Why Corporations And Corporate Reputation

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3.1 Why do corporations voluntarily agree to engage in these activities? It is often argued that economic incentives lead firms to engage in soft law CSR. These are linked to corporate reputation. Political consumers may boycott a product made by a corporation that has acted contrary to human rights or environmental standards. Investors increasingly CSR screen investments and evade investments that have CSR risks. Firms will thus engage in soft law CSR out of self-interest because they will seek to boost their reputations with consumers and investors. This improvement in reputation will translate into improved sales or a higher stock price, while a bad reputation will do the opposite. This was the case with the consumer pressure imposed…show more content…
However, this theory holds that the primary purpose of the firm is to increase profits, therefore, while it is possible that CSR can be financially beneficial in the long run, the purpose of the firm is profit maximisation, and CSR should not interfere with this. 3.2 What are the advantages of soft law CSR? There are many advantages to soft law CSR. Vogel has stated that codes of conduct have indeed improved business activity, particularly in relation to labour and environmental practices. Two decades ago, there was only a small number of firms accepting responsibility for their social and environmental impacts, whereas now it is a norm. Indeed, corporate self-reporting and sustainability ratings are becoming mainstream. As previously stated, one of the main advantages is soft law CSR can extend the jurisdiction of standards across national boundaries and along international supply chains. Indeed, in some developing counties, soft law CSR is the only effective form of corporate regulation. Another advantage is industry or bottom-up initiatives bring legitimacy, expertise and other resources that promote compliance and enforcement of new norms. Furthermore, a decrease in state interference might lead to responsible forms of interaction between stakeholder groups. In contrast with hard law, soft law CSR entails comparatively low political costs in regards to resistance by special
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