ASIGNMENT 1: SHORT INDIVIDUAL ESSAY

DANG NGUYEN QUYNH GIANG

S3836465
LECTURER: Hoa Huynh Thi Ngoc
WORDS: 1095
The purpose of this paper is to determine how CSR is beneficial for both international business
and society and give some practical evidence about using CSR to solve the conflicts between
them. From this essay, conclusions regarding CSR practices will be made.

Yet there is no clear definition concerning the exact meaning of Corporate Social Responsibility
(CSR), while there are several relative ideas that have been implied. According to Carroll (1979,
p.500), CSR comprises ‘the economic, legal, ethical, and discretionary expectations that society
has of organizations at a given point in time’. This definition is considered the first unified
definition of CSR by combining the view from other researchers and could be applied under any
context (Agudelo, Jóhannsdóttir & Davídsdóttir, 2019). These four categories build a foundation
and characterize the businesses’ responsibilities to the society in which they are operating their
business (Carroll, 2016).

Due to the advent of globalization recently, CSR has gained increased interest and is applied in
the context of international business due to its benefits. Campbell, Eden, and Miller (2011)
suggested that if a foreign affiliate invests in CSR actions, host-country stakeholders would have
expectations of CSR commitment, leading to the development of a reputation for socially
responsible behavior. A good reputation is argued to be linked with the high expectation of
buyers for the quality of goods and services (Rhee & Haunschild, 2006). Therefore, firms with a
public dedication to ethics often perform better on financial measures and gain some tangible
benefits such as cost-saving, or developing human capital (Gupta & Sharma, 2009).
Additionally, when using CSR, the foreign firms may customize their products and services,
meeting not only the demands of customers but also the society's needs for sustainable
development, leading to the differentiation of their products in the market (McWilliams &
Siegel, 2001). One popular firm using CSR as a tool for its business is a Korean MNE - LG
Electronics which is famous for its social responsibility in Indonesia. One of the most well-
known programs called ‘LG Love School’, which is used to build infrastructure for IT education
in underdeveloped regions by replacing old IT equipment, the company aims to acquire the local
workforce in the long term since local hiring is hard in high-tech industries than low-tech
industries (Park et al, 2015). By conducting a variety of social campaigns, LG Electrics was the
first Korean company to win the Indonesia Investment Award and being the most used brand in
Indonesia (Fadillah, 2010).
Besides the wide range of benefits that CSR brings for business, the main role is supposed to
contribute to the well-being of society. It is widely believed that the benefits toward the local
communities or societies are reflected through the companies’ activities, environment-
friendliness, and the care for employees. Many managers believe that creating jobs and
minimizing the negative influence from the production are some practical values to the society
(Pedersen, 2009). By using CSR, the cost of production of a company may fall, leading to the
potential decrease in price, from which customers may also benefit (Park, 2016). Moreover,
training programs for employees, sometimes for people from outside, have a significant
advantage for the community which could improve locals’ knowledge (KsiężaK, 2016). Finally,
protecting the natural environment by reducing CO2 emission and decreasing the damage of
companies’ activities is the top priority of CSR actions. For instance, Sharp, which is the
multinational firm that designs and manufactures electronic products, has developed an ‘Eco-
Positive Strategy’ to reduce greenhouse gases (Sharp, 2012). More specifically, Sharp’s CSR
comprises the creation of green products and services with emission reductions and the
development of a green factory. In 2011, by replacing mercury lamps, establishing periodic
emission tests, and altering closed roofs into transparent ones, electricity and diesel oil usage
were reduced by 2.47 and 0.092 kg, respectively (Park, 2016). As a result, Sharp could achieve
its goal as a ‘Green factory’ in Indonesia in 2011 (Sharp, 2012).

Friction between the strategy of a company and a lifetime of the community is observed in many
parts of the world. The community seems to be an offensive party as it is often identified with
the exploited while the corporation can be seen as a defensive party since it has economic power
and causes conflicts (Dulkiah et al, 2019). They acknowledged that profits were more important
than society’s value. Coca-Cola, for instance, had been involved in CSR conflicts in Indonesia,
which led to the development of a detailed and clear CSR report. In 2000, the company expanded
its operation in Plachimada, where local citizens accused them of causing water scarcity and
water pollution by discharging wastewater into the river and field surrounding (Rajesh, 2019),
leading to the long legal process against the Indian government that Coca-Cola had to face at that
time. It suffered a significant loss in brand reputation and consumer truth, causing a reduction in
sales of 40% in 2 weeks after the 2003 CSE report was released in India (Vedwan, 2008). This
published friction did not only damage the brand in India but also caught the attention of the
consumers in the US, in particular, 10 universities temporarily stopped selling their products on
their campuses, implying huge damage to Coca-Cola (Warner, 2005). This problem suggests,
therefore, that a priority component in the corporate strategy should be the most detailed and
comprehensive attention to the local societies by involving them in the project decisions
(Fontana, Merino & Baca, 2015). Thus, after being aware of its mistakes, Coca-Cola established
several measures to control the controversy. In 2008, it published its first environmental
performance report in operation in India and created the Coca-Cola Foundation which tried to
solve the water problem with the locals and NGOs (Torres et al, 2012). Additionally, by
implementing a water stewardship program, pledging itself to reduce the operational water
footprint, and compensating the water used in its products through various projects, Coca-Cola
tried to regain Indian consumers’ trust (Torres et al, 2012). The conflict seems to influence the
corporation on deciding to implement water management which is one of its core elements of
CSR policies and established a wide range of proactive initiatives to address its operational
impact on the environment. Nowadays, Coca-Cola can be seen as a corporation that has become
a model for its industry. Hence, when conflicts between business and community occur, it is
better handled if the company includes its stakeholder engagement in its strategy.

Overall, CSR plays a significant role in international business and is an extreme investment tool
that creates a strong bond connection toward the society’s morals, expectations, and values.
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https://www.diva-portal.org/smash/get/diva2:353800/fulltext02