Beyond the Bottom Line: Corporate Social Responsibility

CSREthics in the corporate world has evolved well past the days when companies simply needed to adhere to legal and regulatory requirements in the course of their businesses commerce. With the high degree of communication connectivity and a social movement toward treating people and the planet with kindness, an entirely new area has developed: Corporate Social Responsibility, or CSR.

As Edgeman & Eskildsen (2012) point out, today business faces increasing scrutiny to recognize the importance of achieving additional results beyond maximizing shareholder value in the form of profitability. They must also consider and develop plans around sustainability across economic, social and environmental constructs.

The authors write that a comprehensive plan should be an all-encompassing view of “innovation, sustainability, and enterprise” (Edgeman & Eskildsen, 2012). The idea of adding value isn’t a metric that focuses only on profitability; it includes satisfying all stakeholders with interests in the environment, along with innovation; sustainability, and combined with enterprise excellence.

Greenhouse (2013) addresses the enterprises that have been negatively impacted by tragedies such as the recent death of 400 garment workers who died in a Bangladesh factory fire in April 2013. Only after the tragedy occurred did Western companies get to work on plans to ensure safety and basic human protections must be in place wherever their supply chain was located. With some companies, for example Disney, rather than try to change local laws and safety requirements in third-world countries such as Bangladesh and Pakistan, they set a timeline to pull out completely. The author noted that in the case of Disney their presence in these countries was probably not accretive or impactful to their overall business nevertheless.

A third perspective considered the progress of “conscious capitalism” (O’Toole & Vogel, 2011). The thought behind conscious capitalism addresses dimensions well beyond profitability – stakeholders include examples such as the host community and the physical environment. Much like Edgeman & Eskildsen (2012), O’Toole & Vogel use the accounting-like term “triple bottom line” that takes performance measurement into social and environmental areas, well beyond enterprise profitability.

Unfortunately, even with successful companies that are virtuous, the medicine doesn’t always cure the patient indefinitely. In fact with just a new CEO, a socially conscious enterprise can re-focus the company singularly back to the bottom line.

The common thread between the points made in the three articles that have been mentioned is that for sustainability to work a firm has to seek success factors well beyond profitability. Although movements such as “conscious capitalism” don’t offer a “how to” guidebook, and indeed some of the recommendations may appear both daunting and costly, firms that neglect CSR are likely to face a crisis in credibility at some point when an unplanned disaster changes their entire view from the world’s perspective. BP was in the process of remaking its own brand and CSR image when their gulf oil platform blew up, resulting in deaths and the biggest oil spill in American history. All of the hard work BP had done to remake their image was, at that point, for naught.

Vallaster & Maon (2012) tie the threads of brand management, CSR, marketing research and corporate identity into one comprehensive vision.   The outcome hoped for is that of seeking to protect and generate value. Decisions that get made however, are decisions that must optimize around competing and conflicting criteria such as seeking the benefit of the firm versus seeking the benefit of society.

Savvy leaders tuned to today’s sea change of increasing attention and focus on CSR plan and include goals and objectives well beyond the “bottom line.” Especially, large, publicly traded global firms, whose visibility is global and carefully studied by environmental groups and organizations dedicated to improving working lives and communities. If steps are taken to formalize an integrated vision of social responsibility, those firms that stand to benefit the most are firms with “high customer awareness,” (Servaes, & Tamayo, 2013) that correlate to high advertising expenditures. If a firm has relatively low customer awareness, according to Servaes & Tamayo, the importance of CSR is much less , perhaps almost insignificant. Finally, the CSR initiative needs to be genuine. Organizations throughout the world have created screens and criteria to ferret out the “have’s” from the “have not’s.” The “have not’s” who come up with an environmentally conscious slogan, while at the same time not adhering to the implications of that slogan, will, in time, be discovered, vetted and hurt.

 

References

Edgeman, R., & Eskildsen, J. (2012). Viral innovation: integration via

sustainability and enterprise excellence. Journal of Innovation and

Best Business Practice, 2012, 13.

 

Greenhouse, S. (2013, May 2). Some Retailers Rethink Roles in Bangladesh.

The New York Times. Retrieved from

http://www.nytimes.com/2013/05/02/business/some-retailers-rethink-their-role-in-bangladesh.html?pagewanted=all&_r=0.

 

James O’Toole, J. & Vogel, D. (2011). Two and a Half Cheers for Conscious Capitalism.

California Management Review, 53(3), 3, 60-76. Retrieved from

http://hbr.org/product/two-and-a-half-cheers-for-conscious-

capitalism/an/CMR484-PDF-ENG.

 

Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on

firm value: The role of customer awareness. Management Science, 59(5), 1045-

 

Vallaster, C., Lindgreen, A., & Maon, F. (2012). Strategically leveraging corporate social

responsibility to the benefit of company and society: a corporate branding. California Management Review, 54(3), 34-60.

One thought on “Beyond the Bottom Line: Corporate Social Responsibility

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