In the world today, Corporate Social Responsibility (CSR) has become one of the most essential aspects adapted by governments and companies. The concept of CSR normally relates to the firm’s decisions in which would help out towards the company’s growth as well as improving the development of having a better society. The reason CSR has become very important for firms today is to counteract the growing public skepticism caused by corporate wrongdoings (Birth et al. , 2008).
CSR is defined as “a model of extended corporate governance whereby who runs a firm (enterpreneurs, directors, managers) have responsibilities that range from fulfillment of their fiduciary duties towards the owners to fulfillment of analogous fiduciary duties towards all the firm’s stakeholders” (Sacconi, 2004). In other words, initiative to evaluate and take accountability of a company’s actions on the environment and social welfare. In this assignment, we will be addressing some of the controversial issues and challenges of the current corporate social responsibility practices among companies in Malaysia.
Today, among companies, there is an increase of awareness and active participation by the corporate professionals in the evolution of CSR. (John Garett, 2012). More organizations are now actively participating in the green era to create an eco-friendly environment by embracing sustainable processes and practices. Such example that we look into would be Sime Darby and The Body Shop. Sime Darby has been working on Corporate Social Responsibility (CSR) to sustain its good relationship with the public and to ensure business and operational sustainability. The said company, has created an awareness project event called the “Project Rhizo 2. ”.
This project involves planting of mangroves saplings in Port Dickson. Besides that, more organizations are moving its products and services to a low carbon economy and introducing it in all areas in their business. There are several positive outcomes in practicing corporate social responsibility in an organization such as obtaining an increase in returns on investment (ROI). In regards to positive outcomes of corporate social responsibility, the following discussions are few credible benefits to the increased of returns on investment by the corporate social responsibility.
Firstly, corporate social responsibility will enhance the operational efficiencies and cost savings. A systematic approach management of environmental practices helps employees to understand the relationship between corporate social responsibility and an increased operational efficiency and maintaining continuous improvement. As such, educating the employees on corporate social responsibility is important because it can increase the sales revenue by supporting greater efficiency through less wastage of raw materials, energy and water usage.
Hence, organizations will meet sustainability and quality, which will lead to an increase in sales. Secondly, corporate social responsibility helps to improve innovation, competitiveness in the market and market positioning. The essential step to this practice is to collect more feedbacks from its diverse stakeholders in order to gain more ideas in creating new product. For example, Sime Darby Malaysia ensures that an appropriate initiative is taken across its business to address its stakeholder’s concerns and effectively respond towards the needs of their stakeholders.
Lastly, it is the brand image produced, that is strengthened by emphasizing corporate social responsibility. In today’s business world, most brands are perceived by various internal or external organizations and their responses to these perceptions. Creating or strengthening the brand image of a company requires factors such as good business ethics and honesty as well as environmental responsibility and also active participation in the community. This is when corporate social responsibility comes in. CSR has to be implicated and practiced throughout to ensure the main goal is achieved.
In regards to active participation in community, organizations may further develop social image by awards given in plasticizing and recognizing corporate social responsibility. For example, Sime Darby Malaysia has set up a Human Learning Centre that was collaborated with Plantation Division, which focuses education. It is mainly for the children of the Sime Darby workers whom are residing in the plantation estates. The establishment, managements of teachers and school facilities are fully sponsored by Sime Darby.
As a result, Sime Darby has managed to create a clear ethical, strong brand image and good social position and also manage to hold on to skilful and efficient employees. In short, corporate social responsibility is commonly used in organizations as good ethics and social position within a organization does effect consumers buying decision. Although the CSR department of Sime Darby has been ensuring the sustainable business growth and the good impact it has to the planet, its people and the economy, without a doubt, it will still trigger some of the negative issues on certain perspectives.
Working on CSR itself, costs Sime Darby a large amount of money, which can be amounted up to RM64 million. The costs incurred are allocated to develop the few main pillars of Sime Darby’s CSR department. Scholarships are given to those who need financial supports on their educations. As calculated, Sime Darby spent over RM20 million on giving educational assistance to those desperately needed the help. Sime Darby’s CSR contribution to the community’s difficulties such as alleviation of poverty uses quite a lump sum of money, whereby they distribute basic needs to those homeless and poor kids around the world.
Their charity works on giving foods to fugitives and helps to orphanages and disabled homes, all cost them money to operate such events. Their assistance given to Thailand flood’s victim years ago uses up quite some money because they provide a lot of money and human capital to help those victims. As recorded, they have employed three divisions of human capital in providing relief aid. Besides that, Sime Darby’s projects on building affordable housing also cost them the opportunity cost to earn much more money than doing such CSR works. These projects indirectly pull down the profit made by Sime Darby all the time.
Works on Conserving environment, protecting ecosystem and rehabilitating endangered species, are another sector of Sime Darby’s CSR. Monitoring of resources to conserve the environment all require research team and large human capital. All the wages and equipment purchased become expenditures to Sime Darby and directly causing less profit on the year ended financial report. Species rehabilitation and conservation will need places and research team to minimize the environmental impact also need Sime Darby to allocate financial supports when comes to buying foods, provide places for species, and pharmaceutical needs on doing research.
These are all costs that reduce Sime Darby’s profit. As recorded, Sime Darby has a long-term tree planting program called River of Life and restoration of degraded forests. These contributions by Sime Darby to the environment will need a lot of human capital and equipments to execute the projects. Purchasing of those required equipments and employing human capital all have become part of Sime Darby’s extra burden while contributing to the society. One other company we look into is The Body Shop. Said company is one of the many organizations that practices CSR as part of their business activities.
Entrepreneur Anita Roddick founded The Body Shop in 1976, when she identified a niche in the market for nature-based beauty products with minimal packaging. One of the ways they imply CSR into their product is by making sure that their product is 100% vegetarian and that they do not and will not test their cosmetic product on animals, therefore making it animal free nor do they accept any others that do so. It is stated very clearly and can be seen by looking at their campaign signs which stated “Choose Cruelty-Free Beauty 100% Vegetarian”.
The Body Shop are endorse as Cruelty-Free by the People for the Ethical Treatment of Animals (PeTA). The British Union of the Abolition of Vivisection (BUAV) Humane Cosmetics Standard (HSC) has always audited The Body Shop to ensure that they comply with the regulations that have been set by BUAV and HSC. The Body Shop is among the few who follow completely to the regulations. The Body Shop also audits themselves every two years to make sure that they are always updated to the latest animal-welfare guidelines.
They believed that testing any product on animal is considered unethical and unnecessary and should be banned. The Body Shop can proudly say that they do not test their cosmetics products on animal and they would never will nor they support others to do so. Therefore their product can be used by everybody especially to those who are particular in saving the animals. Nowadays, the society is becoming more and more aware with products that are tested on animals and those that are not. Most of the, The Body Shop products are also 100% vegetarian as well as using plant extracts instead of chemicals.
All this, will help increase the sales as the society are now heading to the green era, which sees lesser chemicals and are going into more environmental products. One other way The Body Shop practices CSR in their business is by saving the planet by reducing their impact on environment. This can be achieve is by reducing their carbon footprint, thus reducing the energy and wastages that they produce. These changes are implemented not only in one country but they are trying to make this worldwide where all of their other stores would do the same thing that is protecting the environment.
The suppliers, franchisees, colleagues and customers have given them a positive feedback on their effort on protecting the planet. Since 2010, The Body Shop has set targets that they would want to achieve by 2020. They are planning, by that time they are able to reduce their CO2 inputs from their activities by 50% especially from electricity as it is the major contributor CO2 emissions. Also to reduce the CO2 emissions in their gas and their fuel consumptions in transporting their products from distribution centre to other stores. Not only would they want to reduce their electricity but also they want to reduce their waste to 50%.
This include all kind of wastage from the production activities but for this to succeed they would need the help of the consumers as well to recycle the packages after they finish using their product. Therefore, they introduce using recycled paper bags instead of plastic bags. Last but not least they hope to reduce their water consumption as it is a scarce resource whereby it would not last long enough for the future if people keep wasting their water consumption, all the reason more why The Body Shop would want to save their water consumption.
Even though this just looks like The Body Shop is trying to make the world a better place to live in not just by cruelty-free product and also saving the planet for future children and grandchildren to live as how the dads and the grandfathers has preserve the planet for us but these activities and many more can help increase their company image and therefore increase their sales. In conclusion, corporate social responsibility is an important practice among companies today. Many companies are very successful in various developing countries but at the same time, these countries are also facing many challenges such as poverty and corruption.
Hence, all companies should work together and apply the concept of corporate social responsibility to make the society better than before. The reason CSR is very important in today’s world are as follows. Firstly, it helps the companies to understand their roles in developing a society. Furthermore, corporate social responsibility helps to create awareness among those who want to start running a business, corporate bodies and the people. It is important to remember that the growth of a country absolutely depends on the growth of the society and it is through that it will generate profit in a company.