CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility

Table of Contents

1) Introduction1

2) Literature Review2

Corporate Social Responsibility4

Examples of CSR in Practice7

Components of CSR9

Economic Responsibilities9

Legal Responsibilities9

Ethical Responsibilities9

Discretionary Responsibilities10

3) Conclusion10

4) Recommendations10

Corporate Social Responsibility

1) Introduction

While purchasing a product/service, or when making purchasing decisions, consumers pay more attention and importance on the social responsibility of firms, especially in developed countries. Social responsibility perceptions play a significant role in affecting the image of the brand and a company, and the financial performance of firms (Orlitzky et al. 2003: 403).

The significant increase in the mass-media coverage, aggressive consumer advocacy groups, rising numbers of anti-corporate web sites have revealed all practices of companies, which appear socially irresponsible. As a result to this surge, as well as the increased market with intense competition, many companies are making Corporate Social Responsibility (CSR) an essential strategic objective. For instance, more than 5,000 companies in 130 different countries have adopted the Global Compact Strategic Policy, which commits to align the operations of the company with a set of standards of socially responsible behaviors. In addition to that, the new Business Ethics Leadership Alliance that consist many leading and global companies such as PepsiCo and Dell made a public commitment adhere to certain guiding principles of Social Responsibility (Friedman 2005: 32).

Thus, the importance of CSR has been rising over the last few years, and it will continue to increase as a result of current worldwide conditions of economies and because of the effects that corporate policies have on society. However, companies that have already adopted these policies are bound to increase the effectiveness of these policies as they globalize. For example, the world famous coffee-house chain Starbucks has always adhered to effective CSR policies; however, it was recently criticized for trying to inhibit Ethiopian farmers from securing trademark protection for their coffee in order to obtain a better price for themselves (Orlitzky et al. 2003: 405).

In addition to that, the complexity further increases when firms source globally, which makes it more difficult for them to monitor the methods used to make the products/services and their quality. For instance, the image and profitability of the brand Mattel were eroded when the management recalled the toys from China due to reason that lead paint was used in its production process. Companies face significant challenges while operating in different nations and regions because of diverse cultures and business practices. Therefore, it is more likely that customers are exposed to inconsistent information about the policies of a firm related to CSR that may differ from their actual practices (Waldman et al. 2006: 1703).

2) Literature Review

CSR is defined as the obligation of a company to exert a positive impact and to reduce its negative impact on the society (Turban 2001: 293). Several studies have demonstrated how information about CSR affects consumers such as their attitudes towards a company, brand, and retail store; purchase behaviors, identification with the company; and causal attributions (Piga 2002: 13).

Schwartz et al. (2003) examined the definitions of corporate social responsibility, and concluded that ...