“People want to use services from companies that believe in something beyond simply maximizing profits.” (Mark Zuckerberg) An increasing number of companies in this day and age is largely focusing on catering the external stakeholders’ needs and expectations, as well as being conscious about ‘ethical’: social and environmental issues. More and more companies are proceeding through the “CSR Strategies Continuum” and changing their degree of social responsibility from denying and defencing the society’s requirements to the proaction stage, where they take the initiative and see the CSR as a ‘potent source of innovation and competitive advantage.’ ( Harvard Business Review, 2006) However, it is also the case that exactly the ethical concerns have been the primary force to the CSR business approach. In this essay the reasons for the ethical-strategic behaviour will be discussed. To do so I will analyse both business approaches and give my opinion on it.
For the majority of companies, accepting and establishing CSR model was the main objective, as it was a potential way to achieve higher profits and develop a sustainable long-term strategy. There have been introduced 4 main arguments to benefit from the CSR: ‘moral obligations, sustainability, license to operate and reputation.’(Harvard Business Review, 2006) Let me explain and show 3 of these justifications in detail.
First of all, it is the reputation that will be specially treated by the company, as it ‘satisfies the external audience’ and creates a ‘company’s image, strengthen its brand and raise the value of stock.’(Harvard Business Review, 2006). Even though it involves lots of aspects such as good working conditions, transparency in the providing of information where the item was produced, fairness in the workers’ paying or launching the Fair-trade labelling system to build a strong brand, a firm with an excellent reputation may find it easier to fix its position on the market and develop customer’s connection to the brand itself, as ’Customers are attracted to firms they can feel good about’ (“The Business Book”, 2014). Such a strong customers’ bond was developed by Starbucks, when they launched the sustainable production of coffee or supported ‘Ethos Water, which provides clean water to more than a billion people’. (www.business2community.com, accessed 04.07.18)
Secondly, the principle of sustainability is considered to ‘secure long-term economic performance by avoiding environmentally wasteful or socially detrimental short-term behaviour.’ McDonalds can be a great example of the company that implemented this strategic approach by changing the wrapping paper and what, in result, significantly reduced its solid waste and, accordingly, boosted the profits. ( Harvard Business Review, 2006)
Last but not least, moral obligations position a firm as an attractive place for talented staff to work and show that ‘business could make a profit while pursuing an ethical path’. One of the most famous british fashion brands“Ted Baker”, for instance, showed an ‘exemplar in the way it runs its business’. The company integrates environmental and ethical matters in the strategy by improving the sustainability of its collections, providing an appropriate training for workers and partnering with other organisations who are interested in improving the social conditions in the fashion industry. ( “The Business Book”, 2014)
The result of these messages firms send to consumers is a general public’s satisfaction and a strong reputation. And due to the fact that companies intensively publish the benefits of their CSR activities in forms of various reports and articles, that are ‘described in terms of dollars or volunteer hours spent but almost never in the terms of impact’ (Harvard Business Review, 2006), we can see that companies are primarily and mostly interested in gaining profits rather than improving the global environmental or social situation.
Looking from another perspective, the CSR issues are never neglected these days, especially because of the governmental or social pressure. Companies are urged to care about environment’s state, human rights and wellbeing and so gradually, or as a result of law measures, they develop a business approach or implement fundamental environmental reforms (“The Business book”, 2014) that are ethical in its nature and that directly and honestly emphasises the global problems at first and only then the possible profits.
Such behaviour might however be seen only in some particular spheres where any ethical concerns would be immediately noticed and fined when needed. So, for example, in the tea/coffee production, where the labour is a well-known problem, companies try to guarantee the workers fair pay and facilities, as they are aware of possible health issues for which they can later be charged from government. Another good example is Nike’s boycott for abusive labour practices. In this situation, the company had to introduce any new approach or change in order to keep its good reputation on the market and not because of profits purposes. We need to take into consideration not only environmental or social issues, but also such underhand methods as price-fixing or sharing restricted information. There were various examples of situations when the companies with huge volumes were admitted to collusion or came under fire for shifting profits to avoid large tax liabilities. ‘That was regarded as immoral, and consumer perception largely affected a firm’s profits’.(“The Business book”, 2014).
Business inputs can also be in form of transportation infrastructure, policies, standards for quality and safety. All these are included in the business approach that seems to be ethical in nature.
Despite the fact that so many companies are now involved in developing a positive model for the industry, I doubt that they primarily do it exclusively for nature saving or human rights purposes. ‘Corporate responsibility is now the integral part of the market’s strategy for successful selling.’ (“The Business Book”, 2014). Lots of managers proceed to the CSR strategy as the postponement of the needed actions will only lead to far greater costs when the company will later be judged to have violated its social obligations. Beside this aspect, as in the chemical industry, for instance, the CSR might be seen as a form of insurance, in the hope that its reputation for social consciousness will temper public criticism.(Harvard Business Review, 2006).
It is also my opinion, that companies accept the CSR first due to the fact that it might be a new ‘source of competitive advantage, as the business applies its resources to activities that benefit society’ (Harvard Business Review, 2006), what is followed by proper strategic planning and calculations; once that is done and not only ethical, but also material benefits are discovered, it is to be decided whether the new approach can be launched.
As we can see, business approaches are always a combination of both: ethical and strategic purposes and however fair the company is, there will always be an interest in commercial profits or benefits it can derive from all the possible novelties.