BUSS4 Section B: Corporate Social Responsibility (CSR)

hi in this topic briefing we want to take a look an introduction to the important concept of corporate social responsibility or as it's always abbreviated to CSR never write corporate social responsibility in an essay exam always use the abbreviation CSR and this concept of CSR whilst it's been around for a long time for well over a century it's changed significantly in recent years as stakeholders in the business have existed much greater pressure on businesses and businesses themselves have recognized that some of the issues and problems that arise from what they get up to potentially threaten their long-term prospects as a result CSRs become quite an important corporate objective for many organizations so it's more than just an issue around social responsibility CSR for many businesses is a core part of their business but let's firstly explore what do we mean by it look at a couple of models it's always worth looking at some of the theory key models that you can use to support your analysis and then finish off by looking at some examples and potentially how CSR gets examined essentially a CSR goes to the heart of two questions firstly why do businesses exist what is business for and secondly what contribution if any should business make to society and where you sit on the fence of CSR in terms of whether you view it as being an irrelevance or something that's very important or somewhere in between really depends on how you view the interdependence or the relationship between society because there's no doubt that that society needs business but also business need society as society we need business to providers with jobs to pay those jobs the wages and salaries and other remuneration we need business to invest and to innovate and also society needs business to pay its fair share of taxes so that government spending can be supported on the things that society needs but on the other hand course business there's no doubt that business need us need society needs us as consumers to create demand in the market it needs society to provide the essential public assets in infrastructure for example health systems transport systems legal systems to enable business to take place so there's no doubt the business of society are interdependent but I guess really the debate on CSR the case against the case for really largely is determined by your view on whether business should take account of its broader social obligations responsibilities and there are essentially two schools of thoughts and this is the this is the way in which you compare and contrast there is muslin as the free-market view at the shareholder value theory which is basically leave business to get on with business and let society take care of itself and there's the alternative view which is the social responsibility view which is actually interdependence of businesses society is so important and so strong now that it can't be ignored so let's just spend a few minutes just exploring this theory in a little bit more detail and then take a look at some examples let's start with the case against CSR in other words the free market view and I guess the the Guru of three market thinkers no longer with us but the guy behind this important shareholder value theory as a guy called Milton Friedman and I'm a big fan of using quotes in essays and answers and Friedman said very succinctly the business of business is business the business of business is business it's a really easy quote to remember and what Friedman was really saying and I've just quoted it further here is that you should leave business to get on with what it knows best which is doing business making money investing innovating and the only responsibility that business has to society is firstly to operate within the law and also within the ethical customer the country beyond that business should not concern itself said said Raymond or proponents of shell the value theory business should not concern itself with its broader social responsibilities and you could support this line of analysis by perhaps quoting the views of a very successful businessman the guy behind GE the big American conglomerate he said that you're sure every company should be a good citizen but actually before you could be a good citizen you actually need to make money you first have to make money before you can give it away now so in a in essence the case against CSR is really as Freeman said leave business to get on with business it's not business's job to decide what society thinks it's valuable regulate business prevent them from innovating impose all kinds of obligations on them in terms of social responsibilities there's only one thing that that will do which will increase business costs which will eventually get passed on to consumers and to society in any event businesses should be left with getting on with their prime purpose which is maximizing profits and looking after the needs of shareholders provided that they operate within the law and with the customs of the country in which they operate that is the essence of the case against being obsessed with CSR now all about the flipside the arguments that say no the interdependence between business is so strong that actually businesses can't ignore their broader obligations their broader responsibilities in essence CSR is about businesses recognizing independence and doing more than is required of them by the legal system if you like it's the bridge between what society demands from the law and what increasingly society expects of its its businesses so movement going beyond the bare minimum being a good citizen being part of society rather than simply being a supplier to society if you like of those jobs now there are lots of different arguments for why CSR is a good thing for business to do and of course the trick in an exam is not to list out a whole series of them but to identify maybe one or two if you're trying to build the case for CSR and explain how and whites it's a good thing from a business point of view so for example CSR is often seen as being a way in which particularly large businesses and multinational businesses or substantial brands it's a way in which they can continue to support and build their reputation and indeed some brands as we'll see in a few few minutes actually now base their business brand and image and reputation around their broader CSR activities they see CSR as being a core part of their business just looking down the list there let's pick out what about put about the penultimate one there that CSR can help increase employee motivation and that the most beer that's pretty compelling isn't it that the employees will tend to want to work for organizations that play their part in the broader society rather than simply exist to make money lots of different arguments for CSR but a theory to help you frame knows if you like coming out from a guy called Qatar what he said was that he looked at all the CSR initiatives that the businesses were engaged in and said actually the lots of different ways in which you can you can deliver on your social obligations and your responsibilities for example you can make sure that you source raw materials and other other goods and services sustainably in the words you don't damage the environment in the long term you can make sure that you market to your customers in a responsible way that you don't so you don't break any regulations around marketing but you do so responsibly for example advertising to children or responsible promotion of financial services you can certainly make sure that you look after your responsibilities to employees making sure that you pay them fairly and that you provide strong safe working conditions you can do your bit for good causes and social causes and in particular you can reinvest profits in the societal infrastructure that helps stay in the business in particular education so socata so there are lots of different ways of doing csr that are good for the business he summarized them in that in a way that I just I just summarized on the slide there so I mean you may have come across some of these for example community volunteering it's quite a few many organizations that provide time off for employees to go spend some time in the community perhaps providing their their expertise to to community or societal projects corporate philanthropy cash lots of lots of businesses large and small are prepared to put their hands in the pockets and provide cash donations and sponsorship as part of their csr and of course we've seen increasingly larger brands particularly consumer brands picking up on this concept of cause related marketing great example of that is is the Race for Life with the with the promotion and sponsorship from major supermarket chains is a great example of cause related marketing so cotton leads said that you have lots of different ways of doing it and actually they identified some some nice categories there a bit of theory and clearly there are lots of businesses now that out there that believe that CSR is a fundamental part of their business so we mentioned that CSR has become effectively a strategic objective rather than just a nice to do a couple of great examples of that in fact three of them coming up firstly Marks and Spencers who several years ago launched this CSR initiative called Plan A and they call it play because in their view there is no plan B that plan a is all about them becoming one of the most sustainable retailers in the world in fact they want to become the most sustainable retailer in the world and plan out play walls and is a hugely complex and very successful projects around sourcing sustainably reducing waste within the business a great example of sustainability as part of a CSR plan similarly if you're looking for another great example of a global brand of multinational who have essentially made CSR a core part of what they do look no further than Unilever the CFC oh if Unilever is a guy called Paul Polman and he has pinned his colors to the mass and said no there's no conflict here between making profits and acting in it in a sustainable way actually you'll increase your profits in the long term by adopting a very rigorous approach to CSR in particular what he calls the sustainable living plan throughout their global operations and another great example is is IKEA or akhir as the people that IKEA call themselves so a corporate culture fascinating corporate culture organizational culture and based around this this concept of frugality low cost but also phenomenal product innovation customer service and a consistent culture everywhere you go but actually what underpins Heike its business model is this commitment to to doing things better and in particular to providing a better what they describe as a better everyday life for the many and there are numerous initiatives around sustainability and beyond educational programs and beyond within the IKEA CSR plan so IKEA Unilever and Marks and Spencers three great examples of businesses that have put CSL right at the heart of their corporate being the key strategic objectives but of course there are lots of other examples where you might question the the approach taken to a business's broader social responsibilities I think the the payday loans market is a terrific example the market that's changing rapidly it's now being more heavily regulated in the UK and as a result firms like longer have seen a substantial reduction their profitability and indeed many payday loans firms have now exited the market because of the regulation that's been put in place but there are lots of examples of where you could question the social responsibility of providing high interest payday loans to people who buy large cars afford them and you don't have to look much beyond the retail sector to see some other examples you may be an Abercrombie & Fitch fan or customer or you may have been previously but but no longer one of the reasons why increasingly teenage customers are abandoning Abercrombie & Fitch it's partly because fashions change and and taste change but also because a and F have had some pretty poor publicity about how they treat their employees and and customers and no doubt at all that's how the damaging effect on their brand similarly significant issues arise where you've got complex supply chains around the world and in particular the fast fashion retail chains have being caught out haven't ly over recent years when it's been discovered that the working conditions in which some of their suppliers are providing to to employees have been have been less than satisfactory and of course the classic example of that is the factory collapse at Rana Plaza in Bangladesh and variants a factory many many people killed and of course when they discovered and investigated who was buying the clothes made at that factory they discovered that amongst them was one of the UK's leading fast fashion retailers Primark and it raised all kinds of issues around weather primer were delivering on their broader social responsibilities in this case to protecting the health and well-being of employees at their suppliers in Bangladesh now there are lots of reasons why increasingly firms are adopting CSR but I just wanted to finish off in terms of evidence edits with this this chart that's from a recent report on UK firms and the essentially that the CEO and the board were asked you why why are you increasingly taking CSR seriously and in particular adopting a more sustainable business practices and I think it's quite interesting just linking back to shareholder value theory because it's kind of an argument that says that you know the business of business is business and business should be left alone to get on with the key activity which is making profits and therefore paying tax on those profits back to society through tax but actually this is interesting that the main reason now why firms are adopting the principles of CSR in particular sustainability is because it lowers costs and we know from listening to Paul Polman at Unilever who who absolutely believes in this he doesn't think there was a conflict no conflict whatsoever between maximizing profits and operating sustainably because in the long term it reduces your costs it's more than just the right thing to do it's more than just building brand which are all good reasons for adopting CSR it's actually because it reduces costs and therefore increases operating profit margin and therefore improves the returns to shareholders in other words that chart is saying shareholders should be excited if their firm embraces CSR because it's going to be useful interesting thought now the point about CSR is it's a very broad topic it's very closely linked with business ethics and of course you can bring it in to answers and si si questions as a relevant line of analysis even if the the essay question or the topic isn't specifically about CSR I've just listed here some questions for you to have a think about how would you go about approaching some of these which are essentially around CSR the first one do the activities of businesses need to be more regulated by the government it's really basically saying to what extent can we rely on businesses to act in society's interests should we leave them to get on with the business of business or does regulation have a role to play in enforcing if you like the interdependence between businesses and society that second one really goes back to that remember that child about interdependence the why society needs business and why business needs society well which who needs each other more interesting question a classy question around CSR and also don't forget this is also about stakeholder and shareholders so Milton Friedman would say the business of business is business its shareholders who are the most important stakeholders in a business and that's whom business should look after Paul Polman at Unilever who buys into sustainability would say no actually shareholders benefit from a business taking a much broader view of their stakeholders their customers employees suppliers and Beyond and stakeholders the broader stakeholder group are much more important and lastly a linked question is there a conflict between maximizing profits and actually adopting a proper approach to CSR is there a conflict so interesting questions on they're all linked to CSR for you to have a think about be delighted to continue the conversation on social media if you want to follow me on attitute err to you or myself and grow and Rachel and Jamie increasing to to your business team on at 2 to do business please follow us if you guys are preparing for the Aquabus for essay papers don't forget to use the hashtag plus four and this has been a short topic briefing an introduction and overview of CSR I hope you find it useful

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