct impact in terms of organizational benefits to get competitive advantage.
Today that people are paying more attention to environmental and ethical issues being socially responsible can strongly have an effect on good reputation, loyal customer, morale employees (vogel 2005), decreasing risk of scandals and damaging the image of the company in public, law courts and Medias. In the same way not behaving responsibly has a negative direct effect on profitability of a company too (for instance the bad reputation of a company for using child labor decreases the customer quantity of the business dramatically). CSR practices are new business solutions ways leading to gain competitive advantages.
But getting competitive advantage through CSR is not only a choice, rather an inevitable requirement for the 21 century companies for surviving. Sebhatu1 says the new business nature and requirement of embrace of money and morals has made business systems to change their business models towards CSR. The value orientation in business case of CSR argument is a key concept. If a company succeeds in achieving customer satisfaction, it has come up with a competitive advantage in the market which improves long term corporate profitability.
Today a big part of customer satisfaction is depending on values which company stands for; and businesses are changing in to values-based business. In a values- based business, values which are co created among CSR, drive the sustain competition for the company in the market. (Enquist et al. 2008) (Edvardson & Enquist 2008) for a company wanting to get financial profits through values, a new strategy should be applied to enjoy the benefits of CSR value making. and CSR would be a part of the business model being integrated with the business strategy.
Corporate responsibility is better understood as one dimension of corporate strategy (Enqusit et al. 2008) with this approach CSR is not only charity rather a part of the business model for a values-based business. But even “philanthropy is still a competitive advantage when it is in a proactive way”. (Edvardson & Enquist 2008) companies these days embed their CSR experiences and reports as a highlighted means for advertisement and creating a good image of themselves in public even though sometimes image making of CSR is being missused and companies reputations are not always on the basis of true CRM practices.
There is no dispute that CSR is accepted as a potential means to help today companies with customers concerning ethical and environmental issues to get competitive advantage, but there is not any prove that always ethical values leads to financial profits. Different literatures and empirical studies reports different relationships (positive, neutral and even negative) between ethics and profits. (Vogel 2005) Even some pioneers companies in SCR like Body shop, Ben & Jerry after some years of financial success faces financial crisis.
Also some others like Control Data, Cummins Engine, Dayton-Hudson, Levi Strauss even went bankruptcy. Meanwhile so many Companies benefit financially from their value creation in the presence of CSR. (Vogel 2005) But should we always expect CSR be responsible for financial growth or decline of a business? “But just as firms that spend more on marketing are not necessarily more profitable than those that spend less, there is no reason to expect more responsible firms to outperform less responsible ones. Sometimes investments in CSR make business sense and sometimes they do not. (Vogel 2005) it should be taken in to account that plus CSR, there are other internal and external circumstances of a business and its market environment that have key roles to success or decline of that business as well. For instance the a company may have a very good reputation on ethical issues but the products or services which company offer are not good, it is obvious that the company loses the customers. As CSR is an approach which change the business model of a company, in order to foster the company, it needs to be managed and streamlined within all the company aspect to be efficiently profitable.
The need of SCR integrated management system to foster the company reminds the TQM systems. Looking more closely to these two, manifests many similarities between Quality and responsibility. In fact the scenario of quality movement which first was just a choice was aiming to save the businesses and increase their productivity is being repeated for the corporate responsibility today. The same as quality which evaluated to an integrated system including the whole business, TQM, Corporate responsibility in the organizations is fruitful if there is a total responsibility management approach within the organization. Waddock 2004) Among all the similarities of TQM and TRM, the two important issues of TRM are related to this paper topic. I think A big part disclarities in CSR and CSR practices & performances are because of lack of a systems and tools and Standards that can make the CRS practices more transparent, tangible and manageable. Also I think this is also one of the reasons that makes drawing conclusions out of different CSR practices, difficult. (For example the relation between SCR practice and profitability as it was mentioned in this text) i.
Measuring the Unmeasurables of CSR by the tools which TRM offers like balanced scored card or global reporting initiative (GRI), and ii. Assuarnce Personnell in terms of codes of conducts, principles or values of the firm and making business case of CSR by putting responsibility management systems in place to see the linkage between being responsible and company productivity are two similarities of quality and responsibility which helps CSR be more understood and more applicable (waddock 2004)
Conclusion There are many debates about business cases of CSR. CSR makes business cases and can be considered as a competitive advantage driver in general but there is not any prove that always Ethical result in Financial profits. There is a great empty place for more theoretical and empirical studies and more standards and measures should be applied to be able to draw better conclusions. Corporate responsibility is going in to the similar track condition that Quality went in to.
At the First, quality was doubted to productivity, gradually reached to a competitive advantage and nowadays it’s a perquisite to existence in the business world. In order to benefit from CSR it needs to be managed and be integrated with organization strategy. Total Responsibility Management (TRM) is the solution which can bring SCR in to a systematic and fruitful approach for the companies. In the future business world being responsible is a necessary condition for long-term business success and surviving.
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