Corporate Social Responsibility ‘hereafter CSR’ seems to be becoming popular among companies. Great enterprises, referents in the corporate world, claim in their public webpages to be engaging in working not only for themselves but also for a better world. For example, IKEA states that they do what they can to help create a world where they take better care of the environment, the earth’s resources, and each other. The dairy giant Arla states in their 2013 annual CSR report that they have a sound foundation to build on when it comes to sustainability and corporate responsibility. This may be explained by the fact that CSR is not only an ethical Pressures and challenges.
Failing to foster CSR practices could harm the well-being of the people and natural resources interacting with the company. Moreover, given the arguments described above, it would also imply missing opportunities to gain strategic advantages through HRM and other organizational resources. Then, why is that nowadays we witness companies behaving in complete disregard of their social responsibilities? In the light of these benefits, how is it that catastrophes such as the Deepwater Horizon massive oil spill in the Mexican Gulf or the collapse of the building of a functioning sweatshop in Bangladesh can happen? All the lives lost in those two tragic events are the devastating evidence of CSR failures. The relevant point to examine is why many companies fail to implement CSR goals and the answer lies on the conflicting pressures they face.
According to Carroll (1991) in Fang & Qiaoling (2010), CSR is a multidimensional pyramid encompassing four sets of responsibilities: economic, legal, ethical, and philanthropic. The author argues that CSR must be present in all four areas simultaneously. However, the pressure companies receive from its different stakeholders may be considerably big and contradictory between each other. Investors and stockholders may request higher margins, consumers request lower prices, workers may request higher benefits, and NGOs, communities, and governments may also pressure for environmentally-friendly practices. The complex and pressuring situation this creates may be one of the reasons behind the failure to implement CSR goals resulting in great losses for humanity and the environment.
The predominance of the economic aspect of CSR explains much of this unbalance between the four spheres of responsibility. In an increasingly competitive environment, many global companies have to aim at a cost-cutting strategy in order to survive, and therefore the search for efficiencies becomes essential (Burke et al., 2006). The answer to this pressure usually is the process of transferring some activities to under-developed and cheaper countries. Both the tragic Rana Plaza collapse in Dhaka and the Deepwater Horizon oil spill could be regarded as events resulting from a prioritization of economic efficiencies over legal, ethical, and philanthropic purposes. In both cases, the companies made the conscious decision of betting for this strategy. The problem lies in that it is the employees who pay the price, even with their own lives (Woolfson & Likic-Brboric, 2008). Firms should have the legal and moral obligation of providing their employees with a safe, healthy, and high-quality working environment, which calls for more emphasis on socially responsible HRM (Fang & Qiaoling, 2010).
However, there are also other factors that could be analyzed in the Ranza Plaza case. When companies have operations spread across the world, it may be difficult for them to implement CSR in their HRM for the differing institutional and cultural circumstances. Bangladesh, for example, is a country without unions, governmental ties, or local HR practices. Even though the owner of the factory acted with negligence, it has also to be noted that Bangladesh has high rates of corruption and that the workers are regarded just as labor and not as valuable human beings. These cases are what Guest and Conway (1999) call ‘black holes’. The complex supply chains make it difficult for the managers in charge to track how CSR is executed in every stage and in every location with such different institutional arrangements.
Conclusion
Even when implementing CSR has so many positive effects, many companies fail to understand the benefits of implementing it and therefore have a tendency of losing the balance between all four CSR areas. As Windsor (2006) states, it seems to be a conceptual gap between economic and ethical aspects. In order to fill this gap, the organizations need to discover the competitive matter, but there are also several strategic benefits of engaging in CSR. However, there is another side of the coin. Firms face pressures which make that sometimes those grandiose statements on the internet become just that, words. In this essay, both the benefits and the pressures on CSR are explored.
CSR as a strategic move
In my view, the primary role of CSR is achieving that companies, as key players in societies, will start having an active and voluntary contribution to social, economic, and environmental improvement, what it is called corporate citizenship. Nevertheless, CSR is not only good for the society as a whole but it also a very powerful resource for the companies.
Fang & Qiaoling (2010) analyzed many of the benefits coming from CSR practices. Firstly, the authors mention that CSR can support a business by avoiding business risk, gaining access to capital, attracting and retaining talented employees, creating customer loyalty, and gaining acceptance by local communities. They further argue that the increase in ethical consumerism awareness such as being environmentally friendly and providing fair treatment to workers imposes pressures on companies to adopt CSR practices to keep being attractive in the eyes of the consumers. Lastly, the authors also mention how the interaction between CSR and HRM could give firms a competitive edge. They argue that CSR in HRM terms would imply not only complying with the regulations regarding basic working conditions, but also by going beyond those minimums and really caring for the employees and considering them the company’s most important assets, a higher HR outcome can be achieved. This increased HR outcome may give companies a strong competitive advantage.
Reputation is another reason for companies to adopt CSR practices. Gillies (2010) argues that businesses may show some concerns about their reputation and this can motivate a higher compliance to the existing norms and increase transparency in the industry. In her research, based on the oil industry, she examines how the companies strive to do things the best they can and be transparent due to their institution’s reputational interests. Moreover, if they fail to comply with their CSR rules and some failure occurs and becomes public it may result in more regulations by the government, and therefore, in bigger restrictions for their activities.
Advantages with ethical practices. This is not only for the sake of being corporate citizens but also to achieve sustainable competitive advantage.