What is CSR and how is it applied to cor e functions and activities of a company.

2013

Table of Contents
Introduction ...............................................................................................................3 Arguments for and against CSR ...................................................................................4 Theories of CSR ...........................................................................................................5
Utilitarian Theories ..................................................................................................................................................5 Managerial Theories ................................................................................................................................................6 Relational Theories ..................................................................................................................................................6

From Theory to Practice ..............................................................................................7

Review operations....................................................................................................................................................7 Engage with stakeholders .....................................................................................................................................8 Guarantee product and service responsibility .............................................................................................8 Verify and measure ..................................................................................................................................................8

Conclusion ..................................................................................................................9 Bibliography ............................................................................................................. 10

Introduction
Over the years, the definition of corporate social responsibility has a constant grow in terms of importance and prominence. CSR has been the on the focus of many debates, research and theory building. Moreover, Corporate Social Responsibility (CSR) is a concept that every day is becoming more dominant for businesses. Every business organization has a policy regarding to CSR and they have to produce annual reports about its activity. On the other side people are interested to understand corporate activities that are socially responsible and those activities that are not socially responsible. There are two problems about this issue: firstly people do not agree with each other about what is socially responsible, and when they are asked to define what it is or is not socially responsible it is very difficult to give a definite answer. Therefore, there are many different definitions concerning CSR. The relationship between global organizations, governments of countries and individual citizens are known the broadest definition of CSR. (Schwartz et al,2008) Furthermore, more locally the definition is described with the relationship between local societies and corporations that operates in these locations. In addition to this there is another definition of CSR that includes the relationship between corporation and stakeholders. The present-day CSR is also called as corporate citizenship, responsible business or corporate social opportunity. All of these terms have a common aim to increase the attention of business originations to take more responsibility for the influence of their activities on customers, stakeholders, employees and other communities. This responsibility shows that corporations have to function in conformity with legislation and governmental rules. CSRs aim refers to the corporations that like to do their business in a way that is ethical and society friendly. This is possible through CSRs tool that covers many activities such as working in partnership with local communities, developing good relationships with employees, customers and their families and including environmental and sustainability activities. (Spector, 2009). All of these definitions of corporate social responsibility are relevant and each of them exhibits a dimension toward the issue if corporations are responsible for their actions. The debate that is taking

place is on the arena of ethics, where the issue of self-interest is dominant. As a result of this people put the individual interest above the collective ones. The main principle of social responsibility is the contract between the stakeholders to society, which is crucial obligation of civil rights. In a way this is described as citizenship but social responsibility should extend beyond the present members of society and be responsible for the future and for the future members of society. Also in this context is included the responsibility toward environmental issues. However, there is no agreed definition of CSR, so this raises the question as to what can be consider to be corporate social responsibility.

Arguments for and against CSR

Always when it is discussed about CSR issues, supporters and the detractors have been raises their voices in favor or against the phenomenon of CSR. The situation where the concept of CSR begins to be criticized was at the classical economic by Milton Friedman (1962). He believed that managers are responsible only how to maximize their profits. Also he said that social issues are the concern of business people and he believed that the governments should resolve these problems. The second case against CSR is that business in not prepared or do not provide such a tools that can solve social problems. In addition to this there is another argument against CSR that claim that if business companies pursue CSR they will be lees completive in global market. (Davis, 1973). On the other side we have arguments that are in favor of CSR. The first argument that is in favor of this explains how CSR is positive in long-term for business, based on the fact that if a business will have a healthy climate it will operate for long time. Another argument that is in favor of CSR is that it will avoid government regulations. The reason of avowing government regulations is because in the future government will intervene with stricter and disciplinary policies. (Carroll and Buchholtz 2009). Finally, the last argument that is in favor of CSR is that businesses should be involved in CSR because the public strongly supports it. The public believes that business corporations should be responsible to their

employees, stakeholders and different communities. (Bernstein 2000). The fact that there are many arguments for and against CSR, this gives us a perception of how complicated and sensitive CSR issues are.

Theories of CSR
Based on the fact that there is heterogeneity between theories of CSR, they are divided in three groups: the first one is the utilitarian theory, the second one is the managerial theory and the last one is the relational theory.

Utilitarian Theories
According to the utilitarian theory the role of corporation is to be part of the economic system and provide its main function, which is called profit maximization. The CSR ideas appeared after a realization that there is a need for corporate responsibility. Therefore, the idea of laissez faire business in a way determines the personal or individual responsibility to social or public responsibility. Moreover, the utilitarian theory could be related with instrumental theories (Garriga and Mele, 2004; Jensen, 2002) where corporation is appreciated as an instrument for wealth creation, and its activities are focused only in economic profits. The utilitarian theories are related with strategies that aim competitive advantages. The supports of this theory are for example Porter and Cramer (2002) who claimed that the basic goal of this theory is to gain as more as possible form natural resources and use them as a competitive advantage. Secchi (2007) further divides this theory into two groups the social cost of the corporation and the idea of functionalism. The first one in other words is called instrumental theory because the social power of corporation is materialized especially in political relationship with society. The functionalist theory believes that corporation is part of economic system and with its major

goal of profit making. The corporate is considered as a investment, and investments always tend to be profitable to the investors and stakeholders. In this context CSR was invented as a protection strategy against external attacks since there was necessary to balance profits and social objectives.

Managerial Theories
According to Secchi (2007) the managerial theory is the crucial component of the corporate management where CSR is handled by the internal managerial staff. From the perspective of CSR this differentiate the utilitarian theory from the managerial one. Based on this everything that is external for the corporation will affect the decision making process. Managerial theory build by three sub groups of theories: the first one is corporate social performance (CSP), the second one is social accountability, auditing and reporting (SAAR) and the third one is social responsibility for multinationals. CSPs goal is to measure how much the social variable affects the economic performance. Therefore, the problem is that of managing social and economic factors that affect the corporation. This can conclude one that growth and sustainability of business corporations depends on society. Secchi (2005) also explains that SAAR is related to the social performance through accounting, auditing and reporting processes. In addition, SAAR means that the corporation is responsible for its actions, so corporations are regulated and controlled by their actions and responsible to the society. These three activities distinct managerial activities but on the same time they are related to each other. The three managerial activities help the company to be more socially responsible.

Relational Theories
The roots of relational theory are from the complex firm environment relationships. Based on the meaning of the term it implies that the focus of CSR is the relationship between these three theories. The relational theory is divided into four sub theories: the business and society, stakeholder approach, social

contract and corporate citizenship. The first sub theory business and society is planned to have a meaning as business in society in which arises the relation between two things. The first goal of CSR is to develop economic values in the society. The other goal of CSR in the context of relational theory is the personal responsibility to think about the effect of its decision toward the whole society. The stakeholder sub theory is the strategy that is developed to improve the management of the corporation. According to this theory mangers should understand the reality in order to be able to manage the corporation in a social and responsible way. Moreover, the stakeholder theory consider the corporation as a indicator that connect different interests of the society such as self creation and community creation that are made as a result of good collaboration.(Porter et al. 2006)

From Theory to Practice

Most of the businesses claim to act as a corporate social responsibility or at least they might think they are. When a company does something positive or charitable for the society it is too often claimed as CSR. People think that is called CSR, but the term of CSR is beyond that and there is more to do about it. So what exactly mean being social responsible in todays business environment? Corporate social responsibility is about going beyond legal compliance. The aim of CSR is to look how business influences four main areas: marketplace, workplace, community and the environment. (Kotler et al, 2005) In other words CSR is tool that helps people to be aware of internal or external events or risks that can affect the society. Therefore, what do corporations actually do when they say they are doing CSR? Here are six fundamental areas where CSR is applicable.

Review operations
CSR starts with a detailed review of what and how the business influences the four areas. For a business to be responsible it should improve and add value and

try to reduce impacts. In the process of reviewing the company should put more effort on the environmental and economic areas and try to reduce its affect. Moreover, this process needs a professional management that is transparent and responsible about their actions.

Engage with stakeholders

By consulting stakeholders helps the business to understand better what and how their impact is. Finding key stakeholders it is crucial to understand their beliefs and aspirations. Usually business engages with regulators, investors and bankers. But contracting a proper stakeholder the business creates a huge group where are included customers, employees, NGOs, and different local communities. The process of engaging with stakeholders it is the indicator that derives the company to act responsible.

Guarantee product and service responsibility

For every company to be responsible it should evaluate the long-term effects of their product. There questions such as What materials should we use to manufacture a certain product? Who is producing this product? How it will be used? Who will use it?. The company should try to offer proper and safe products, using recycled materials and ensure proper disposal all these are examples of product responsibility. (Valor,2008)

Verify and measure

Doing CSR is not something abstract or complicated but it is very clear direction that the business companies should be oriented. The accuracy of CSR is measurable where data is organized, targets are set and impacts are verified. Greenhouse gas emissions gender and racial diversity, reduction of accidents at work place, improvements in energy efficiency and reduction in pollutants are some of the measures that can be avoided as a result of good CSR. (Frederick, 2008)

Conclusion
Based on the literature, there is a growing awareness that business needs to manage its relationships with the broader society. Managers are responsible about their organizations influence on the society and environment. It is concluded that CSR is about business and civil society cooperation. In the perspective of social environment it is CSR that benefits the environment with different levels and tools that results with positive effect. According to the theories allows us to understand that CSR goes beyond its traditional meanings, thus CSR requires a multidisciplinary approach in order to put it in the practice. While, the concept of CSR is very complex, there is a need for other scholars to have a better understanding about society relations and the several internal and external factors that affect corporate social responsibility (CSR).

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