Critically Discuss the Assertion That No Matter What the Ethical Justification for Corporate Social Responsibility (csr) Policies, There Must Be a Firm Business Case for Their Introduction

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Introduction of CSR policies includes cost and risk reduction as justifications. Carroll and Shabana (2010) adopt the view that engaging in certain CSR activities will reduce the firm’s inefficient expenditures and exposure to risks. Demand from consumers is vital to the viability of businesses as it eventually brings in financial returns. Therefore, It is in the corporate economic interest to mitigate threats through a threshold level of social or environmental performance, (Kurucz et al. 2008, cited in Crane et.al 2008). Smith (2005) suggests that equal employment opportunity (EEO) policies provide solutions for cost and risk reduction. EEO statements promote non-discrimination in work places. Examples include corporations like Dell, Lenovo and Kodak who publicises their EEO statements online. Carroll and Shabana (2011) support the view that these statements are necessary to illustrate an inclusive policy, which reduces employee turnover through improving morale. This will turn into cost savings for firms. CSR activities are also directed at managing positive community relations that may contribute to attaining tax advantages. It decreases the amount of regulation imposed on the firm because it is perceived as a sanctioned member of society, (Berman et al. 1999, cited in Carroll and Shabana, 2010). Moreover, cost and risk reduction arguments for CSR have been gaining traction among corporations. In a survey by PricewaterhouseCoopers cited in Fortune (2003), 73% of respondents indicated that ‘cost savings’ were one of the top three reasons why companies are becoming more socially responsible. Hence, the motive for reducing costs and risks reinforces the positive relationship between CSR and CFP.

CSR policies are also used for developing reputation and legitimacy. Crane et al. (2011) subscribes to the view of that businesses are social entities that must exercise responsible use of its power or it will be revoked, losing control over decision-making and external interactions. It is in the interest of a firm to meet stakeholders’ needs as the costs of these CSR activities are much less than potential benefits. The perception that the firm is concerned for society will also give it a license to operate. An example would be cause marketing where emphasising product advantages are linked to appeals for charitable giving. RED initiative is an instance, companies participating in it donate 50% of their profits to purchase and distribute antiretroviral medicine to battle AIDS in Africa (RED, 2009, cited in Carroll and Shabana). Through cause marketing, firms illustrate that both financial and social goals are pursed simultaneously. It creates that the perception in stakeholders that their pursuit of financial gains is a legitimate and is not carried out at the expense of social welfare, which strengthens its reputation and legitimacy. Another example would be corporate social reporting. These are standalone reports that provide information regarding a firm’s economic and environmental and social performance. Firms like 3M, Philips and Timbaland publishes annual reports are transparency and accessible to the public, (Godelnk, 2014). Through the reports, firms are able to convey that their operations are consistent with social norms and expectations and hence prove its legitimacy.

The definitions of a business case model have extended beyond assessing CSR initiatives in an economic manner and pursue for financial performance. Carroll and Shabana (2011) presented a syncretic stewardship model, which combines the social values led model and business case model. It recognises both direct and indirect relationship between CSR and firm financial performance. It enables firms to exploit opportunities beyond the financial and demonstrates the interdependence between business and society. It seeks win-win outcomes through synergistic value creation. Crane et al. (2011) accepts the idea of a virtuous circle approach, which highlights the positive gains generated through combining slack resources and good management. Philanthropic activities, cost and risk reduction and legitimacy can be mutually reinforcing to create a virtuous circle. For example, charitable donations to education causes would improve the quality of human resources. SABMiller has a 4e Camino el Progresso Program that funds small businesses in poverty countries to generate a virtuous cycle for business and social development. These solutions enable firms to pursue its profitability interest with the consent and support of its stakeholders. The win-win perspective to CSR practices provides a view of coexistence between satisfying stakeholders demands and the business case.

The flawed definition of ethics makes ethical justification behind CSR policies vague and unclear. Huczynski and Buchanan (2013, pp 63) defines ethics as “the moral principles, values and rules that govern our decisions and actions with respect to what is right and wrong, good and bad”. The definition does not set a context and can be too generalized. It is important to account the differences in cultures between countries, which will dictate what constitutes fair and just ethical conduct. A striking example would be the provision of carrier bags in supermarkets and retail stores. In some countries like United Kingdom and United States, retailers charge consumers for carrier bags to reduce non-biodegradable waste and advocate environmental causes. Contrastingly, this is not practiced in countries like Singapore, Malaysia or developing nations. It would be inappropriate to use the definition as it would mean that these countries unethical. Some countries simply do not have enough social pressure to create an ethical case and have other priorities like national security and economic growth. Hence, the definition is far too encompassing which makes it unclear. Secondly, there are trends of legislating CSR laws. An example would be India who is the first country to mandate CSR guidelines that requires companies to spend 2% of net profit on social development (Prasad, 2014). Using the definition, companies who act legally would also satisfy as being moral and ethical. However, it would hard to distinguish between responsible actions that reflect a concern for society and actions designed to enhance reputation. Thus, definition of ethics would be vague and inaccurate.

In conclusion, the business case for CSR policies can be made. While it is valuable for a company to engage in CSR for ethical justifications, the highly competitive capitalism world requires companies to allocate resources for CSR policies but also to consider their own business needs. It would be unrealistic for companies to either focus fully on altruism or only be financially driven. It is evident that firms have a variety of reasons for being CSR-attentive and there is an increased