Sunday, 21 February 2010


Corporate Social Responsibility as a concept has evolved over a period of time. The Public Relations handbook by Alison Theaker defines CSR as voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of the wider society. The term ‘social responsibility’ implies that business is motivated by more than just self-interest and is in fact, an activity that aims to promote the interest of society at large.

While formulating CSR policies, corporate organisations need to ensure that it is well integrated into the way their business is being administrated. It should not be considered as a separate set of activity that needs to be undertaken in order to build a strong and credible image. CSR is not only about donating money to charities, it is a much more holistic and comprehensive approach which organisations need to incorporate into their business strategy to develop and maintain partnerships with its stakeholders.

Benefits of doing CSR

After discussing some of the characteristics of CSR, the next obvious question which comes to the mind is why do CSR? Although there are lot of benefits of doing CSR, here are some of the key ones:

Building Good Reputation: Corporate organisations can build their reputation through CSR. They can also enhance their image of being honest and trustworthy. Once they build this image, organisations can develop a strong bond with their stakeholders. Johnson & Johnson’s chief executive officer, James Burke, demonstrates that companies with a reputation for ethics and social responsibility grew at a rate of 11.3% annually from 1959 to 1990 while the growth rate for similar companies without the same ethical approach was 6.2%. As Warren Buffet says, “It takes 20 years to build a reputation and five minutes to ruin it.” Ralph Tench and Liz Yeomans in their book Exploring Public Relations explain the importance of a good reputation:

Risk Management: CSR helps organisation to develop a protective shield in the times of crisis. It enables businesses to operate in communities and act as a social license, a form of insurance against unforeseen risks to corporate image, reputation or profits for example, in the case of Cadbury, the company had such a strong reputation that even in times of crisis (salmonella discovery in their chocolates in 2006 in the UK), public still maintained their trust in the company. This does not mean that the company can escape from its responsibilities, it simply means that all its stakeholders would be more willing to listen and understand an organisation’s point of view during a crisis situation.

Human Resource: Another direct benefit generated by CSR is related to Human resource selection process. Studies done in 2005 have shown that over 75% of the MBA graduates would set aside the financial benefits in order to work for an organisation that has a better reputation in CSR and ethics. It also helps to improve employee morale.

Enhance and add value to the organisation products and services: For example, Sainsbury’s announced in Dec06 that it would switch to 100% fair-trade bananas by July 2007. They did it within the specified time frame and the result: 5% increase in banana sales (35 million bananas) since they switched to Fair-trade.

Brand Differentiation and competitive advantage: In today’s competitive market, companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. This brand differentiation and competitive advantage helps build customer loyalty and generate sales. Several major brands, such as The Co-operative Group, IBM and Cadbury etc. are built on ethical values. "Companies with their eye on their 'triple-bottom-line' outperform their less fastidious peers on the stock market" - The Economist.

Hence, we conclude that corporate social responsibility should not been as a distinct or a separate function, it needs to be integrated in to the day-to-day operations of the business. Also, companies can benefit in a lot of ways if they engage in genuine and consistent CSR activities.

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