Role of CSR in Transforming and Empowering the Economy
“People, planet, and profit” is called the Triple Bottom Line (TBL). This catchphrase defines the foundation of Corporate Social Responsibility (CSR). CSR – as the name suggests – means being socially responsible for your business operations. There’s no single definition of CSR in academia, so it’s explained in different wordings. It’s a concept of corporate citizenship and responsible business. Corporates have acquired awareness regarding the ethical consequences of their business practices. So, CSR helps in creating a social and humanitarian deal between the corporate and the community. It also successfully maintains the public image of major multinational enterprises (MNEs). With their charitable activities, the business sector tries to give back to society. In this case, we can declare that CSR brings a win-win situation between capitalism and socialism, as in the 21st century, CSR is no more an optional luxury or merely a marketing strategy. It’s economically advantageous and crucial for the growth of MNEs. The world has become mindful of the negative impact of its activities on the environment. Therefore, CSR seems necessary to survive in this climate-conscious economy. We can also observe legally-obligated CSRs in some departments. Banks and hospitals cannot disclose the private information of their customers, for instance.
MODELS OF CSR
These are the days of the green and the purple economies. Financial behemoths now require businesses to be eco-friendly and sustainable. There have been multiple models for the implementation of an efficient CSR strategy. Kanji-Chopra Corporate Social Responsibility Model (KCCSRM) contains extensive research on the subject. Carroll’s four-level pyramid of corporate social responsibilities is interesting for business people. This model lists the following hierarchy of a corporate’s accountabilities:
- Economic responsibilities
- Legal responsibilities
- Ethical responsibilities
- Philanthropic responsibilities
A company is responsible for being profitable in its business. It’s also responsible for obeying municipal and international laws and regulations. The world also needs corporates to be fair, just, and harmless. The fourth (and the topmost) responsibility is philanthropic. People want MNEs to invest in humanitarian causes and serve the underprivileged population.
WHAT MAKES A CORPORATE SOCIALLY IRRESPONSIBLE?
While understanding this phenomenon of societal responsibility, we need to deal with some bad corporate social responsibility examples. What are the actions a company should avoid performing? This question takes us to some of the most socially-irresponsible activities conceivable in the corporate world.
- Contributing to environmental pollution and global warming
- Miserable humanitarian policies with no regard for people’s safety
- Inhumane treatment of workers and ignoring labor rights
- Dishonesty and corruption in the corporate structure
- A tyrannical neo-liberalist approach to business with no investment on charity and volunteer works
When CSR goes bad, corporations mess up as Davita and Volkswagen did. Ethical labor policies and hardcore environmental activism are at the heart of a corporate’s progress. Charity, nonprofits, and social work don’t just provide a more helpful image for the corporate. They also prove to be financially beneficial for the corporate’s business.
OBJECTIVES OF CSR
Let’s look at a few objectives of CSR. The primary aim of CSR is to provide and promote social welfare. It’s a communication tool to achieve a solid reputation in the eyes of corporate stakeholders. The “stakeholders” here refer to investors, employees, and customers.
- Reasonable prices of products
- Regard for labor rights
- A complete ban on child labor
- Fewer carbon emissions
- Commerce without the middleman
- Promotion of gender equality
- Discouragement of workplace harassment and bullying
- Removal of all kinds of ethnic, religious, and racial discrimination
- Supporting local charitable organizations
- Socially Responsible Investment (SRI): Its alternative name is “green investment.” It means stakeholders shouldn’t invest in alcohol, tobacco, gambling, prostitution, or weapon markets. SRI encourages corporates to invest in renewable energy sources for a better tomorrow.
There has been criticism of CSR in academic history as well. Is it compatible with Adam Smith’s rough version of capitalism? Do corporations even have any moral obligations to society? In the words of Smith, a butcher’s regard for his self-interest serves us dinner, not his benevolence. Should Nike spend $10-12 million a year on CSR activities? Research shows that CSR is very profitable for MNEs. Even small businesses can progress economically with a viable CSR strategy.
HOW IS CSR TRANSFORMING THE ECONOMY VIA TECHNOLOGY?
It is the digital age where technological marvels rival the human potential. Every industry is gradually changing and adapting to the world of automation. CSR also seeks to adopt this technological revolution and conform to the normalization of Artificial Intelligence. Let’s see how CSR is affecting the economy through technology.
- Cognitive Computing: Cognitive computing (CC) has many academic definitions, all of which get generally disagreed. The concept of CC sounds futuristic. As per one description, CC mimics the human brain function. It imitates our cognition and digitally predicts human reaction in certain situations. With the help of CC, MNEs can now test how their proposed strategies will affect their stakeholders. It’ll help them experiment in multiple digital simulations and analyze the results.
- Real-time accountability: Global access to a large amount of data has made answerability easier. Technology now allows stakeholders to scrutinize the company’s investments more clearly. One of the motivations behind introducing CSR was to bring MNEs under the radar of accountability. CSR enables corporates to self-regulate themselves. With real-time accountability, stakeholders will grow more powerful and authoritative. Collecting real-time data is now an automated and computerized process.
- The AI revolution: Data technology enables a fast and coherent corporate framework. It has also transformed the supply chain management. In financial reports, people can now provide vital information with the help of GIFs, videos, infographics, VR, or interactive charts.
ECONOMIC BENEFITS OF CSR:
Corporations are committing to respect the fundamental human rights of their stakeholders. They are holding themselves accountable – socially and environmentally. Transparency is becoming the new normal in the CSR-conscious world. Starbucks pledged to hire 10,000 refugees and encourage environmental leadership goals among its employees. Google promised to invest in alternative energy sources.
Here are some economic advantages of CSR as quick bullet points. Most of them got published in a 2016 research paper published by an Indian university.
- Low operating costs
- Superior financial performance
- Increased sales and customer loyalty
- Improved brand image and reputation
- Product safety
- Material recyclability
- Positive effect on the growth and stability of the business
- Energy efficiency and cost management
- Risk minimization
- Waste reduction
- Enhanced employer productivity
An ethical commercial behavior enhances and improves the productivity and profitability of the business. CSR is the new financial tool to generate more revenue for the corporate. Its moral, humanitarian and philanthropic approach to business has been successful. People want to be associated with a well-known company. Nobody likes working for a corporation that makes underage African children work for a few cents/hour. A 2003 study showed that the laborers of well-reputed companies were working for lower salaries. It was due to the company’s positive social standing and brand image. CSR has thus revolutionized the 21st-century market.