The Link Between Competitive Advantage And Corporate Social Responsibility

Corporate social responsibility for the authors of the mentioned article is a “form of management that is defined by the ethical relationship and transparency of the company with all the stakeholders with whom it has a relationship as well as with the establishment of corporate goals that are compatible with the sustainable development of society, preserving environmental and cultural resources for future generations, respecting diversity and promoting the reduction of social problems” (Milton de Sousa Filho, Soares Outtes Wanderley, Pasa Gomez, & Farache, 2010). Based on this understanding of CSR Milton de Filho, et al. concluded that a competitive advantage can be derived from social responsibility and has following positive consequences for the firm:

Even though customers are a major key to success of any business, limiting CSR practices to an external group of stakeholder is insufficient. From the customers’ side, the focus is “on the corporate brand and its societal relationships with external constituencies.” (Lacey, Hensel 316). It is undeniable that implementation of CSR can attract the customers and lead them to be a significant are source of a financial gain. That is because CSR changes the way consumers behave in the market and alter their beliefs toward the company standards.” (Lacey, Hensel 316). Nevertheless, extensive focus on the social gains may cause the business to suffer financially. If that happened, the case is considered to be a failure of executing CSR. Again, this is a result of shifting all the business gears to benefit a sole group the stakeholders.

CSR is the obligations of the business to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society. According to (Carroll and Shabana, 2010), CSR has also become one of the most orthodox and widely accepted concepts in the business world during recent years. According to (Sweeney and Coughlan 2008) and (Maignan and Ralston 2002; Wanderley et al. 2008), Organizations increasingly use CSR activities to position their corporate brand in the eyes of consumers and other stakeholders, such as through their annual reporting . communicating about social activities does not always benefit the communicating organization, notably because CSR communication may trigger stakeholders' scepticism and cynicism (Mohr et al. 2001; Schlegelmilch and Pollach 2005).Many organizations engage in CSR because they believe that it is in the organization’s best

Companies lthat incorporate CSR in their strategic objectives are more innovative,for example Unilever was able to create new products such as

Organizations embark on social and environmental reporting for a variety of different reasons and not to simply improve credibility with stakeholders; although that is a primary reason in many organizations. However, other organizations have different objectives altogether that can include a range of different motivations. Some models have broken the range of motivations into signaling or greenwashing or used legitimacy theory to explain the motivations by firms to report on their social and environmental performances. This analysis will look at some of the different models that have been constructed to attempt to explain why firms utilize CSR frameworks.

The importance of corporate social responsibility to companies has been widely debated. Companies eager for maximizing the profit with limited cost. Facing the complexity economic environment and growing competition, as well as the short-term performance pressures from shareholders, companies have no idea but force to restructure the business, reduce the labor force and relocate the business to lower-cost regions. However, are they really helpful to maintain the competitive advantages and gain the sustainable profit? Michael Porter and Mark Kramer, in their January/ February 2011 Harvard Business Review article - Creating Shared Value (CSV) explains what a growing companies have come to recognize - companies can derive a

Despite the increasingly obvious trend of CSR, conflicts around the topic are common especially in real businesses. Conducting CSR initiatives or programs requires investing corporate resources, including charitable giving, investing in green solutions, paying for better working environment and assisting community development, for returns that are usually distant and uncertain. For the decision makers within corporations, it is hard to judge because they would be at someone else’s expense to create social value. Another conflict occurs when it comes to the role of CSR in businesses’ development: whether it is harmful or helpful for the businesses’ profitability is still quite a concern, not to mention that the difficulties to get a measurable bottom line out of CSR initiatives.

Lou and Bhattacharya (2009) maintain that CSR creates a level of ‘Moral Capital’, which then translates into ‘Relational wealth’ with different stakeholders. This is based on brand faith and credibility with costumers, affective commitment among employees and regulators, trust among suppliers and higher attractiveness for investors in general. Consequently it is important for organizations, to understand that CSR initiatives need to be communicated and transmitted to its group of interest. As Blomqvist and Posner (2004 cited in Comfort et al. 2007, pp.584) propose:

In many cases throughout the business world we are able to observe the common belief that corporate social responsibility (CSR) as a business entity is used among CEO’s as a driving force for business operation and strategy to gain competitive advantage. It has many benefits, including cultivating the wider society through positive externalities, increasing operating efficiency and improving brand image. Yet in contrast, some individuals who belong to the academic world such as Milton Friedman and R. J. Klonoski believe corporate social responsibility to be a “cloak for actions that are justified on other grounds rather than a reason for those actions” (Friedman, 1970). Throughout this essay we shall explore the ways in which adopting a socially responsible approach to business strategy and operation can affect a businesses ability to maintain competitive advantage in a market and how the adoption of this strategy can lead to a businesses downfall or success.

Although it is still contested whether organization have a social responsibility beyond making profit, but there seems to be increasing internal and external pressures on companies to satisfy wider societal goals (Aguilera et al, 2007). It is long understood that a strong company reputation and imagine is a significant factor that determine the success or failure of organizations, however CSR has only just recently been acknowledges as an important factor that contributes to corporate reputation. A strong corporate reputation no doubt contributes to competitive advantage but stakeholders are being skeptical about firms intentions in engaging in CSR activities, some might perceive it as a worthy cause while other are beginning to wonder whether the CSR is genuinely altruistic or is it just another marketing ploy for companies own self-interest (Arendt and brettel, 2010).

There are numerous factors that are pushing businesses to adopt some sort of CSR model including, but not limited to the shrinking role of government, demands for greater disclosure, increased customer interest, competitive labor markets, and lastly, supplier relations (Corporate Social Responsibility, 2013). Despite the potential costs, frustrations, additional work and preplanning of a business adopting a CSR model, it is not without potential rewards that positively impact the company the environment, and our community. Some ways that an individual business may benefit are through increased workforce diversity, increased customer loyalty, and the ability to attract and retain

There currently is an evolution-taking place; now the level of a business social responsibility has become increasingly integrated into modern business practices. This focus has seen both advantages and disadvantages to the business. However, to what extent has the use of the greater focus of a business social responsibility affected its competitive advantage in its marketplace.

The recent fifteen years saw a dramatic increase of the corporate social responsibility (CSR) report. There were more than 3300 CSR reports in 2008 while the number of 2002 was less than 100. More and more companies especially some multinational corporations among the world are keen to proving the sustainability, in order to improve their corporate image and credibility (Adams, 2002). This essay will explain why there are an increasing number of companies are willing to make CSR report annually, and discuss whether reporting on social and environmental activities is equal to good social and environmental performance in reality.

Second, although researchers have provided convincing arguments for the potential strategic benefits of CSR activities, scholars have not reached a consensus on whether or not, and how, CSR affects organisational performance (Husted and Allen, 2007; Margolis and Walsh, 2003; Orlitzky et al., 2003). They disagree, for example, as to whether CSR has a positive or a negative impact, or a neutral impact on organisational performance (Margolis and Walsh, 2001; McWilliams and Siegel, 2000; Orlitzky et al., 2003; Wright and Ferris, 1997). A number of scholars have argued that the lack of consensus is due partly to the use of questionable measures of organisational performance (Carroll, 1991; Griffin and Mahon, 1997; Waddock and Graves, 1997; Wokutch and McKinney, 1991). In particular, scholars highlight the limitations of single measures of performance (Egri et al., 2004) and over-reliance on financial performance that, in isolation, does not capture the full impact of CSR on the firm’s overall performance (Husted and Allen, 2007). In this study, we address this issue with three measures of organisational performance: the oft-used financial performance measure, as well as employee commitment and corporate reputation. This study is important for two reasons. First, while the study of the relationship between CSR and organisational performance is important in its own

This essay will evaluate the relationship between Corporate Strategy, Corporate Social Responsibility and will give some examples in order to give an idea to companies why they should engage in CSR and the consequences of engaging on it. It has been told that engaging on Corporate Social Responsibility is a cost, but recently has been demonstrated that if it is well managed the money that you put on CSR implementation can be taken into account as an investment. Companies engage in CSR not only because moral questions, it has been demonstrated that CSR is a door to an increase in the reputation of the company. In the long term companies realize that customers really appreciate the engagement of the company to social or environmental activities. Managers nowadays realize on how the consumers mind are changing towards a more responsible consumption and how these consumers look for information on how the products they consume have been produced. So these managers in order to increase in a long term base the good reputation of the company are investing nowadays on changing their strategy and trying all the company to engage in responsible practices. As explained in more detail in this paper the consequences of engaging in CSR are worth more than the cost of changing the company’ strategy. Some of them are the increase of consumer loyalty, investor attractiveness, political stability and economic benefits.