CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility of Business in a Global Economy

Corporate Social Responsibility of Business in a Global Economy

Introduction

The business paradigm about admired companies has changed throughout the century. In the 70s and 80s, companies showing quantitative growth were considered admired companies while qualitative growth was the key determinant in the 90s. During these earlier periods, a company's corporate strategy was focused mainly on growth based through economies of scale and productivity to achieve larger revenue (Sims, 2003: 318). However, quality problems and inefficiencies began to erode profitability of many firms. In response, firms paid extra attention to quality of products/services and efficiency of the process resulting in wide adoption of new management arms such as quality management, downsizing, and business reengineering. Through these new management methods, firms tried to focus more on core activities replacing less or non-value adding activities with information technology or by outsourcing those activities. Because of the fast changing competitive environment stemming from globalization and technology advancement, firms also paid extra attention to flexibility and innovation. As described above, the expectation from market to a firm has mainly focused on two topics.

The first is about the customer value that the firm creates. Customers want to have better products/services at a lower cost and later at a faster speed. The second is about the continuous growth of the firm. Investors want the firm to stay competitive so that they can see continuous economic returns. However, more recently, society has begun to place additional demands on firms because it recognized that unethical behaviour from a firm can produce a social risk. Therefore, the new demand on companies is to actively participate in reducing/avoiding social risks by directly or indirectly allocating firm's resources to broader stakeholders such as customers, local community, and non-profit organizations (Chan & Shenoy, 2009: 236). In response, numerous organizations created corporate social responsibility (SCR) functions that play a role in utilizing the allocated resources and marketing their activities to society expecting a positive return such as brand recognition, reputation, and retention. A number of business magazines publish lists of the most admired companies that simultaneously carry out social responsibility as well as its own business; and award them with social recognition.

Evaluating the Corporate Social Responsibility of Business in a Global Economy

What is Corporate Social Responsibility?

Corporate social responsibility (CSR) is a broad concept thus; there is a lack of consensuses on the definition of CSR. According to the definition of The European Commission, CSR is seen as “a concept whereby companies decide voluntary to contribute to a better society and a cleaner environment” (Goldman, 2006). Among many, a frequently referenced definition from academic literature is that “the firm's considerations of, and responses to, issues beyond the narrow economic, technical, and legal requirements of the firm to accomplish social (and environmental) benefits along with the traditional economic gains which the firm seeks”. While there are numerous definitions of CSR, the common concepts among definitions are voluntary activities of firms that benefit society and the interaction between ...