Corporate Social Responsibility Essay Example for Free

Corporate Social Responsibility Essay To what extent is Corporate Social Responsibility beneficial to a company’s performance? In the 21st century, Corporate Social Responsibility (CSR) has become an important, if not essential, for businesses. In addition to basic law compliances, the focus of the consumers as well as the business world now include the impact the company has on the society and on the way they use recourses (Davis, 2010). CSR has become a contributing factor to a company’s financial performance. This is supported by the issued figures of sizeable direct contribution from CSR to a company’s profitability (International Corporate Social Responsibility Conference, 2006) from analysis of notable companies. CSR is believed to have assisted companies both externally and internally. 70% of European consumers express that they are ready to pay more on goods produced by socially responsible companies (CSR Magazine Europe, 2000). On the other hand, CSR is suggested to be one of the qualities employees would like to seek. As Copeland (2003), former CEO of Deloitte Touche Tohmatsu has highlighted, the best professionals in the world want to work for companies that exhibit good corporate citizenship. This essay aims at advocating Corporate Social Responsibility as a beneficial policy to a company’s performance through improving customers’ perceptions and employees’ work performances, and thus, can possibly result in a boost of company’s performance, particularly financially. A company’s revenue is mostly generated from customers. The Service-Profit Chain stated that customer value is one of the two factors that will heighten a company’s revenue and hence the company’s profitability( Zeithamal Bitner, 2003). Therefore, a company’s financial performance is affected by how customers value a company’s products. CSR is believed to be a factor that adds value to the product as well as the overall reputation of a corporation. According to Cone Communication (2012), 82 percent of consumers state that they are more likely to purchase a product that clearly demonstrates the results of the companys CSR initiatives. Further more, in the survey conducted by Woolley (2012) that make comparisons between two similar products, the Coca-Cola and Pepsi Cola; over half of the respondents say that they would switch to the alternative provided if it offers more in terms of CSR. In fact, CSR influences consumers’ decision in a way that they tend to be in favor of their company than the competitors that are doing poorly in terms of social responsibility. This creates loyal customers. Hallowell and Schlesinger (2000) illustrated that customer loyalty drives company’s profitability by minimizing marketing and operating cost. Those are achieved through consumers’ confidence with the company’s products, word of mouth and familiarization of the company’s operation system. This results in a higher profit for the company. While the gain from maintaining a good reputation through CSR initiatives may not seem evident, the adverse effect by a socially irresponsible decision on a com pany’s revenue is much easier to observe. In 1980s, Nestle, the world’s largest producer of breast milk substitutes was boycotted because of its infant formula and way of unethical marketing, which contributed to the unnecessary death and suffering of infants in developing countries. The boycott was widespread globally and Buffle (1986, p. 13) estimates $770 million to $ 1540 million sales were lost. It shows that corporations who are being socially irresponsible may have to face severe consequences, including decrease in profits, damaged reputation and lower preferences. To conclude, CSR is likely to uplift a company’s image in customers’ perceptions, earn a higher preference and improve a company’s performance, which mostly will reflect directly from its higher revenue and profitability. CSR benefits a company not only externally but also internally; not only by increasing revenue but also decreasing costs across various aspects. Good CSR practices can help to attract new and talented employees. According to the research by the resourcing communication agency Tenney Clemons Saarelainen (TCS), 44% of employees express an organization’s CSR policy is likely or very likely to affect their decision to apply for a job within that organization. This may result in a lower advertising cost for hiring. Further more, cost of retaining staff can also be reduced by enhancing morale and hence commitment to the corporation. As CSR initiatives within a company includes providing employees’ a work life balance, a safe and more comfortable work place and being environmental friendly in the office, these require employees’ participation and team building. Sharma and Devi (2009) argued that it helps to build positive team spirit in the organization and creates a ‘winning’ environment at the workplace. The dedication from the directors will also result in improving employees’ satisfaction. This is reinforced by the investigation result by Rittippant.N, Tangthuttong.A, Sinyodyeam.J and Aurjongmanee.A (2011) which stated that there is a positive significant relationship between organizational’ members perception of CSR and organizational commitment, which is coherent with the previous studies. On the other hand, Heskett et al (1994) stated that satisfied employees are more productive and produce a higher service value. With more satisfied employees from the well-organized CSR initiatives, a company is expected to be more efficient and thus fewer wastage and errors. The improved quality of services is expected to delight consumers and increase their satisfaction, which can further enhance the value of products. Conclusion In order to heighten a company’s revenue and hence the company’s profitability, increasing revenue or cutting costs can be one of the solutions. Corporate Social Responsibility benefits a company in the way that it may achieve both options at the same time. On one hand, it is likely to be able to enhance the image of the company and increase customers’ preferences, and achieve higher revenue; on the other hand, it tends to reduce operating costs on advertising, retaining employees and wastage for corporates. The combination of increasing revenue and decreasing cost may result in a boost of the company’s financial performance. By analyzing how customers and employees react towards socially irresponsible behaviors by companies, it is observed that both customers and employees have become more and more engaged in CSR. According to Strandberg (2002), one of the top trends around which there is consistent agreement is the increasing importance of stakeholder engagement in the future of CSR. However, whether or not there would be a conflict of interests between CSR and marketing strategies, operating strategies or human resources strategies is yet to be explored.