CORPORATE SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE

MARIELLE DIBELLA BU 201 B DR. JACK WOODILLA March 15, 2006

EXECUTIVE SUMMARY
The theory of corporate social responsibility encourages corporations to take notice not only of the economic and financial dealings in a company, but also the social and environmental consequences a business places on its shareholders and society. Businesses have the duty to generate profit while remaining environmentally and socially conscientious. Corporations follow certain leading practices to balance financial performance with social responsibility. The Neoclassical Model of corporate social responsibility advises companies to seek the maximum profits while obeying a moral minimum. Another common practice a company may use is assimilating corporate social responsibility into its marketing strategies. Consumers may purchase certain products because they are led to believe they are supporting social causes. Lastly, the superior model of sustainable development states that businesses have the moral responsibility to use resources at appropriate rates and compensate ecosystems for any losses incurred. A company has the duty to ensure its activities be ecologically sustainable. Corporations, such as Home Depot and Minnesota Mining & Manufacturing, are leading proactive advocates for recognizing the value of corporate social responsibility within a business. These two companies strive to maintain the balance between financial success and environmentally responsible practices. Both companies follow the model of sustainable development in their corporate social practices. Minnesota Mining & Manufacturing works to reduce volatile air emissions through pollution prevention programs, pollution control equipment, and the development of solventless technologies. Home Depot has introduced a line of building materials produced from wheat straw to be used as a substitute for tropical hardwoods that are diminishing in number. Both corporations seek to improve the environment while generating profit for their business. In addition, both participate in community outreach programs such as building and refurbishing playgrounds and providing educational contributions. The companies differed in the fact that 3M focused more on environmental issues such as air quality and greenhouse emissions whereas Home Depot concentrates more on forest conservation. All of these issues encompass environmental matters, however, and are indeed equally important. These corporate social practices have provided a strong background and basis for recommendations our company will need to further our participation in corporate social responsibility. The company should focus on improving ways to enhance the manufacturing process of our goods so as to improve the environment and reduce pollution as much as possible. It should play an active role in the community and sponsor projects for the betterment of society and those less fortunate. Our company should make generous contributions to society through educational and environmental giving. By promoting and partaking in environmental conservation, the corporation will profit in the long run. Our company will continue to thrive financially and our presence as a leading advocate for social responsibility will be known worldwide.

Introduction In recent decades a great deal of time and attention has been devoted to the theory of corporate social responsibility. This premise has deemed it necessary to take notice not only of the economic and financial dealings in a company, but also the social and environmental consequences a business places on its shareholders and society. It used to be said that the only social responsibility a company had was the promise of profit. Businesses have realized this corporate flaw and struggle to balance financial performance with social and environmental responsibility. Corporations such as Home Depot and Minnesota Mining & Manufacturing are leading proactive advocates for recognizing the value of corporate social responsibility within a business. These two companies strive to maintain the balance between financial success and environmentally responsible practices. Leading Practices Leading practices for social responsibility encompass morally, ethically, and environmentally just aspects. The neo-classical approach emerged as an improved and further developed model of the classical model. According to DesJardins, the classical model of social responsibility denies that businesses have any direct environmental responsibility. The classical model did advise companies to increase profits only so long as there was no deception or fraud. However, this did not hold corporations environmentally responsible for a great deal. According to DesJardins, the neoclassical model of corporate social responsibilityholds that corporations ought to seek profits while obeying a moral minimum. This practice seeks to overcome the obvious ethical deficiencies of the classical view (DesJardins, 1998). The moral minimum is hoped to become part of customary business practice and force restraints on highpowered managers. According to DesJardins, the environmental challenge is to develop an account of environmental responsibilities...to a wide enough rangeyet plausibly within a moral minimum to still motivate business compliance. This practice becomes a way to increase profit by acting socially responsible. Another common practice some companies use is assimilating corporate social responsibility into their marketing strategies (McWilliams & Siegel, 2000). Consumers may purchase certain products because they are led to believe they are supporting social causes. This in turn leads to a heightened financial performance for the corporation through greater consumer profit. In addition, many companies will try to establish a socially responsible corporate image (McWilliams & Siegel, 2000). This technique will also cause consumers to believe they are directly or indirectly supporting a cause (McWilliams & Siegel, 2000). According to DesJardins, an even superior model called sustainable development exists that says business has a moral responsibility to insure that its activities be ecologically sustainable. This theory states the moral minimum must also include an ecological sustainability. It seeks to unite natural ecological laws with moral limits placed on business activity. Businesses have the duty to use resources at appropriate rates and compensate ecosystems for the loss of productive capacity caused by its activity (DesJardins, 1998). This knowledge of social environmental problems helps the corporation in the long run. Conclusion Corporations have the task of performing a balancing act between social responsibility and financial performance. A corporations main goal is usually to produce substantial profit to push the company to the top of competition. To achieve this position, however, moral and ethical decisions must be made that follow certain practices, such as the ones described above. If a corporation obeys these social responsibilities, moral choices will yield significant financial profit in the long run. Company 1: Minnesota Mining & Manufacturing The successful worldwide company, Minnesota Mining & Manufacturing, has managed to maintain leading global market positions for each of its seven businesses, while upholding its commitment to the leading social practice of sustainable development. According

to mmm.com, the company actively contributes to this model through environmental protection, social responsibility, and economic progress. Minnesota Mining & Manufacturing created an Environmental, Health, and Safety Management System responsible for setting targets to provide continuous environmental improvement. According to mmm.com, the company has been successful in reducing volatile organic air emissions from using solvents in manufacturing. These reductions are made possible through pollution prevention programs, pollution control equipment, and development of solventless technologies. Minnesota Mining & Manufacturing has also taken voluntary, responsible action to reduce greenhouse gas emissions (mmm.com, 2006). The reduction goals are achieved through improvements in the manufacturing process and pollution control equipment. In addition, 3M continually seeks ways to decrease the production of waste, reuse it in other areas, and look for other manufacturers who may be able to use the waste in their products. Minnesota Mining & Manufacturing also works to enhance and protect biodiversity out of respect for the environment. According to mmm.com, the 3M Foundation has donated over $5.5 million to The Nature Conservancy to preserve habitat in the United States and Brazil. This partnership, as well as on-site facility preservation, works to safeguard the worlds vital natural resources. Community outreach is a significant aspect of 3Ms sustainable strategy as well. 3M donates to the community through educational contributions, environmental giving, and various grants and projects. Company 2: Home Depot The thriving and lucrative company, Home Depot, strives to remain profitable while upholding a level of environmental and communal sustainability. Home Depot understands the importance of conserving the environment and abides by a set series of principles to guide the companys actions. According to Homedepot.com, the corporation is committed to improving the environment by selling products that are manufactured, packaged and labeled in a responsible manner. Home Depot obeys all environmental laws, as well as works to protect natural resources by using energy and water efficiently. Home Depot is dedicated to recycle in all operations and uses recycled materials for shopping bags, signage, and office supplies (Homedepot.com, 2006). Home Depot has also taken a stand to preserve endangered timber areas. According to Homedepot.com, the company has pledged to give preference to wood that has come from forests managed in a responsible way and to eliminate wood purchases from endangered regions of the world. In addition, Home Depot introduced a line of building materials produced from wheat straw to be used as a substitute for tropical hardwoods that are diminishing in number. Home Depot also contributes to the community through philanthropic giving such as building and refurbishing playgrounds, ensuring the safety and accessibility of community gathering spaces and building and refurbishing affordable and transitional housing (Homdepot.com, 2006). Home Depot strives to build community and remain socially responsible while seeking superior profits year to year. Comparison of 3M and Home Depot Minnesota Mining & Manufacturing and Home Depot both continually work to ensure the sustainability of the environment as well as give back to the community through various contributions and projects. Both companies recognize the importance of recycling products and waste back to the environment to be used in other operations and areas. Neither company uses the leading practice of assimilating corporate social responsibility into marketing strategies, as described earlier. Both partake in the sustainable development model that states the moral minimum must include ecological sustainability. This is achieved by Home Depot through the preservation of endangered timber areas, and by 3M through striving to reduce greenhouse gas emissions as a result of creating improvements in the manufacturing process. 3M and Home Depot differ in their specific practices to conserve the environment; however, all the methods used contribute to sustaining the environment and paving the way towards superior social responsibility in the corporate world.

Conclusion Corporations such Home Depot and 3M have the responsibility and duty to maintain a significant level of social and environmental responsibility while enhancing the companys financial performance. By promoting and partaking in environmental conservation, the company profits in the long run. Corporations have realized conserving the environment is a vital aspect of the well-being of a company in the long run. If all resources are used up and destroyed, future success is not feasible. Home Depot and Minnesota Mining & Manufacturing are on the same level as far as leading the world in socially and environmentally responsible practices. Both partake in ways to better the environment, such as constant product recycling and conservation of natural resources. 3M focuses more on reducing greenhouse gases and harmful air emissions, probably due to the fact it is responsible for a certain amount of pollution in the environment. These corporate social practices have provided a strong background and basis for recommendations our company will need to further our participation in corporate social responsibility. The company should focus on improving ways to better the manufacturing process of our goods so as to reduce air pollution as much as possible. It should also play an active role in the community and sponsor projects for the betterment of society and those less fortunate. The company will continue to thrive financially and our presence as a leading advocate for social responsibility will be known worldwide. Annotated Bibliography Corporate Responsibility. (2006). The Home Depot. Retrieved March 12, 2006. http://corporate.homedepot.com From this website I was able to see how Home Depot remains profitable while staying committed to environmental sustainability. DesJardins, J. (1998). Corporate environmental responsibility. Journal of Business Ethics, 17(8), 825. Retrieved February 4, 2006, from ProQuest database. This article allowed me to see the neoclassical method of increasing corporate social responsibility. This practice is used by some companies today and focuses on the moral minimum companies are held accountable for. This article also allowed me to see the sustainable development model that a few corporations use. This practice focuses on not only moral responsibilities, but also, and more importantly, ecological issues. Environmental, Social and Economic Sustainability. (2006). Minnesota Mining & Manufacturing. Retrieved March 12, 2006. http://solutions.3m.com/wps From this website, I was able to read about the leading practices Minnesota Mining & Manufacturing uses to maintain the balance between financial success and social and environmental responsibility. McWilliams, A. & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal, 21(5), 603. Retrieved February 4, 2006 from ProQuest database. This article focused on the business method of using marketing strategies to simulate social responsibility to consumers. This technique causes consumers to believe they are indirectly helping a social cause.