Corporate Social responsibility: An Introduction

Corporate social responsibility refers to the policies following which a business monitors as well as remains compliant with the laws, ethical standards and national norms governing the business. It is also called corporate conscience, corporate citizenship or responsible business. Also referred to as CSR, it acts as a self-regulatory mechanism for a business enterprise. By following these policies, the main objective of a firm is to enhance their profits in the longer run by establishing good public relations. Along with this, by complying with the ethical standards, a business can always minimize the legal risks. It also helps to increase the shareholder trust as the responsibility is taken for the corporate actions. Positive impact in created on the stakeholders viz. employees, investors, consumers, communities and others through CSR strategies.

It was in 1960s when the term “corporate social responsibility” became popular. Since then many people use this term indiscriminately to include moral as well as legal responsibilities. Business Dictionary defines CSR as “A company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies express this citizenship through their waste and pollution reduction processes, by contributing educational and social programs and by earning adequate returns on the employed resources.”

When CSR was introduced earlier its scope was limited to only the individual firm’s behaviour. However, later the term was expanded and started including other aspects viz. behaviour of supplier and how products were put into use and after usage what disposal strategy was employed to dispose the product. In today’s time corporate social responsibility is considered as one of the standard practices in businesses.

Advantages of Corporate Social Responsibility:

Because of its increasing popularity worldwide, adopting CSR strategies can undoubtedly be an area of great potential for businesses all over the world.

  • The company’s image is reflected in a positive way by the CSR activities. The goodwill of the company is enhanced if it is seen to implement CSR policies in their company. There will be greater willingness in the consumers for availing the products, services of a company because of the excellent image established by the CSR policies. “A study by Unilever, found that a third of consumers are choosing to buy brands based on their social or environmental impact.” (Source: Just because Xerox employees were involved in Community programs, this gave the company the image of a “socially responsible organization”.
  • It also helps in attracting and retaining potential employees. More recognized companies are those who have seriously followed CSR activities. This helps in attracting good candidates for your company who look forward to employment opportunities. Moreover, when the company’s reputation starts rising in the market by following CSR policies, the employees will stay in the company for a longer time period. They are less likely to change their company. It has been found that the company which provides its employees with a flexible work culture and creates an environment where employees feel good are preferred by the millenials. The beliefs and values opted by the organization helps other employees to gain pride in themselves. A survey was done by a non-profit organization which stated that around 53 percent of workers think that a job where they feel valued and they think that their presence makes an impact on the company seemed more significant to their happiness.
  • One can enter the good books of regulatory authorities by following CSR policies. Scrutinizing the company’s operations come under the job of the regulatory authorities. But it has been found that when a company follows CSR activities, there is less hostility shown by the regulatory authorities towards that organization. Moreover, in order to enjoy the potential benefits, any organization that has a strong CSR will always prefer to stay within the regulations of the regulatory authorities.
  • New investors are attracted to a company which practices CSR polices when compared with the company that does not. The number of new investors received by a company depends upon the reputation of that company in the market. If a company wants to boost its image, CSR programs appear to be the best choice.
  • CSR also seems to be a new and a creative way to advertise your brand. A company gains publicity when it starts opting CSR program for its organization. This advertises the company. There should be alignment between the CSR activities opted by the company and the products and services offered by the organization.

Disadvantages of Corporate Social responsibility :

  • CSR implementation requires huge amount of cost investment by the companies. As far as small businesses are concerned, the amount of money spent on establishing CSR programs is too high when compared with the profits that the company may receive from the success of the program. Allocation of the budget to CSR establishment can be afforded by the major corporations but for a smaller business in which only 10-200 employees may be working the use of CSR practices do not seem economical. Social media can be used by a small business for communicating its CSR policies to the customers.
  • there could be an obstacle in following CSR policies even by the large companies. There are companies and businesses who believe that spending money on CSR programs adds only to futility and nothing else. CSR opposes the fiduciary duty of the company’s management toward its stakeholders as the executives have the responsibility of maximizing the profits towards the stakeholders. There is always a risk associated with the job of a manager who gives more preference to benefits offered to the society than to the profits generated in favour of the company.
  • Consumers are wise enough to understand the greenwashing practices of the businesses. Greeenwashing refers to business/corporate practices that may look like environmentally responsible but in actual the business is not showing the change in the practices or how the business has modified its practices to make them environmental friendly. For e.g. there might be certain products which have written on them “All natural” but in actual the products are manufactured the same way as they have always been. Similarly, there are certain dry cleaning services which calls themselves to be “Organic” when there is nothing organic in them. There are some innocent customers who behave in positive manner to these claims whereas others are aware of the greenwashing done by the corporate businesses.


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