Why Companies Engage in Corporate Social Responsibility?

Social Responsibility is the main concern of mankind throughout the decades, which started to amplify almost after World War II and the Great Depression. Today, living in twenty first century, at least three sets of drivers are related to the urgency of arising the significance of corporate social responsibility. Poverty, climate change, air and water pollution, soil erosion, global warming, inequity associated with globalization, employee mistreatment, industrial violation, the outbreaks of diseases and viruses are actual problems of our century, which can be solved only by creating an organic linkage between firms, government institutions and society aspiration to achieve sustainable welfare. Modern companies, on the way towards their main purpose of business-profit maximization, choose to engage in CSR to enhance social well-being. However, these actions often lead to more additional costs. Such controversial behaviour leads to indubitable positive result if applied altruistically.

Firstly, CSR can be compared with an umbrella term, which overlaps with other concepts such as population, poverty and income gap. Mentioning these two terms as a unit takes into account the fact that “2% of world’s children living in America enjoy 50% of the world’s toys, one-quarter of the children in Bangladesh and Nigeria are in their countries’ work force.” (Mike W. Peng, 2015) Millions of people are malnourished, suffer from cold and die in poverty, while rich corporations blow money on luxury lives of their executives. Therefore, maintenance of high ethical standards on global levels, arranging activities such as fund raising or donations, diverse educational and aid disaster relief programs, building infrastructure, will ensure companies in combing financial goals and admiration from social side. The cost of implementing CSR practices will require considerable financial commitments in the short run, while in the long run it is observed a correlation between companies’ more vigorous CSR and higher financial performance. It can increase consumer patronage, brand loyalty, the attractiveness of high valued employees to work even for a lower salary, suppress the negative risks of consumers’ actions, managing reputations and possess government support. CEO John Mackey of “Whole Food” company commented:

“When people are really happy in their jobs, they provide much higher degrees of service to the customers. Happy team members result in happy customers. Happy customers do more business with you. They become advocates for your enterprise, which results in happy investors. That is a win-win-win-win strategy.”

Firms as “Whole Food”, which embrace the proactive strategy, constantly endeavour to perform more than it is required in terms of CSR, prove that it is can be successful in terms of profit and society admiration.

Secondly, CSR started to rise after the waves of catastrophes due to the continued application of unsuitable business practices. The idea is that many companies, motivated by profit making attitude, tend to meet the needs of the present generation without compromising the needs of future ones and as a result deteriorate the ecosystem of the entire planet. For instance, in 2010 BP, following its profit mainspring, made a huge mess in the Gulf of Mexico. The great ocean’s garbage is a myriad of company’s waste which results in enormous losses of aquatic life and water contamination. Therefore, CSR acts as a vehicle that ensures that enterprises are responsible for their actions towards the environment. Today smart managers can increase profits through improving environmental practices. It can be exemplified by a firm that invests in environmentally friendly production technology receives lower production costs or can receive some eco-subsidies from the government. As a consequence, it will drive the next wave of eco-innovations like renewable energy, biofuel or organic farming.

To sum up various economists investigate the question why so many companies today tend to engage in CSR and the reasons are complex and intertwined. Such factors as cost efficiency along with socially responsible actions can motivate companies to voluntary engage in CSR and actually it can generate sustainable results if applied positively. 

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