Corporate Social Responsibility

Corporate social responsibility focuses on what an organization does that affects the society in
which it exists. CSR refers to a set of policies designed to demonstrate the commitment of a
business to the well-being of the society and others by taking responsibility for the impact of
business decisions on all stakeholders. CSR commits a business to a way of operating that goes
beyond what is required by law -A socially responsible firm that operates in an ethical way has
concern for the environment and undertakes philanthropic activity on behalf of the disadvantaged
in the society.
Social responsibility programmes
Making sure the employees receive fair treatment, fair wages, access to health and safety at
work, fund training programmes
Using environmentally friendly production methods
Championing community programmes like infrastructural development
Providing quality goods and services
Treating other business partners fairly i.e embracing a fair and responsible approach to
procuring and delivering goods and services
Arguments for Social Responsibility
1. The creation of a better social environment benefits both society and business.
2. To comply with the law
3. Social involvement creates a favorable image for the company.
4. Businesses have the resources to help solve social problems.
5. Businesses and society are interdependent.
6. Social involvement discourages additional government intervention.
7. it reduces the risk of negative publicity
8. To respond to the demands from stakeholders, particularly customers and pressure groups
Arguments against Social Responsibility
1. The primary task of business is to maximize profit by concentrating on commercial activities.
2. Social involvement results in higher prices to customers.
3. Company directors have a duty to shareholders.
4. Businesses lack the social skills to deal with the problems of society.
However, CSR is not just related to environment. For eg:
CSR and accounting practices:
If the business is deliberately window dressing it’s financial statements in order to attract more
investors and lenders into the business, the business is working against the law and CSR policy
of accounting.
CSR and the payment of illegal incentives:
Giving bribes to government officials, managers or directors is considered to be socially
irresponsible and is against the policy of CSR.
Social Auditing:
This involves a business formally reviewing and accounting for the impact on society of its
operations. It can include its impact on the environment, its effect on the local community, its
attitude to such things as human rights and its attitude to stakeholders including employees. The
business is now accounting to non-financial aspects of the business and deals with social matters
that are not necessarily measured in financial terms
Purpose of Social Auditing:
• The purpose of conducting Social Audit is not to find fault with the individual businesses
but to assess the performance in terms of social, environmental and community goals of
the organization.
• It is a way of measuring the extent to which an organization lives up to the shared values
and objectives it has committed itself to.
• It provides an assessment of the impact of an organization's non-financial objective
through systematic and regular monitoring, based on the views of its stakeholders.

Advantages of Social Auditing:

• It becomes a way to measure and evaluate corporate social responsibility to take
mitigation steps against related risks, such as risks to its reputation.
• Management can identify gaps between performance and corporate social responsibility
objectives.
• Companies can develop measures and set targets to improve corporate social
performance, either from improving past performance or benchmarking with the
industry’s best-performing companies.
• Implementing the auditors’ recommended improvements helps the company meet
stakeholder expectations, enabling it to build a good relationship with them in the long
term.
• Publishing audit reports leads to better information transparency and accountability,
improving the company’s public image.
• Improved transparency and accountability towards social responsibility attract more
business customers and consumers as they increasingly make their purchasing decisions
based on ethical factors.
 • From the audit results, the company can promote and develop a socially responsible
culture for everyone in the company, for example, by prioritizing customer privacy,
which supports a better reputation.

Disadvantages of Social Auditing:

• Auditors’ access to data and information, while crucial, is often limited because they may
face resistance from management or key people who do not want to be exposed
negatively.
• Audit results can be biased if the audit is not examined independently because often,
companies are more likely to report positive results just to increase positive publicity
without actually intending to adopt a socially responsible approach.
• Auditing consumes resources where companies have to spend a lot of time and money to
produce a comprehensive social audit.
• Social responsibility may not be the only reason consumers buy company products, or
suppliers sell inputs to companies, but for price reasons.

The role of Pressure Groups

These are also stakeholders to the businesses. Pressure groups refers to an organisation created
by people with a common interest or aim who put pressure on business and government to
change policies so that an objective is achieved. They include organisations such as the Friends
of the Earth that have been set up to highlight and sometimes oppose developments that may
cause changes to the environment.
International Examples of Pressure Groups
Friends of the Earth
Green Peace: campaigns for greater environmental protection by both businesses adopting
green strategies and government passing tighter anti-pollution laws
Fair-trade Foundation: aims to achieve a better deal for agricultural producers in low income
countries
Jubilee 2000: campaigns western governments to reduce or eliminate the debt on developing
countries
Pressure groups want changes to be made in three important areas:
•businesses to change policies so that are causing damage to the environment
•consumers to not buy from those businesses who are not acting in a socially responsible way
and to increase the sales of those businesses which have adopted appropriate policies.
•governments to change their policies and to pass laws supporting the aims of the group

The ways in which Pressure Groups use to achieve their objectives

 Publicity or campaigns through media i.e frequent press releases
Demonstrations and meetings
consumer boycotts: the consumers will stop buying a particular product for a long period of
time
lobbying the government to change the law or to put in place laws

External Influences from a Demographic Change

This refers to a change in the human population in terms of age, gender, education and ethnicity
etc. This can be on either a local level, national level or global level.
Population size is influenced by 4 factors:

1. Birth rate (BR)

2. Death rate (DR)
3. Infant mortality rate (IMR)
4. Life expectancy (LE)
On the other hand, population structure is affected by a myriad of factors. For example, it is
affected by:

• migration patterns
• government policies
• the changing status of children
• a shift in cultural values (including the role of women in the workforce)
• different levels of health and education
• access to contraception

Ethnicity is related to races or large groups of people who have the same customs, religion,
origin etc. The demography of a country is important to businesses because it can help determine
the best way to target products and marketing. It also has impact on manpower planning and
other workforce issues
Two key demographic changes in the UK that impact on many businesses are:
Ageing Population:
This means that now more people are dependent on social benefits which puts a pressure on the
taxpayers of the society because to cover the cost of social benefits of these elderly people, the
state will implement higher taxes on taxpayers.
The effects of this demographic change is apparent in 2 ways:
Change in the patterns of demand: since there is an increase in the ageing population, now the
businesses will try to make such products which will satisfy the ageing population.
Age structure of workforce
High levels of net immigration:
Some possible business implications are:
Higher costs of social benefits again, the burden will be on the taxpayers but there will be an
increase in the demand of public services (e.g. education, health, housing)
Increase in size of labor force – potentially keeping wage rates low since the immigrants might
also be willing to work at a very low wage rate too. Although this is against CSR If the business
is not giving even the minimum wage rate to the immigrant employees.
Patterns of employment
Changing patterns of employment are one of the social constraints on the activities of business.
For many businesses, labor is still a crucial factor of production and probably the greatest single
expense. The main features of changing employment patterns are:
• Transfer of labor from secondary to tertiary sector since the labor is now more demanded
in tertiary sector as compared to secondary because due to industrialization and
modernization of these industries, the workers are being replaced by automated hi-tech
machineries.
• Increase in temporary and flexible employment contracts in order to increase the
flexibility of the workforce due to globalization, to reduce the work pressure on full-time
employees and to prevent the high cost of hiring full-time employees.
• Increase in part time employment
• Increasing pressure on pensions and healthcare services due to an ageing population
• Increase in student employment this is also called a learner employment and mostly
companies like McDonalds, try to hire these employees on a minimum wage rate (on a
part-time basis)
• Increase in number of women staying full time jobs this will lead to lower birth rates and
smaller families but employing more women gives businesses a wider choice of staff and
improved motivation amongst workers. Also, this gives access to higher quality and more
qualified workforce but costs increase when they take maternity leaves
• Businesses which are able to quickly adapt to changing environments are able to survive
successfully
• Having a younger workforce:
o cheaper
o more flexible
o geographically mobile
o innovative
o technologically skilled
o keep changing jobs frequently
o require greater training
• Having an older workforce:
o more loyal
 o greater experience
o hard-working
o demand higher wages
o reluctant to change
How demographic changes are used by business:
• For marketing strategies : having demographic information helps them to understand
their target audience. It is a powerful marketing tool that helps companies assess the
market’s size and allows them to segment it by factors like age, sex, income, cultural
habits and buying behavior.
• For Production of good and services: The business will try to make goods for those group
of consumers who are willing to buy the products of the business hence for eg. if the
population in any country of bachelors or youth is higher, the construction companies
will be keener towards constructing studio apartments rather than constructing apartments
which have facilities for elderly people.
• For planning the Workforce: In case of better education facilities and training of
employees, the businesses will plan their workforce with higher wage expenses since
those employees will be well trained and flexible enough to demand higher wage and in
case of increase in immigrants or high population with low access to education, the
overall expense of business’s workforce will be reduced so now the business can hire
more people in less wage expense.