To What Extent Does Corporate Social Responsibility Beneficial to a Company’s Performance?

Businesses, specifically larger corporations, play a major role in what occurs in society therefore, they are responsible to their stakeholders not only to pursue economic goals but the greater social good as well. Corporate social responsibility (CSR) means that a corporation should act in a way that enhances society and its inhabitants and be held accountable for any of its actions that affect people, their communities, and their environment. (Lawrence, 2010). Social responsibility is becoming the norm so much so that some businesses have incorporated it into their business model. There are three components of the bottom line of social

Although not all companies are successful at truly embodying what it means to be green, even companies that have been synonymous for contributing pollutants and greenhouse gasses spend millions trying to convince stakeholders that they do. It’s often these last two dimensions of CSR—social and environmental, that either embroil a corporation in controversy or allow it to serve as an exemplar in good ethical business practices.

Corporate Social Responsibility (CSR) is something that affects all companies and should be an active factor in the company’s decision making. It is something all corporations need to care about. CSR is when business’ or corporations take part in an initiative or campaign for a cause that will benefit society and/or in some way make the world a better place (Taylor, 2015). Initially, Corporate Social Responsibility started to take shape around the 1950’s, but some say that it dates all the way back to the 1800s, the idea of CSR was seen (Carroll, 2007). One may think that because it is dated so long ago, it doesn’t have an important impact today nevertheless, it is proven that Corporate Social Responsibility is a pathway for entities to self benefit as they are in the process of benefitting society.

Friedman saw CSR as an additional business cost factor that made the financial equilibrium more difficult to maintain. In this sense, M. Friedman (1962 and 1970) saw CSR as a “subversive doctrine” and he said that the sole responsibility of the business is to increment profits.

A company’s objective is always to make achievable profit. According to the research, CSR wants both companies to make high profit and let the society benefit.2 Even though, we cannot definitely consider that society does benefit eventually. Nearly all companies that work together with CSR have other hidden thoughts. Since CSR is a legal corporation,3 businesses use the cooperation to profit. For instance; imagine a company would spend its shareholders money to improve the environment for their employees. They would not use the money of their shareholders if they would not see profit in it.4 It is rather ridiculous to use the shareholders money for their profit. In that they cooperate with CSR, nobody can see their absurd thought behind. Indeed it is an intellectual force that businesses use. From the research article, we know that CSR essentially just has to build a company’s long term value and profit.5 However, as long as they do not see the ulterior motives and the misappropriation of the business against them, their actions are rather inept and expedient for the society and the employees.

Whether CSR costs a company money or earns them money can be a challenging topic to argue. There are many factors that are considered when assessing a company’s long term financial performance and its relationship between the company’s CSR and their revenue. These factors include a company’s CSP (Corporate Social Performance, or the measure of CSR), size, risk taken, economic scaling, and competition. However, there are several additional variables that are commonly forgotten and must be considered when calculating the effect a company’s CSR has on their financial situation. R&D for example has a major impact on a company’s long term economic performance, as it leads to improved knowledge and increased ingenuity on the company’s operations and products. Positive returns on R&D investments can lead to increased shareholder returns and increased profits.

Corporate social responsibility (CSR) is the pledge a business makes where it promises to behave ethically and contribute to economic development while improving the quality of life of workforce and their family as well as the local community (Pride, Hughes, Kapoor 42). This practice helps to form or improve the positive image of the company. Businesses that follow the socially responsible model consider the impact of the company’s actions on society. This also includes promoting and supporting local, national and global causes, which is a part of CSR called corporate philanthropy, where businesses donate some of their profits or resources to charities (Taylor). Companies that show social responsibility this way must be devoted to doing so on a regular basis, because if don’t follow through with it, your organization may be viewed by the public as dishonest. Many critics of CSR believe that this model reduces the main goal of business, restricts the free market goal of maximizing profit, and also limits the ability to compete in a global marketplace (Pride, Hughes, Kapoor 47). Though critics may believe they are right, CSR gives companies a chance to address social issues caused by business’ and other factors and allows them to be a part

Archie Carroll defines corporate social responsibility (CSR) as “the social responsibility of business encompassing the economic, legal, ethical, and discretionary expectations that society has of these organizations at a given point in time.” (Crane, 5) Interesting enough, there has been an abrupt growth of firm’s engagement in CSR within all industries. This is the result of growing requests from the civil society demanding firms, of all sizes, to legitimize their practices. (Crane, 4)

The theory is if they are in good standings, it can benefit them in many ways. One way is that consumers are more willing to purchase from a company after information of their CSR is out and can see that it is an ethical company (Mcguire, Sundgren, Schneeweis, 1988). Low social responsibility, on the other hand, may encourage some stakeholders to doubt the ability of a firm to honor implicit claims and may increase the number of a firm’s more costly explicit claims. Moreover, Bowman and Haire suggest that stakeholders and stock and bondholders see CSR as correlating to management skill. The theory is that reputation is an investment and through positive CSR, financial performance will increase accordingly. However, there have been various arguments regarding the relationship between a firm’s social responsibility and its performance outcome (Sankar, 2001).

Businesses and big corporations face issues regarding their business ethical practices that may arise as potential problems. These practices could impact governments, the outside environment and society as a whole, if those said practices use exploitation and is harmful to its external environment. Because of this major issue, corporations are left with the decision to change the way they operate by applying a code of conduct that would improve their ethical practices suited for the needs of society. Corporate Social Responsibility (CSR) is the practice with which a corporation is essentially responsible for their misconduct, and will not only focus on making profits but provide a goodwill to society. CSR is an important implementation for corporations as it is beneficial to the business itself, as well as for its shareholders. With that being said, it also has its disadvantages. This essay will discuss the importance of CSR in the world of business, furthermore it will explain the principles of CSR, and then it will discuss the advantages and disadvantages it has for corporations.

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.

Those who are being served (i.e. shareholders or high-need populations) are the ones who know the most regarding the importance of CSR initiative, and those who don’t know often don’t because barriers to entry are

The research conclusion of the relevance between corporate social responsibility and corporate economic performance is not similar. They can be mainly divided into three views. One view is that company’s social obligation has a negative relevance with the economic performance of companies; another view is that corporate social obligation can cut down transaction expenses, enhance the competitive power and the manufacture efficiency, finally it increases the company 's financial performance. Some literature studies think that there is no relevance between company’s social obligation and its financial obligation or the relationship is nonlinear.

Additionally, natural resources such as forests and water are threatened by selfish strategies aimed at realizing financial performance without consideration of social responsibilities of the firm. CSR also encourages organizations to behave and act in a manner that promotes values of the community which they are embedded (International Conference on Economics and Management Engineering, 2014).

In this article, we will be looking at the effect Corporate Social Responsibility on firm’s financial performance. I will introduce a few examples of some practices that could be implemented towards CSR actions plans that will benefit financial production. I will also include examples of some well known companies that have implemented some of the practices mentioned and what these changes did for the company.