Corporate Social Responsibility

This document was prepared by Positive Revolution LLC, For educational purposes. 2/16/2011

For Sponsorship Opportunities: Contact: Philip Morgan 1-888-385-6831

Corporate Social Responsibility

Corporate Social Responsibility (CSR) is defined as the role, duty and obligation of a business to provide service beneficial not only to the company itself but to the stakeholders as well. To define clearly, stakeholders are groups of people that exert direct or indirect influence over a business and are also influenced by the actions made by the business. These people could be the community, the consumers, the employees and other social groups that are either directly or indirectly connected to the activities entered, created and maintained by a company. Stakeholders invest time, capital and a personal relationship with the company. The company in turn gives back to the stakeholders by providing excellent services and commendable output products. The concept of CSR is not new to the business community. In fact, as early as the 1800s, the economics of Adam Smith and the philosophy of John Locke have already pointed to the emergence of the model also known as the minimalist business responsibility. Under this model, the value given to the stakeholders is considered to be the sole responsibility of the company. Initially, the maximization of this value is said to be accomplished only by the efficient and productive delivery of products and services to the shareholders. But as business evolved and governments worked to protect the environment and the people, using CSR as an embedded business model became necessary to many companies.

The CSR movement is pioneered by a coalition between avantgarde corporations, lobbyists, environmentalists, socially-conscious individuals, progressive economists and other cause-oriented groups. It is a business evolution that points towards the search for valuation. CSR in its entirety is a consensus among various social groups to bring good to the environment, the community and the business as a whole.
As a whole, CSR tries to address the major problems that companies face today. The economic, social, environmental and ethical challenges are just some of the issues that CSR is trying to deal with. By creating a culture of doing good and being right, companies are ensured that they gain not only their shareholders purchasing preferences but the shareholders trust as well.

Who are the stakeholders?

CSR involves a very large scale of stakeholders. Under CSR, delivering goods and services does not end only with the target social group or community. Because it is the duty and responsibility of the business to provide a plethora of benefits such as community project support, environmentfriendly processes, transparent financial disclosures and more opportunities for the minority, companies are expected to provide for everyone and not just for their specific market group. If the primary customers of a banking business are made up of professionals, income-earners and investors, it doesnt mean that these groups are the only stakeholders of the business. Everyone is a stakeholder; from the employees, the owners, the people who live around the community up to the groups indirectly connected to the company, CSR reaches out to everyone who is included in the web of interconnections a business creates.

Necessity and not just Advocacy

To follow the CSR model is to remember this phrase: necessity and not just advocacy. Critics of the CSR model proposed that business philanthropy, whatever one may choose to call it, is still business. According to these critics, a business will give charity, compassion and generosity only if these activities translate to the generation of more income. Adopting CSR in business is only acceptable if it leads to a surplus in demand and a steady increase in profit. On the other hand, the argument presented by CSR advocates points out the flaw in this reasoning. According to Elizabeth Ness in her paper Corporate Social Responsibility: since when did honesty go out of fashion? Since when did operating with basic decency and integrity move into the purview of the fashionista? And how can todays money markets, which are increasingly remote from the wealth-generating activities (eg commodities and derivatives trading), retain stability if there is no basic underlying integrity? Because social responsibility should be a part of an individuals duty to his own self and to the humanity as a whole, it goes without saying that a business should encompass this value as well. If stakeholders consider honesty, social responsibility and integrity as important core values, companies and businesses should assess their ways and listen to what their stakeholders value as well.

BUSINESS CSR

ENVIRONMENT

SOCIETY

CSR Convergence Diagram

CSR and Long-Term Business Success

The importance of CSR in a competitive market
Increasing pressures from the recent global financial crisis and from several governments taking measures to protect its environment and people have led to the sudden rise of CSR. Because of the drastic fall in the finance market and the increased competition between companies, avant-garde businesses implemented CSR to veer away from their competitors. Consumers value honesty, charity and competency and often use it as a guide in looking for a business to support. And in a steadily increasing competition between companies and global brands, embedding CSR in the business model of a company produces positive results not only for the company and but for the shareholders as well.

Business Branding and Winning Customers

In a competitive marketplace, companies look for ways to separate themselves from the rest of the competition. By adopting CSR, building a unique brand and image in the minds of the customers is further improved. Several major brands such as McDonalds and Adidas spend not only years but decades to build a certain image in the eyes of consumers. By practicing CSR through supporting sports events, headlining feeding campaigns, creating charities and developing output-based community projects, both McDonalds and Adidas indirectly say to the stakeholders that for every hundred dollars you give, we give ten dollars back. This mentality leads the customers to consciously take part in the companys advocacy by supporting not only its products but its CSR endeavors as well.

Risk Management
A companys image takes years, sometimes even decades, to develop and market effectively. Managing risks is an important corporate strategy employed by top-level companies to avoid the possible damage to its brand and reputation. Sometimes, incidents such as allegations of corruption, scandals, environmental accidents and intellectual dishonesty can instantly ruin the customers trust. Creating diversion and maintaining a good track record by adopting CSR can neutralize or reduce the damage done by these incidents.

Recruitment and Human Resources

By gaining the trust of the community and the customers, a company with an embedded CSR plan inside its business model attracts potential employees. A company that proposes a clear and definite CSR plan to its employees and staff can also gain the respect and dedication needed for a healthy workforce. CSR provides a unique brand of service and identity instilled in the culture of the business. Involving the workforce in cause-oriented activities such as tree planting, fundraising, charity work and socially-relevant activities can change the perception of the workforce regarding the company. This direct involvement leads to loyalty and a sense of belongingness within the companys workgroup.

Government Support and Incentives

Companies are keen to avoid any interference from the government in their businesses. By doing voluntary steps and actions to promote environmental concern, better employer-to-employee relations, equal opportunity and support to charity, companies gain not only the support but also the trust of the government and the customers. Potential customers can be transformed into loyal buyers if they know that the business is doing its part in protecting the environment and helping people. Governments can also offer incentives such as tax reduction and flexible working terms for companies maintaining a good CSR implementation.

Reduced Cost of Capital

In the paper entitled Does Corporate Social Responsibility Affect the Cost of Capital?* (Ghoul et.al, 2010), the possibility of reducing a companys cost of equity by employing CSR as a central part of a companys business plan is thoroughly observed. In the study that included 12,915 U.S. business firms and took place from 1992-2007, the researchers concluded that CSR investments can enhance the value of a firm by simply reducing the cost of equity capital. Firms that have high CSR scores enjoyed significantly lower cost of equity in their businesses compared to those with low or no CSR ratings. These findings support the argument that companies with socially-responsible products and practices enjoy a higher valuation and lower business risk.

Spreading Positivity through Corporate Social Responsibility

The need to adopt CSR as a working and active business plan involves a companys future. With the growing consciousness among stakeholders and affected social groups regarding issues about ethical, environmental and social concerns, employing CSR in business proves to be a positive move that brings only positive perceptions and results. Winning the loyalty and trust of stakeholders increases not only the monetary benefits that a business enjoys. More importantly, by being a part of the community and the humanity as a whole, a company promoting CSR is assured to secure its long-term survival and existence.

Four Pillars of Corporate Service Responsibility

Focus a companys CSR programs should properly address a specific concern among the shareholders and the community. Pointing out the exact issue to be addressed and the best plan of action to solve this problem will lead to better distribution of resources and faster viewing of results. Objectives must be properly defined to facilitate better resource allocation and avoid unwanted wavering of attention. Commitment -- long-term support for the companys CSR programs is required in order to succeed in delivering the intended service. A business should prioritize its CSR even in times of crisis and financial challenges. Making CSR a central part of a companys business plan will build a culture of commitment and loyalty to the stakeholders inside the firm and out to the community. Integration CSR should be embedded and integrated into the business system and not treated as a bolt-on activity employed only when the need arises. A culture of doing the right and ethical thing should be learned and practiced not only inside the realm of the business but outside its four corners as well. Transparency a company should have a transparent, open and balanced communication with its stakeholders. Allowing the community to know about the ongoing activities, current plans and future endeavors of the company is necessary to build a strong relationship with people. Building trust is very important in any business and transparency forms a stronger trust coming from the employees, the customers and the community.

Four Pillars of Corporate Responsibility

Informing Stakeholders: Let people know that you care

It is very important to let stakeholders know that you are promoting CSRrelated advocacies and activities. Most of the time, stakeholders are not aware of the steps many companies are taking to promote the overall well-being of the community. By involving its customers, employees and the community, a business raises the awareness level of these social groups. This increase in awareness will lead to involvement and support and a change of perception among your management and your shareholders. Cause-Related Marketing: Reaching out to your Shareholders A company should not hide its CSR endeavors behind the backroom. In contrast, it is very important to market your CSR-related plans to gain the support and respect of the customers and the community. Raising the shareholders level of involvement and awareness is what measures an effective, well-perceived and wellreceived social duty and responsibility. You can reap all the benefits provided by CSR if people know that you are doing the habit of doing good and you have a culture of being good. Using media and the Internet to spread the message Modern technology offers a wide array of resources for you to reach out to your shareholders. Different forms of media such as television, radio and the internet offers an alternative where you can rapidly and instantly spread your message to a wide audience. Sharing news, activities, ongoing projects and future plans involving the community can be achieved through the use of media communication. Proper orientation is also perceived to be the best way in promoting cause-related marketing. Among the mentioned modes of communication, the Internet is considered to be the most dynamic of all. Unlike in television, radio & newspapers where people engage in a one-way mode of communication (target groups can receive information but cannot give information back instantly), the Internet provides an arena where two-way communications can proliferate. In social networking sites, Internet users can view information and instantly react if there are concerns involving the subject. Dialogues between the company and its shareholders are quickly established and trends about important issues can be easily understood.

www.positiverevolution.org

Join the Positive Revolution now!

Positive Revolution LLC. is an organization that supports your need to spread your message of responsibility and positivity to a wider audience. By operating as a Social Cause platform where companies and individuals are able to broadcast their positive actions and social responsibilities, Positive Revolution creates a community of individuals that care about caring. We are an organization committed to motivating individuals across the world within an ambitious timeframe. The heart of our mission is to reach out to people and share with them the news of positive opportunities. Since its formation, Positive Revolution has been a Philanthropic brand where companies and individuals have the ability to broadcast and announce their positive actions and sociallyresponsible initiatives. Positive Revolution also offers unprecedented reach for news on corporate citizenship, sustainability and socially responsible initiatives. We support the endeavor of individuals, companies and businesses in spreading positivity under the following areas: Business Ethics Clean Technology Community Development Human Rights Corporate Governance Renewable Energy Environments, Green Building, Clean Energy, Volunteerism

In a Positive Revolution, our goal is to let people know that YOU are doing something socially, ethically and environmentally beneficial to your community. Because we believe that A society that lacks a POSITIVE outlook on the present and on the future is in danger of extinction", we are committed to motivate companies, social groups and individuals across the world to share their message of positivism through cause-related marketing.

Join us in starting a movement that will bridge together positive individuals and organizations with the causes we value to change the lives of those who need it most.
Visit http://www.positiverevolution.org today!

Notes and References:

1. Johnson Douglas, et.al., Corporate Social Responsibility: Its about long term business success. 2. Strugatch, Warren, Turning Values into Valuation: Can Corporate Social Responsibility survive hard times and emerge intact?, www.emeraldinsight.com/0262-1711.htm 3 Quairel-Lanoizelee, Francoise, Are competition and corporate social responsibility compatible? The myth of sustainable competitive advantage., www.emeraldinsight.com/1746-5680.htm 4. Ness, Elizabeth. Corporate Social Responsibility. 5. Green, Todd. and Peloza, John. How does corporate social responsibility create value for consumers? www.emeraldinsight.com/0736-3761.htm 6. Ghoul, Sadok, et.al. Does Corporate Social Responsibility Affect the Cost of Capital?.2010