Corporate Social Responsibility
Introduction
Corporate Social Responsibility (CSR) plays a critical role in economic and social development of communities. The success of any company depends on cooperation between the organization, its workers, and hosting community. Through CSR firms can develop a mutually beneficial relationship with surrounding communities leading to effective collaboration in solving social evils, social, and economic challenges affecting their surrounding communities. Companies continue to engage in CSR because of their positive impact on society by ensuring sustainable growth and safeguarding the environment. The purpose of this report is to provide a comprehensive analysis of CSR’s regulatory framework, environmental, social and community issues, changing attitudes of CSR in the country, benefits of CSR to employees, possible impact of CSR to the firm’s supply chain, and type of CSR activities adopted by other organizations and their impact.
Task 1: Analysis of the Regulatory Framework for CSR
Negative publicity can lead to the downfall of any organization since it results in reduced sales, increased customer disloyalty, and adversely impacts on the morale of workers. The company is undergoing through this phase and it is our collective responsibility to curb the growing bad publicity that is adversely impacting on the image of the firm (Yu et al., 2018). The organization has been accused of human rights violations, unfavorable and inhumane working conditions for the employees in the company’s factories, abuse, low wages, and poor physical working environments. The accusations are false but bad press and continued online shaming adversely impacts on the firm’s profitability and sustainability (Jung and Seock, 2016). The main disadvantage with publicity is that the company cannot control the spread of the inaccurate information. Additionally, people tend to trust the source of the inaccurate data and what is being said. Consequently, the impact of the bad publicity can be greater compared to that of the organization’s advertisement (Jung and Seock, 2016). The bad publicity does not only affect sales and customer loyalty but adversely impacts on employees’ morale. Smear campaigns acts as a source of demotivation among workers, lead to higher voluntary employee turnover, and act as a turn off to candidates hindering them from applying making the firm to risk losing potentially good applicants (Yu et al., 2018). As a result, the company should act fast to contain the bad publicity and win the trust of its workers and customers.
Companies can use corporate social responsibility (CSR) in fighting bad publicity since it grants an organization a good image that can help in reducing anger and negative word-of-mouth. Chung and Jiang (2017) assert that strategically employing CSR communication in an apology statement after a negative publicity may reduce negative consumer reactions. CSR act as a source of positive public relations because it provides good news stories about a brand. Consequently, it is the duty of the organization to publicize its CSR activities to ensure its reaches a wide audience comprising of its customers, suppliers, and local communities. Vanhamme and Grobben (2009) note that corporate crisis leading to negative publicity call for effective communication to undermine the spread of the smear campaigns and to restore a firm’s reputation in a market. Companies can use CSR which acts as an effective tool to counter the negative impact of a crisis. Vanhamme and Grobben (2009) asserts that the use of CSR claims in crisis communication is more effective for organizations with long CSR history compared to those with a short CSR history since companies should showcase their genuine intentions of being involved in CSR activities. CSR activities are meant to benefit the community and not the company. Consequently, if the audience can prove that the intentions of a CSR are to cleanse a firm’s image from negative publicity it may adversely impact on the brand. This organization has been dedicated in CSR activities since its inception. As a result, it can take advantage of its involvement in CSR activities to counter the negative publicity and restore its image in the market.
Governments pass laws to regulate business to promote best practices in various industries. Section 135 of the Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules, 2014 are the two main legislations regulating CSR activities in the country (Rajeev and Kalagnanam, 2015). The Companies (Corporate Social Responsibility Policy) Rules, 2014 contributes in the regulation of the sector by providing the meaning of CSR and outlining the activities that are ineligible for CSR. Rule 2(1) (c) of the regulation states that CSR entails programs or projects relating to programs or projects that relate to activities specified in Schedule VII of the Act and activities that are undertaken by the Board of Directors of a firm in ensuring the recommendation of the CSR Committee of the Board as per the declared CSR policy of the organization along with the conditions that such policy will cover subjects specified in Schedule VII of the Act (Rajeev and Kalagnanam, 2015). The applicability of the law apply to every company in the United Kingdom, holding companies, foreign firms, and subsidiary organizations that having in the preceding financial year net worth greater than 500 crore, turnover of more than 1000 crore and net profit greater than 5 crore (Rajeev and Kalagnanam, 2015). Additionally, Schedule VII of the Companies Act, 2013 provide companies with a list of CSR activities that an organization can engage in which include:
Figure 1: Schedule VII CSR Activities
Laws are meant to encourage changes in a system. The Companies Act, 2013 introduced the concept of CSR to put greater responsibility on firms in India to have unequivocal CSR framework (Mitra and Schmidpeter, 2020). The nation’s CSR policy are meant to focus on care for all stakeholders, ethical functioning, respect for worker’s rights and welfare, and uphold human rights, safeguard environment, social inclusiveness and development as the main objectives of CSR activities (Kumar, 2019). As a result, the Act and rules managed to inculcate the culture of CSR in the country’s corporate sector since it requires companies to formulate a CSR policy and spend on social uplifting activities; thus, promoting the social, economic, and environmental growth of communities.
Regulatory framework for CSR is compulsory since its regulation is beneficial to both organizations and the beneficiaries. According to the United Kingdom laws, CSR is not a mandatory activity for firms domiciled or operating in the country (Cho, 2016). Consequently, CSR is a voluntary act for organizations operating in the country. Moreover, CSR activities have no legislation regulating the practice in the United Kingdom. Conversely, the Companies Act, 2006 grants directors of firms that adhere to the triple bottom line approach system the duty of dealing with environmental and social impact of their organizations (Husted, 2015). Triple bottom line system (people, planet, and profit) contribute to the sustainability of an organization since it helps companies to give back to society through CSR activities; thus, contributing to good publicity (Husted, 2015). The regulatory framework for the CSR is meant to promote responsible behavior, human rights, environmental protection, betterment of societies, and the integration of social and environmental concerns to the business. The United Kingdome has used various laws to guide the concept of CSR in the country (Husted, 2015). For example, the Accounts Modernization Directive regulates CSR practices in the United Kingdom by requiring large public limited companies to report on environmental significant issues, the Health and Safety at Work Act, 1974 and the Working Time Regulation, 2001 (Cho, 2016). The purpose of the legislations is to guide on the CSR expenditure but do not mandate CSR spending for organizations. Furthermore, the aforementioned legislations tackle the allegations affecting the firm and through appropriate CSR activities the company can use its data to clear its name and maintain a good publicity (Husted, 2015). According to the Confederation of Business Industry the goal of the voluntary CSR expenditure in the United Kingdom is to encourage firms to have the freedom of defining their CSR expenditure as per their core competency. CSR play a critical role in tackling environmental and social issues in the United Kingdom. During Tony Blair’s tenure, the United Kingdom become the first country in the world to have a Minister for CSR under the nation’s Trade and Industry Department (Cho, 2016). The goal of the ministry was to enhance CSR activities across the various departments of the government. In Smith v Barlow case, the court held that under the present conditions of the companies should acknowledge and discharge both their private and social responsibilities (Husted, 2015). The verdict indicates that every organization in the United Kingdom has a social responsibility to the local communities. Consequently, firms in the region should use CSR to promote responsible behavior, human rights, environmental protection, betterment of societies, and the integration of social and environmental concerns to the business.
Analysis of Environmental Issues in CSR
The company’s line of trade is sports clothing manufacturing. The organization’s manufacturing plant is responsible for air and water pollution because of the waste and toxic gases released into the environment. Additionally, the firm is facing allegations poor working conditions for workers in the various factories used by the company and poor physical working environment (Fukuda and Ouchida, 2020). The organization should adopt environmentally friendly mechanism in their manufacturing plants to reduce pollution which impacts on the local communities and can lead to a negative publicity. According to the Environmental ISO14001 standard for firms to follow, companies are required to reduce environmental pollution by having a recycling policy that require the organization to recycle materials used when running their day to day activities (Fukuda and Ouchida, 2020). The company considers adopting recycling as one of its CSR activities to change its image and to fight the bad publicity. Adoption of recycling as one of its CSR activities will help fight the allegation levied against the company that focus on the conditions for workers in factories used by the company and the poor physical working environments (Kolk, 2016). The public will consider the firm to be environmentally friendly. Furthermore, recycling may help in achieving carbon neutrality and help the firm to create a rapport with the local community.
Manufacturing plants are among the highest polluters of the environment since they release toxic waste and air into the environment. The activities contribute to increased global warming and climate change (Fukuda and Ouchida, 2020). Additionally, the waste released into the environment may have adverse health effects on the local communities as they can contribute to deaths or illnesses (Kolk, 2016). As a result, the adoption of the recycling policy and neutrality of carbon illustrates the firm’s commitment in fighting pollution and their dedication in safeguarding the environment and local communities. The company can achieve its goal by reducing its packaging or increasing its recycle measures and adopting the online delivery services to reduce its carbon footprint since increased consumer transportation to retail outlets assist with carbon dioxide emission (Fukuda and Ouchida, 2020). The environmental measures adopted by the organization (recycling and carbon neutrality) are sustainable because of their positive long term impact on both workers and the local communities.
Analysis of Social and Community Issues CSR
The CSR concept focuses on a management concept that requires firms to integrate both social and environmental concerns in their business operations and interactions with stakeholders. The company’s manufacturing plants have contributed to large carbon footprints that adversely impact on the health of the local communities (Barnett et al., 2020). As a result, the organization has both social and environment responsibility of empowering the local communities to mitigate the social challenges experienced in their respective areas. The company can practice its social responsibility by donating money, good or services to social causes and nonprofit organizations in the region. The common social challenges experienced by the local communities surrounding the firm’s manufacturing plant include poverty and homelessness, high rates of unemployment, and climate change (Fukuda and Ouchida, 2020). Majority of the firm’s employees should be members of the local communities since the gesture will help in fighting the rate of poverty and unemployment in the region (Barnett et al., 2020). Moreover, the firm can donate some of its merchandise to the homeless in the community. The other social gestures that will help in improving the company’s image is volunteering in community activities and partnering with nonprofit organization to build houses for the homeless members of the community. Education and training play a critical role in solving social challenges (Barnett et al., 2020). The company should sponsor its employees to advance their skills and members of the community to fight poverty. The company can adopt bright and needy students from the community and pay for their tuition fees and provide them with employment activities after completing school (Barnett et al., 2020). The process helps to socially and economically empower the younger population in the country; thus, improving the lives of the local communities. Education is a weapon that can be used in eradicating poverty and social evils such as criminal activities. Finally, the company should empower the locals socially by investing in the existing social enterprises (Barnett et al., 2020). Ploughing back profit to improve social communication both internally and externally will help the company combat the negative publicity allegations (Chung and Jiang, 2017). The organization has been accused of poor physical working environments and poor conditions for workers in factories used by the company. Establishing social enterprise will help the company to achieve sustainable ways of improving the lives of people from the local communities and its staff.
Assess Changing Attitudes to CSR
CSR activities help in transforming the mindset and attitudes of both a company and members of local communities. Moreover, increased involvement in CSR activities contribute in providing opportunities to the two parties involved (local communities and companies). An organization can create an opportunity for growth of their businesses through involvement in CSR activities. The goal of an organization should not be profitability but empowering and uplifting others (Chung and Jiang, 2017). Through CSR activities, firms illustrate their lack of selfishness and enhance their commitment to empowering in the society. The commitment contributes to a positive image and can help the firm in combating negative publicity others (Chung and Jiang, 2017). Furthermore, involvement in CSR activities is beneficial to businesses because it provides them with the opportunity to interact and engage with its consumers. Through the engagements, the firm can get feedback from the local community about their practices and improve the relationship between the two entities others (Chung and Jiang, 2017). Engaging with consumers help create a rapport between the business and members of the local communities; thus, increasing sales and customer loyalty. The company plans to reduce environmental pollution by adopting recycling mechanisms and manufacturing methods that will contribute in achieving carbon neutrality others (Chung and Jiang, 2017). The involvement in CSR activities assist in transforming the mindset and attitude of the firm towards environmental pollution and understanding the challenges affecting members of the local communities. Consequently, it promotes and offers opportunities for innovation to tackle the both environmental and social problems affecting the people (Barnett et al., 2020). The company can use the innovations to reduce its operating costs and fight the allegations levied against the firm. Finally, the organization can implement the lessons learned through CSR interactions to improve on its physical working environment and conditions for employees in factories used by the company (Barnett et al., 2020). The innovations can help in improving the lives of the local communities and contribute in promoting the image of the company.
Task 2: Impact of CSR to Stakeholders
Assess the Benefits of CSR to our Employees
Employees are the foundation of any business since they are the ones who interact with consumers and profitability of a firm depends on their productivity. Rise in stakeholder capitalism is attributed to increased CSR activities (KsiężaK, 2016). Involvement in CSR initiatives is beneficial to employees because it can lead to conducive working environments and creation of effective and long lasting working relationships among workers since CSR contribute to enhanced organizational citizenship behaviors and improved worker relationships (Gazzola and Mella, 2017). CSR require teamwork among employees to plan, organize, and execute a given mission with cooperation with the local communities (KsiężaK, 2016). Consequently, CSR initiatives promote cooperative engagement among workers and the organization leading to the achievement of higher-quality and closer relationships between workers (Gazzola and Mella, 2017). The second benefit to employees includes enhanced worker identification with the company. The feeling that the firm is socially responsible makes employs to experience a sense of identity with the company (Gazzola and Mella, 2017). Socially responsible activities motivate workers compared to a company’s financial success and promote workers identity and commitment to a firm (KsiężaK, 2016). The enhanced commitment attributed to identification help employees to be happier to be on the job and enhance their deeper connection to the company (KsiężaK, 2016). Conducive working environment created through fostering of effective working relationships and cooperation among workers during CSR initiatives help in enhancing workers retention and organizational commitment and the creation of attractive organizational culture to prospective workers (Gazzola and Mella, 2017). The teamwork created among members help to improve their creativity leading to improved employee engagement and performance (KsiężaK, 2016). Consequently, the CSR activities are not only beneficial to local communities but act as a source of friendship, morale booster, and motivation to workers.
Analyze the Impact of CSR on our Supply Chain
CSR will impact on the company’s innovation, safeguarding environment, reducing supply and distribution cost, enhances ethics in production. Involvement in CSR initiatives and dire need to improve the state of its workers and enhance the community both socially and environmentally can lead to innovation of ways of reducing the different forms of pollution. Consequently, it can motivate the company to implement technology to curb environmental pollution. The implementation of technology will help the firm achieve its goal of being environmentally responsible to the local community and its workers. Moreover, the implementation of technology in the company’s supply chain will help in curbing carbon footprint due to the reduction in the rate of toxic emissions caused by vehicles that supply goods to retailers then to the final consumers. The process will be beneficial to the organization since it helps in reducing transport cost. Finally, the ethics lessons learnt when engaging with members of the local community will enhance the firm’s responsibility in sourcing for goods and enhanced ethics in production. The analysis indicate CSR’s impact on supply chain can help the firm increase its profitability because of reduced cost of operational cost and help the company safeguard the environment by curbing the rate of environmental pollution.
Impact of CSR Policy on Senior Management Team and Business Performance
Involvement in CSR activities contribute to increased profitability and sustainability of a company. The goal of the senior management team is to ensure that the organization is profitable and makes the required profits to enhance it sustainability. CSR initiatives help the senior management team to achieve an organization’s goal. CSR initiatives impact positively on the business performance of a company because it contributes to its increased competitiveness in a market (KsiężaK, 2016). Shareholders benefit from CSR activities since they enhance customer loyalty and increases an organization’s customer base resulting in enhanced sales and profits; thus, promoting the sustainability of a company (KsiężaK, 2016). CSR initiatives propel a firm’s image because it ensures consumers that the company abides by ethical practices and principles in the operations and adhere to the regulatory laws that warrant businesses to have social and environmental responsibilities (KsiężaK, 2016). CSR activities assist in creating a conducive business environment and acts as motivation to workers; thus, increasing productivity and profitability. Organizations should embrace CSR initiatives because of their benefits monetary and social benefits to a firm.
Assess the Potential Conflicts, which May Arise between the Needs and Expectations of Different Stakeholders
People have divergent opinions on the implementation and the need for CSR activities leading to a conflict among stakeholders. Organizations depend on reduced operational cost for profitability and sustainability. Involvement in CSR activities increase a firm’s operating cost (KsiężaK, 2016). Consequently, a section of stakeholders may be against the idea since it can undermine the profitability of a business. The disagreement in CSR approach can undermine the CSR activities implemented by a business. In the United Kingdom, it is not compulsory for firm’s to be involved in CSR activities. As a result, a section of stakeholders may wonder why it is a must to have CSR initiatives when the law does not make it mandatory (KsiężaK, 2016). Finally, stakeholder have varying environmental and social issues that they may want to be involved in. The divergent opinions on which social or environmental initiative to invest in may lead to conflict among stakeholders.
Task 3: Review the CSR Policy of a Specific Business
TOMS is a for-profit organization that was established in 2006 and it has been centered on CSR activities leading to its growth and attainting multinational status. The social mission of the company is to donate a new pair of shoes to a needy child for every pair sold (Ford and Stohl, 2019). Currently, TOMS has donated shoes in more than 50 countries across the globe. Furthermore, the company has expanded its CSR portfolio to include health, education, hygiene, and community development programs (Ford and Stohl, 2019). The organization’s CSR activity has earned the company loyal customers since they know by buying shoes from TOMS they are helping needy children in other parts of the world.
Recommend Changes to CSR Policy to Benefit Different Stakeholders
- Expand their business portfolio through innovation for their CSR activities to include a wide range of product.
- TOMS has an environmental responsibility; thus, it should formulate its recycling policy and waste management activities during production to help curb environmental pollution.
Assess the Potential Impact of Changes in CSR Business Performance
CSR contributes to positive business performance since it improves the image of an organization. The positive attributes associated with CSR activities contributes to increased sales and profits because of customer loyalty and increased customer base (KsiężaK, 2016). CSR makes a business competitive in a given market as it promotes innovation and enhances recruitment of a skilled pool of talent and retention of staff because of the friendly working environment and effective working relationships created among workers (KsiężaK, 2016). Finally, CSR promotes motivation and cooperation among workers leading to enhanced productivity. Businesses should adopt CSR as it propels business performance.
Assess the Extent of Voluntarism CSR
The practice promotes effective working strategies to enhance positive outcomes on social and environmental issues (KsiężaK, 2016). Helps people to understand societal and environmental challenges contributing in the formation of pressure groups and responsible citizens geared towards making the society a better place for all.
References
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