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Csr - a Key Element for Organizational Success

Essay by   •  March 27, 2018  •  Research Paper  •  1,868 Words (8 Pages)  •  898 Views

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CSR: A key element for organizational success

Introduction

In recent decades, Corporate Social Responsibility (CSR) has become increasingly popular. It is used to define the commitment of business to integrate environmental and social concerns in the operation strategy, and behave ethically to improve the welfare of the whole society (Dahlsrud, 2008). Corporates nowadays are believed to have the responsibility for all their stakeholders beyond that of perusing profit in economical dimension (Barnett 2007). More importantly, CSR is increasingly regarded as a crucial factor contributing to a corporate success in the ever increasingly competitive business world of today (Junquera and Fernández, 2012). This article is aimed to discuss the importance of CSR in company long-term strategy despite some arguments in both academic as well as business communities, and illustrate how it could potentially benefit the business enterprise by introducing and analyzing some real business cases.

CSR has become a topic arising wider concern, one can seldom pick up a news or articles without encountering the discussions about the issues. Additionally, with the advance of society, the indivisibility of business and society has been gradually realized by public and the idea that isolating economic and social objectives is unrealistic has been accepted by the mainstream value. As the aggravation of a series of global pressing issues such as climate change, environmental pollution, food safety and human right violation, the action of companies on sustainable development is receiving higher degree of concern. Thus, higher demand, as never before, has been put forward on companies in respect of the responsibility for all of their stakeholders and the contribution they devote to the social well-being and sustainability. Furthermore, being socially responsible is believed as a potential approach for corporates to build competitive advantage, earn reputation, and expand market shares. Therefore, growing number of business enterprises choose to fling themselves into CSR initiatives construction, attempting to establish effective win-win model for both the society and themselves.  

However, the dispute about whether performing social responsibility could generate tangible benefit for the company has been around for long. Plenty of researches have been conducted to ascertain the relationship between companies’ CSR and their financial performance. Whereas many of those researches are meeting the difficulties in defining and measuring social responsibility, and great variance emerges when different assessing standards are adopted.

One of the representative studies was conducted by Samy, Odemilin and Bampton (2010), who attempted to exam the trends of five years earnings per share (EPS) of 20 selected enterprises in the UK to find the association with companies’ CSR reporting. EPS was used in this study, as its effectiveness in providing important information about company’s operation for both external investors and internal managers. Besides, Global Reporting Initiative (GRI) guidelines are adopted as a standard to measure companies’ CSR performance, which was assessed mainly from six dimensions: social, environmental, economic, society, product responsibility and human rights. Unfortunately, the result indicated merely a weak relationship between EPS and CSR, which implied that corporate social responsibility might not serve as an effective instrument in firms’ profit generation as generally believed. Similar results were received in other studies. However, these results in academic circles are still unable to explain a host of successful cases in the real business world.

In essence, the relationship between responsibility and performance is more than one that cannot be reflected by correlation based detection. Carroll and Shabana (2010) suggest that the influence of CSR initiatives implemented by firms should not be assessed in a narrow view, which mainly focuses on immediate cost saving and risk reduction. In contrast, the broad view may be more favorable as it acknowledges CSR’s effect on company performance in both direct and indirect way, by emphasizing its positive role in enhancing firm’s competitive advantage and creating win-win relationships with the stakeholders (Kurucz, Colbert and Wheeler, 2008).

In addition, it is contended that effective CSR initiatives depend on appropriate CSR strategy (Smith, 2005), where high coordination need to be constructed to ensure that initiatives are mutually consistent and reinforcing with the firm’s business values and purpose. In reality, many companies fail to optimum the return of their efforts in social responsibility due to incoherence and disparity of their CSR strategy (Rangan, Chase and Karim, 2015). It is also believed that successful CSR initiatives are usually those emphasizing on interactions with stakeholders (e.g., customers, employees etc.) and improving stakeholder’s relationship, which underlines the important role of stakeholder’s reaction on value creation. To achieve this, Bhattacharya (2016) bring forward three approaches in psychological level, he points out the initiatives should be aware of and fully understand by stakeholders (understanding) and must have the ability to bring benefits to them in either functional form or psychological form (usefulness). With “understanding” and “usefulness” combining, the “unity” emerges and creates a sense of belonging between stakeholders and companies. When the three factors work coordinately, both corporates and society could benefit to the greatest degree from the CSR. By applying those methods appropriately, companies would be able to gain optimal returns from the efforts.

With focus on some real business cases, the significance of implementing appropriate CSR strategies for companies would be better verified. Unilever is definitely one of successful business, awarded by promotion and pursuit of social goals through implementing these approaches. The corporate has continued to implement its CSR initiative in social sustainability by driving positive change and sustainable growth, which in turn, greatly contributes to its development. In 2011, Unilever launched its Sustainable Living Plan (USLP), which for the first time drew the blueprint of enterprise’s plan on self-sustainable development as well as its vision to increase positive social impacts. The plan includes three main goals:

  • enhancing health and well-being for more than one billion by 2020
  • improving Livelihoods for millions by 2020
  • reducing environmental impact by half by 2030

Unilever also articulates its simple and clear purpose — “to make sustainable living commonplace”, which conveys strong aspirations of the company on social responsibility (Sustainable Growth, 2017). With the belief that profitability growth should be responsible growth, its spirit is embedded in brands to customers, governance system, benefit-led innovations in R&D and also collaboration with the partners from government to NGOs. They attend to every stage of their products life-cycle with sustainable standard, by focusing not only self-operations but also those of their suppliers and distributors in product chains. The company’s strategies are holistic and are successfully communicated to the customers by demonstrating authenticity, transparency and credibility. On the other hand, Unilever tris to imbue all its brands with purpose. Through the brands, the motives of the company are better transmitted to the customers. Domestos, for example, is a brand of Unilever for household toilet cleaning, which is endowed with the mission to enhance overall health and hygiene by combatting and alleviating remaining issues in underdeveloped locations of open defections and providing access to toilets for families and communities in need. The goal of Unilever is helping 25 million access to toilets by 2020. Close coherence and consistency can be seen between the initiatives and its business purpose. It goes without saying that more toilets will contribute to Domestos sales, but that does not detract from the social benefit of improving hygiene, reducing disease and the human dignity that brought by toilets availability. For this reason, Domestos becomes the fastest growing Unilever brands among all the purpose products. According to the statistics, more than half of company’s revenues are generated from markets in developing countries (e.g., Africa) and Unilever’s share price has virtually doubled since USLP was launched (Bhattacharya, 2016). Unilever Sustainable Living Plan has been proved resultful in adding strategic advantage to the company and enabling it to stand out from its competitors. Furthermore, Unilever’s socially responsible action is also believed to have potentially promote the loyalty of its employees. A recent survey shows that USLP is greatly supported by Unilever employees, and nearly 80% of them express their appreciation to work in such a company doing “great good”. Needless to say, company’s CSR could to some extent increase employees’ sense of satisfaction and enhance interior harmonization, which would furtherly elevate employee motivation and improve company’s business performance.

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