Historically, companies have mostly pursued the goal of profit maximization at the expense of all other considerations. However, when the same entities participate in activities that do not promote this objective and instead advance those of a social or philanthropic nature, they are deemed to engage in corporate social responsibility (CSR) (Rioux and Vaillancourt, 2020). Traditionally, CSR has been a voluntary practice adopted by various companies but it has recently morphed and integrated into the corporate practices of many organizations at local and international levels (Sajko, Boone and Buyl, 2020).
Consequently, there has been a general acceptance of CSR as a core business function in many business circles. This paper highlights reasons why companies that have been traditionally engaged in profit-maximization support CSR activities today and concerns that critics may have towards such initiatives. The goal is to provide a holistic understanding of the importance of CSR to business growth and development.
Why Companies are Supporting CSR Initiatives
CSR has been widely adopted by many countries because of its potential benefits to local communities and organizations. In this regard, companies support it because it promotes a win-win strategy for businesses and communities alike, whereby everybody stands to benefit from the pursuit of common interests (Rioux and Vaillancourt, 2020). After all, it capitalizes on the symbiotic relationship that different parties involved business processes share. For example, CSR helps communities to integrate corporate support in promoting social agendas. In this framework, companies benefit from acquiring a good brand image by engaging in noble projects.
The triple-bottom-line theory also supports CSR because it is premised on the assumption that corporations evaluate their performance based on three platforms: their economic, social, and environmental impacts. In this regard, the theory advances a hybrid understanding of corporate impact analysis, thereby eroding the credibility of arguments made by critics of CSR who suggest that companies only exist to maximize profits (Böhm, 2020). Therefore, the triple-bottom-line theory promotes an alternative view of evaluating business performance. It is hinged on the understanding that companies not only exist to make profits but also to have an impact on people’s lives and communities. Therefore, proponents of CSR view it as one of the many responsibilities they have towards their stakeholders.
Companies also support CSR because it is an effective basis for differentiating one brand from another. In other words, some businesses believe that they genuinely care about their social and environmental impacts and consequently use CSR to differentiate themselves from their competitors who may be “less concerned” about the impact of their actions on society (Rioux and Vaillancourt, 2020). These types of businesses adopt a broader understanding of their operations, beyond the basic instinct of maximizing profits, thereby promoting the view that the pursuit for profit is tied to social performance.
The stakeholder theory supports the above-mentioned views because it encourages people to evaluate corporate performance subject to the impact that firms have on stakeholder groups that are affected by their operations. These groups are diverse and may include employees, government agencies, investors, and local communities (Painter, Pérezts and Deslandes, 2020). Based on the need to address all their interests through CSR, the stakeholder theory shifts the focus away from profit-maximization to the pursuit of initiatives that benefit everybody (Barney and Harrison, 2020). In this regard, the stakeholder theory proposes a holistic understanding of organizational performance.
Reasons against CSR
Critics of CSR have questioned the motives for companies to engage in CSR activities. Some of them base their skepticism on the assumption that corporations can be deceitful in their CSR claims (Haslam, 2020; Hira, 2020). Particularly, those who champion this view claim that companies can pretend to be social and environmentally conscious to mask their unethical business practices (Hira, 2020). The assumption here is that some companies engage in CSR as a “trend” and not because they believe in its importance. These criticisms have increased mistrust and created cynicism among people about the authenticity of CSR.
Critics of CSR have also given reasons for their objection to the concept based on the value conflict that emerges when firms pursue social objectives. They argue that the sole reason why corporations are formed is to maximize profits and not to promote social or environmental agendas. Milton Friedman is a proponent of this view and he argues that the sole reason why corporations are formed is to maximize the interests of their shareholders – profit-making (Böhm, 2020). Therefore, he believes that engaging in CSR activities misdirects them from this goal, consequently distorting the core functions for which businesses are formed.
The insights presented in this paper suggest that there are varied views about CSR. Those who support it do so because they believe that organizations have a broader responsibility of meeting the interests of different stakeholder groups and CSR is one of the tools to help them achieve this goal. Comparatively, critics claim that organizations cannot be trusted to promote the CSR agenda because of a conflict of interest. To address this gap, CSR needs to be separated from government intervention. In other words, it should not be mandatory for companies to engage in the CSR practice. This is the best way of ensuring that it remains an acceptable and effective way of realizing social justice in business development.
Barney, J. B. and Harrison, J. S. (2020) ‘Stakeholder theory at the crossroads’, Business and Society, 59(2), pp. 203-212.
Böhm, A. (2020) The social responsibility of businesses. The example of Zalando. London: GRIN Verlag.
Haslam, P. A. (2020) ‘States and firms co-producing corporate social responsibility in the developing world’, Journal of Developing Societies, 36(3), pp. 270-289.
Hira, A. (2020) ‘Developing state capacity: the missing variable for corporate social responsibility?’, Journal of Developing Societies, 36(3), pp. 290-311.
Painter, M., Pérezts, M. and Deslandes, G. (2020) ‘Understanding the human in stakeholder theory: a phenomenological approach to affect-based learning’, Management Learning, 4(2), pp. 1-10.
Rioux, M. and Vaillancourt, C. (2020) ‘Regulating corporate social responsibility for economic and social development through trade rules’, Journal of Developing Societies, 36(3), pp. 335-352.
Sajko, M., Boone, C. and Buyl, T. (2020) ‘CEO greed, corporate social responsibility, and organizational resilience to systemic shocks’, Journal of Management, 7(2), pp. 1-10.