Business Case For Csr

This essay sample on Business Case For Csr provides all necessary basic information on this matter, including the most common “for and against” arguments. Below are the introduction, body and conclusion parts of this essay.

Corporate social responsibility (CSR) has never been as important as it is in today’s society. It redefines corporate values and the long term commitment between a company and all of its key constituents. The World Business Council for Sustainable Development (2000) characterizes CSR as “the commitment of businesses to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life”.

In a world driven by consumer perceptions, CSR is rapidly becoming a key to success for maximizing a company’s profits. Peattie (1995) suggests that CSR is “the holistic management process responsible for identifying, anticipating and satisfying the requirements of customers and society in a profitable and sustainable way”. Briggs & Verma (2006) believes the investment of engaging CSR brings both tangible and intangible benefits such as financial returns and reputation improvements.

There appears to be no doubt that there is a business case for CSR for a company. This essay will first identify the importance of engaging in CSR by showing examples of success and surveys conducted by third parties. Then, it will analyze how the different expectations of CSR among stakeholders of a company affect its CSR strategy. Finally it will discuss the measurement of CSR activities.

CSR studies have become a trend for global companies.

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In its “Attaining sustainable growth through corporate social responsibility” survey, IBM surveyed more than 250 business executives worldwide. Many of them believe CSR can bring competitive differentiation, permission to enter new markets, and favorable positioning in the talent wars. The survey shows that 68% of the business leaders are now utilizing CSR as an opportunity for new revenue streams. In addition, 54% believe that their CSR activities are already giving them a competitive advantage over their top competitors. Andrew, C. & Matten, D., (2010) found that profit maximization, enhancing corporate reputation, customer loyalty and goodwill, gaining positive media coverage, and employee retention are the key motivators for a company to engage in CSR. As suggested by the “10 benefits of CSR for businesses” derived from the CSR network, engaging in CSR can bring significant synergy to a company (Briggs & Verma, 2006).

Business Case For Csr

CSR Network’s list of 10 benefits of CSR for businesses is:

1. Increase profits

2. Access to capital

3. Reduced operating cost/ increase operating efficiency

4. Enhanced brand image and reputation

5. Increased sales and customer loyalty

6. Increased productivity and quality

7. Increased ability to attract and retain employees

8. Potentially reduced regulatory oversight

9. Reduced risk/ increased risk management

10. Keeping ahead of the market curve

Indeed, companies which have high ethical standards seem to enjoy considerable commercial success. As noted by Andrew, C. ; Matten, D. (2010), developing “Ethical Behavior” has a significant effect on enhancing a business’s image and is a positive on sales and profits. For example, since the middle of the 1990’s, Co-operative Bank has enjoyed rising profits because of its ethical stance. The management of the bank concluded that the stable growth of company is driven the bank’s ethical behavior or the bank’s ethical practices.

It attracted many customers from wealthy social groups who held large, and profitable, balances with the bank. Similarly, by using sustainable resources in its factories as one of its ethical principles, Mitsubishi also gained significant financial benefits as a result. Apart from increasing profits, CSR can also help the company’s access to capital. Corporate citizenships are expected by customers and investors. They attracts significant funds from ‘ethical investors’, and it also helps build the company’s reputation and maintains its relationship with stakeholders. According to a survey conducted by the PR firm, Hill ; Knowlton, 71% of investors consider corporate citizenship when making investment decision. (Briggs ; Verma, 2006).

In addition to the sales and profit growth, engaging in CSR sometimes can provide cost saving, enhance brand image and reputation, and increase customer loyalty. Milton Friedman (1970) claims that “It is the managers’ responsibility to act solely in the interests of shareholders”. He states three key points such as: cost savings versus differentiation, green consumerism, and the bottom of the pyramid. First, he argued that managers should maximize their companies’ profitability. This is economic responsibility, the bottom of the pyramid. Second, companies should promote cost savings and differentiation. By reducing energy consumption which benefits the environment, companies can also reduce overall cost structures and increase productivity. For example, Catalyst Paper Corporation, a Canadian pulp and paper company, practices CSR by applying its energy recycling system.

This lowered the company’s GHG emissions by 70% while reducing its energy use by 21% since 1990, thus reducing cost (Pohle ; Hittner-IBM). Moreover, CSR is one of the unique selling points (USP) for a company. For a company that provides indistinguishable business and products, this attractive USP can help the company gain market share. For instance, Starbucks sells Fairtrade coffee as a differentiation from its competitors (Andrew, C. ; Matten, D., 2010). By practicing CSR, the company builds a unique differentiation in its product and it also helps to enhance customer loyalty. Lastly, companies should apply green consumerism. As the rise of consumerism is accelerating, consumers consider morally correct operations as one of the factors in purchasing goods and services from organizations. A survey conducted by the PR firm, Hill ; Knowlton, supports the view of Milton Friedman (1970). The survey finds that 79% of Americans take corporate citizenship into account when making purchase decisions (Briggs ; Verma, 2006).

Nowadays, reputation is a vital asset for a company. Corporations ultimately succeed or fail on the basis of public trust and support. Briggs ; Verma (2006) remarks that by not engaging in CSR, companies are not only under-managing their impact on society and the environment, but they are also under-managing their own economic self-interest. They argued that CSR is becoming an important benchmark to evaluate whether a company is well managed and reputable or not. The success story of Co-operative Bank and Mitsubishi are good examples. An ethical marketing strategy can rescue the business image of a company. US fast food giant McDonald’s has faced ethical criticisms over the past three decades.

The accusations included ‘exploitations of children’ with its advertising, ‘culpably responsible’ for cruelty to animals, ‘strongly antipathetic’ to unions, paying its workers lower wages, falsely advertising its food as nutritious, and risked the health of people plunged the firm into crisis. It seems that McDonald’s broke all of the social responsibility rules. As of the early 2000’s, the firm changed its marketing strategy to a more ethical one, such as devotes the resource to promote the advertising campaign to build up a fresh and healthy image. Accompanying these campaigns was a range of new healthy options on a new menu. They also launched exercise and sports initiatives especially targeted at young people. After the new menu and promotions launched, McDonald’s sales rebounded in the late 2000’s from the slump they suffered in the early to mid-2000’s. The firm’s commitment to good values had won back the customers successfully. (Andrew, C. & Matten, D., 2010)