(2) Why should firms undertake corporate social responsibility?
Corporate social responsibility (CSR) is a business approach that creates long-term shareholder value by embracing opportunities and managing risks derived from economic, environmental, and social developments. A CSR policy functions as a self-regulating mechanism whereby business monitors and ensures its active compliance with the law, ethical standards, and international norms. The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, and stakeholders. Customer social responsibility can build the loyalty and trust that both ensure a bright and sustainable future in business.
In our global society, corporations are becoming increasingly visible, and are judged on their results and behaviour. The reputation of a brand is achieved, in part, as a result of corporate governance. By integrating corporate social responsibility into your business as a core value, you are contributing to a better society and will be recognized for doing so. Businesses can increase their CSR by supporting public expectations, focusing on long-run profits, complying to ethical obligations, boosting their public image, bettering the environment, discouraging further government regulation, balancing responsibility and power, remembering stockholder interests, and building a superiority of prevention over cure.
The benefits to developing a positive CSR are an enhanced ‘brand image’ with regard to trust and reputation, new customers and development of a strong relationship with consumers, a better ability to attract and motivate a talented workforce, and the availability of new resources by influencing key stakeholders (investors and policy makers).
On the other hand, if a company was to not undertake CSR, there would be negative impacts on that organization. For example, there would be an unfavorable public opinion and increased reputation risk. This might lead to decreased shareholder value and a diminished stock price. Also, there would be increased litigation and related legal costs on various social and environmental issues, a decreased customer loyalty, and a loss of customers and/or stakeholder support due to the negative publicity.
Corporate social responsibility is an important tool for a developing economy to ensure that the growth is evenly distributed amongst all. By helping to increase the quality of living of our society as a whole, CSR entails many positives to a business. It is the focused actions of a corporation that desires to do well while simultaneously doing well for the community, the society, the environment and all aspects with respect to general human well-being.