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Corporate Social Responsibility - Coggle Diagram
Corporate Social Responsibility
Different responsibilities:
Economic Responsibility
meet's society's interests and demands; the obligation to seek out supplies of raw materials, discover new resources and improve current technologies.
Legal Responsibility
responsibility to fulfil the terms of contract with employees, customers, suppliers, lenders, accounting firms and so forth.
Social Responsibility
ethical representation that society has on the business, even if this comes with economic cost
Do good
Prevent Harm
Not cause harm to others
Models of CSR
Economic Model of CSR
Maximise profit within the law (serve shareholders)
Philanthropic CSR
Business is embedded within a web of social relationships of mutual rights and responsibilities to a range of stakeholders - does not give primacy to one stakeholder group over another, though there will be times when one group will benefit at the expense of others)
Citizenship Model of CSR
May choose to contribute to society as a matter of philanthropy, but not as a matter of duty or social responsibility
Integrative Model of CSR
Social responsibility is integrated directly into the mission and purpose of the corporation (e.g. social enterprise)
Advantages of CSR
Helps balance corporate power and rights with responsibilities
Encourages more responsible self-regulation than government oversight
Promotes long-term profits for businesses
Improves business value and reputation with trust and confidence building
Socially responsible companies tend to attract employees who are eager to make a difference in the world
Manages negative externalities caused by businesses
Studies have found that socially responsible companies produced the following metrics:
Increase productivity by 13%
7.5% increase in employee engagement
Increase the company's share price by 6%
Create "reputation dividend" worth up to 11% of market cap
Reduce financial risk, the cost of equity, and the cost of borrowing
Classical View of CSR
Under Adam Smith's Free Market Theory and Ethical Egoism, the primary criteria for business performance are economic efficiency and growth in production of goods and services.
Corporations should engage purely in economic activity and be judged solely in economic terms. While social issues are important, this should be left with other institutions/ individuals who specialise in such areas.
When corporate seek self-interest, it creates overall benefit for the whole economy, even in the area of social responsibility
The classical view suggests that ethical egoism leads the invisible hand to resolve issues eventually.
Anti Classical View
Powerful corporations have to be restrained and the only way this can be done is through incorporating active CSR.
E.g. Apple's market capitalisation account for most countries' GDP.
Social problems can be too big for governments to handle alone. Corporations should help socially if:
The need is urgent
The corporation is of close proximity
The corporation can respond effectively
The need will be left unattended to unless a corporation acts
Disadvantages of CSR
Individuals and governments may find little incentive to be involved in the business' CSR efforts
Many businesses lack expertise, knowledge in dealing with social issues
Cost of CSR are born by stakeholders and customers
Lower economic efficiency and short-term profits
Choosing social issue to address
Generic social issues: Issues important to society but not significantly affected by the company's activities in the course of business.
Value chain social impact: Areas significantly affected by the company's activities in the course of business. e.g. DHL; carbon emissions
Social dimensions of competitive context: Factors in the external environment in places where company operates E.g. Samsung offering educational opportunities to girls from rural India