Two Sides of Corporate Social Responsibility

Corporate Social Responsibility (CSR) -- it is the hottest topic out there. Should we trust that companies live up their values or there are any underlying motives? But, let's first start by exploring the definition of Corporate Social Responsibility (CSR). It is defined as the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life (World Business Council on Sustainable Development, 2000). So, CSR is based on the belief that companies make positive contributions to society.

Some examples of CSR activities that organizations participate to be socially responsible are as follows:

Philanthropic CSR- Companies donate to the needy via charities. Their donations include clean water programs, helping those affected by natural disaster etc.

Environmental CSR- It is very important to limit pollution. Companies participate in CSR by limiting wastes and staying under threshold limits or help in reducing carbon or plastic print.

Ethical CSR- By looking after the well-being of employees and following fair labor practices, companies engage in ethical CSR. Also, companies ensure that there will be no gender, race or other discrimination among its employees and each employee will be given equal pay and better living wages.

Why do companies engage in CSR?

Reputation- When a company invest on these values that are probably intangible, they will have direct effect on their balance sheet numbers. CSR will give the company a positive image that it is trying to make the world a better place.

Investor relations- There are many investors that believe that socially responsible companies are secure  investments. Apart from this reason, some investors see themselves as socially responsible people and are interested in investing in such companies.

Employee satisfaction- According to Gareth Chadwick, 2005 , 3 of 5 people are more  interested in working for companies that have some kind of socially responsible portfolio. This helps the employees identify the company as a fair employer and will retail goodwill among them.

Competitiveness and positioning- If a company invests in CSR today, it only means that the company can position itself as the market leader in its field and will be ahead of the game if regulations are introduced while the other companies in the same sector take up CSR as a business strategy. Nestlé started its Fairtrade coffee as part of CSR initiative. This not only helped it to secure its market position but helped it regulate profits from niche markets.

Operational cost reduction- CSR can be used to save money. As part of CSR, some environmental measures such as energy saving or minimizing wastes might help to reduce operational costs. These kinds of CSR are prioritized by companies—this raises a question, what will happen if CSR measures necessary to protect the environment are not profitable? Will the companies still initiate them?

Who profits because of CSR- Society or Organizations?

The companies are supposed to earn benefits while helping the society. But who really wins? And, if there is a benefit to the society is it balanced by losses to society because of the company's operations? Many criticize that companies improve their image by associating themselves with a charity as there is an underlying motive, because the company benefits more than the charity. Some of the criticisms that companies face in the name of CSR are as follows:

CSR for public relations- By pleasing its customers ethics through CSR, companies can develop a special connection with their customers. The corporate charity associations give them an advantage to target markets. Especially in this era where social media is powerful, companies are looking for ways to deliver their message to customers. CSR will help to wash the company's negative impressions.

CSR to avoid regulations- Companies sometimes argue that regulations can hinder their innovative capability. This however, makes us curious as to why would a 'socially responsible company' have any problem with government regulations? Is it probably because they want to be selective about which areas of 'bad practice' they want to eliminate, or do they want to use their 'best practice' to distract attention away from the bad? Sometimes they might need the bad practice of competitor only to get an advantage over them.

 Let’s consider the example of Coca-Cola… 

Coca-Cola is a company that swears by CSR. It even goes by the saying- “CSR is in our DNA”. But few years ago, this giant faced reputation damages for its bad practices in India.  An Indian NGO called Centre for science and Environment tested samples of Coca-Cola that are being sold in Indian market and came up with evidence that said Coca-Cola’s products contain pesticides. Surprisingly, there is an acceptable level for pesticides consumption, but Coca-Cola was the only company that exceeded limits. They also extracted large amounts of groundwater and polluted the sources. The NGO’s urged the government of India to enforce water standards and sue the giant. Coca-Cola had to go through legal procedures and lost credibility of many of its Indian customers. People spoke about how Coca-Cola was interested only in profits and not health of its customers. The sales of the company have dropped down to as much as up to 30%. It was very important for Coca-Cola then to launch CSR to fend off their credibility damages.

According to CSR report,2018 of Coca-Cola, they collected approximately 14% of plastic packaging’s for recycling globally. But who created all that plastic in first place? According to the guardian, Coca-Cola generates 3M tons of plastic every year. It produces 200,000 bottles a minute. Is it able to recover and recycle all that plastic? 

Another news is that Coca-Cola is now using operations that contribute positively to healthy freshwater and marine ecosystems around the world. They are also taking many fresh CSR initiatives and conducting programs to empower woman. They lend about 1 % of their revenue to charities. That being said, do you think that Coca-Cola has a smart approach towards CSR in which they increase their profits and brand image, or do you think that they changed their ways and are genuinely contributing to society and environment? Whatever is the case, it is able to satisfy its shareholders with performance of the company as well as its CSR.