Corporate Social Responsibility – Series 1
By Mr.Ng Kean Kok, Dr Falahat Nejadmahani, Mr.Tuam Kwok Choon and Ms. Farah Waheeda (CSDCSR)
The following write-up represents the first of a series of articles that hopes to provide readers with facts and information regarding Corporate Social Responsibility (CSR).
The items to be covered in this article and future articles are aplenty. As a preliminary, this article shall attempt to explain the following:
Definitions of CSR
Importance of CSR
Potential business benefits for firms that practice CSR
The definitions of CSR are aplenty, ranging from simplistic to the more complex. At its simplest, it has been defined as ‘’ (Mallen Barker, 2004).
It is about treating all stakeholders responsibly or ethically. Michael Hopkins (2011) explained:
‘Corporate Social Responsibility is concerned with treating the stakeholders of a company or institution ethically or in a responsibly manner. ‘Ethically or responsibly’ means treating key stakeholders in a manner deemed acceptable according to international norms.
Social includes economic and environmental responsibility. Stakeholders exist both within a firm and outside. The wider aim of social responsibility is to create higher and higher standards of living, while preserving the profitability of the corporation or the integrity of the institution, for peoples both within and outside these entities.
CSR is [thus] a process to achieve sustainable development in societies.
The United Nations Industrial Development Organizations defines CSR as follows:
Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (“Triple-Bottom-Line- Approach”), while at the same time addressing the expectations of shareholders and stakeholders. In this sense it is important to draw a distinction between CSR, which can be a strategic business management concept, and charity, sponsorships or philanthropy. Even though the latter can also make a valuable contribution to poverty reduction, will directly enhance the reputation of a company and strengthen its brand, the concept of CSR clearly goes beyond that.
However the definitions are framed, readers will note a somewhat common theme that permeates all the definitions. Firms are expected to do more than merely make profits for the owners or shareholders of the firms. There is the increasing expectation that firms undertake additional initiatives to assess and take responsibility for the firms’ effects on the environment and the consequent impact on social welfare and well-being. Firms would therefore be judged as to whether the firms do and also the extent to which the firms indeed go beyond what is required by the regulators and environmentalists.
This is why many now see CSR as being a process that aims to embrace (and put as its core activity and concern) responsibility for the firm’s actions and yield positive impact through its activities on the customers / consumers, suppliers, employees, communities (far and near), government, environment and many other stakeholders.
Marlen Barker (2004) illustrates the influence and effects on the many stakeholders through a diagram, as shown in Illustration 1.
Definition and effects of CSR
Importance of CSR
Key CSR issues that firms are expected to consider and tackle nowadays are: environmental management, eco-efficiency, responsible sourcing, stakeholder engagement, labour standards and working conditions, employee and community relations, social equity, gender balance, human rights, good governance, and anti-corruption measures.
Given the key CSR issues as noted above, when firms are seen to operate in an economically, socially and environmentally responsible manner (and especially when they do so transparently), it helps such firms to succeed. This becomes more so through the encouragement of shared values within and outside the firm, and from the society’s point of view, the firm provides itself with an increasing social license to continue to operate.
For instance, proper management and mitigation of social and environmental risk factors by businesses are increasingly important for firms’ successes, as the costs to firms of losing that social license, both in terms of share price and the bottom line may be significant.
Given the earlier described definitions, readers would note that CSR requires firms to engage with its internal and external stakeholders so that the firms are able to anticipate better and take advantage of fast-changing expectations in society as well as the constantly changing and evolving operating conditions.
CSR can therefore also act as a driver for the development of new markets and create real opportunities for business growth.
By addressing their social responsibility, firms can as a basis for sustainable business models. This in turn helps to create a conducive environment in which firms can innovate and grow.
Carefully crafted and implemented CSR policies by firms can result in significant benefits accruing to the firms concerned. The following lists some of the benefits:
Attract, retain and maintain a happy and motivated workforce, and become an Employer of Choice
Be able to differentiate a business from its competitors
Develop and enhance relationships with customers, suppliers and networks
Generate innovation and learning within a business, and consequently enhance the influence of the business
Generate positive publicity and media opportunities due to media interest in ethical business activities
Increase customer retention
Improve the reputation and standing of a business
Provide access to investment and funding opportunities
Save money and resources on energy and operating costs, whilst concurrently manage risk
Win new business
The next article shall discuss this area in greater detail.
The above is a product of UTAR’s CSDCSR
The Centre for Sustainable Development and Corporate Social Responsibility in Business (CSDCSR) is based in the Faculty of Accountancy and Management, Universiti Tunku Abdul Rahman.
For businesses seeking to excel in CSR, UTAR’s CSDCSR is able to provide your business and / or your firm with consultancies in the following areas:
Developing CSR policies
CSR workshops / seminars
Do visit our website: research.utar.edu.my/CSDCSR for more information