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“A business’s obligation to follow goals that are good for both organization and society in the long-term, and are not required by law.” Corporate Social Responsibility The term “corporate social responsibility” came in to common use in the early 1970s. It means the duty of an organization towards society in order to prove itself responsible about its actions and their effects on environment, community and external stakeholders. It means that an organization is responsible for all its action towards the people who are affected by its actions and processes.
Therefore, corporate social responsibility can be defined as: “Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business.” The Socioeconomic View
The Socioeconomic view stated that it is the responsibility of managers and all organization s to take care of public interests as well as their profits. Each organization should be responsible for all its actions which may harm or benefit community and should take actions to stop any malpractices in its operations, finance, marketing and human resource departments.
Business organizations should not only act for their own profit but also for the welfare of community. They should take an active part in happenings in the society and should perform such actions which can improve the political, economical, social and environmental conditions of the society. In short, corporate social responsibility makes an organization to play its role in the improvement and welfare of society. Arguments For and Against Corporate Social Responsibility
According to Classical view of social responsibility of an organization, the management and managers of an organization are responsible for maximizing organizational profits only.
It is not their duty to take care of public interest. The only purpose of establishing a business is to generate profits and therefore, he only duty of managers is to maximize profits and reduce costs of doing business. Given are some of the arguments for and against corporate social responsibility:
1-Corporations as Moral Agents Business organizations are an important part of any society and play an important role in determining the economic and social condition of any society. As organizations are considered as one of the major factors affecting economy of a country, they should be responsible of what they are giving to the society. They generate profits by selling their products and services to customers and, therefore, should be responsible for any good or bad effects of their actions and products on consumers.
On the other hand, the proponents of this view state that organizations should be responsible only for generating profits. As the owners or investors are also a part of community, the organization performs its duty by maximizing the wealth of their shareholders. The sole purpose of an organization is not to serve society by getting involved in welfare activities. The organization serves the community by making products and rendering services. Therefore, there is no other duty of an organization towards society.
2-Social Responsibility and Economic Performance
The advocates of corporate social responsibility state that by getting involved in community services, an organization gets a chance to improve its revenues. The social welfare activities improve the good will of the organization and make its corporate image better than its competitors. Customers prefer to buy products and services from an organization which proves it to be socially responsible.
Those who say that organization should not be socially responsible state that such activities increase the cost of doing business. As one of the major goals of a business is to reduce the costs, such practices are in opposition with benefit of business owners.
For example, investing in a production plant which emits less carbon to the environment needs higher expenses as compared to the normal, cheap plant but is dangerous for environment is a question for managers.
3-Social Responsibility and Ethics
Organizations should not be involved in any kind of practices which may give rise to the feeling of inequity and unfair actions in society. Discrimination based on gender, race and nationality is one major action which is considered as the social responsibility of organizations. When giving promotions to employees, every person should be given an equal chance to advance in the career and should be treated fairly.
The proponents of corporate social responsibility also admit the fact that the organizational practices should be ethical in nature but to a limited extent. The practices should not harm anyone but should place organizational interest before the community interest.
4-Social Responsibility and Environment A corporation must produce goods and services that are beneficial to society while making sure that the processes of production also avoid damage, such as pollution. The initiatives such as green management and environment friendly products make it clear that customers want to purchase the products which are safe for them and do not damage environment. They also prefer those organizations which prove that they are not damaging the natural environment of earth in any case. On the other hand, the proponents of the view state that saving environment may increase the cost of their business and will make the organization less efficient in a number of its practices. They put the question of buying one kind of machinery over the other which is environment friendly but incurs huge costs.
Conclusion In order to get better financial performance and good will, it’s better for an organization to realize its corporate social responsibility and manage all its operations in an ethical way. Only an improved society can lead to an improved business which is in favor of both internal and external stakeholders of an organization. More and more organizations are taking serious steps to get involved in socially responsible actions and consider it profitable in the long as well as short run.
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