Written by Career Peer Uyen Nguyen, Senior, B.A. Economics – Accounting
- What are corporate social responsibilities (CSR)?
When people make decisions about investing in a public company, they care mostly about the shareholder value, which is the financial benefit or the equity that the company owes to shareholders who purchased the company’s stocks. Should this be the only factor that investors consider when investing in a corporation? We hear about this shareholder value a lot because it is what research analysts, stockbrokers, or traders discuss heavily at Wall Street; and public companies always aim to meet Wall Street’s expectations to maintain a high share price. But what most investors usually ignore is the corporate social responsibility (CSR), which means the companies integrate social and environmental concerns into their business practice and openly discuss it with their stakeholders.
I understand that the CSR term seems vague and sounds more like a gimmick that corporations use to boost their public images. The government created the generally accepted accounting principles (GAAP) for IPO companies to assure that they follow the same format and investors can compare corporations’ financial information across various industries. However, there are less guidelines and rules for CSR. Thus, the term might have different meanings to different companies, even within the same industry.
- What does CSR mean in the corporate world?
When consumers purchase goods or services from businesses or organizations who enact positive changes in society, they are doing their part. CSR helps corporations to create trust and increase awareness. CSR activities can be reducing carbon footprints, philanthropy, or limited manufacturing waste policies. According to the Digital Marketing Institute newsletter, here are a few examples of how companies have been doing CPR successfully:
- Coca-Cola: Coca-Cola continues to make gains in trying to resolve environmental concerns. Since learning that its fleet of distribution trucks accounted for 3.7 million metric tons of greenhouse gasses (GHGs) in 2014, Coca-Cola made major improvements to its supply chain, such as investing in cleaner fuel-powered trucks. They also took initiative to reduce 25% of carbon footprint in 2020.
- Johnson & Johnson: Johnson & Johnson has long committed to humanity and sustainability. Their projects range from exploiting wind power to supplying clean water to cities around the world. The purchasing of a private energy provider in Texas Panhandle helped the company to mitigate emissions while offering a clean, economical alternative to electricity. Their “Save the Children” program also helps mothers in developing countries with limited access to healthcare to receive messages from doctors for a safe pregnancy and delivery.
Nevertheless, there are some other companies that still exploit child labor and pollute the environment. For example, according to the Washington Post article, although Hershey pledged for nearly two decades ago to stop using cacao produced by children, yet they failed to uphold their promise. They have not taken any steps in reducing their reliance on child labor; but in fact, most of the chocolate products that we bought today are harvested by children in Ivory Coast, Africa. In a 2011 letter to researchers, Hershey allegedly denied their responsibilities by stating that due to the absence of farm level monitoring, there is no guarantee with respect to their labor practice. Indeed, the first steps in improving and changing the business environment is to admit the mistakes; and Hershey has failed to do so!
These unethical business practices not only affect the image of a company but also have negative effects on consumers. Consumers’ perception has changed greatly regarding whether the corporation has become successful at an expense of others. A Mintel research showed that
56% of U.S. customers stop purchasing from companies that they think are unethical. Moreover, more than 35% of customers stop purchasing products that they see as immoral even though there is no alternative available and 27% stop buying even though they believe the rival delivers lower quality. Consequently, not only should corporations be concerned about earning profit and cultivating growth, they should also consider the ethical business practices they are engaging in.
- What impact does CSR have on employees?
In The Conversation article, a survey by the organizational behaviourist Sigalit Ronen and sustainability researcher Carol-Ann Tetrault was carried out to gain a better understanding of the impact of CSR on employees. The research showed that employees care deeply about the moral face of the corporation and employees don’t respond well if they know the firm is using CSR to create a false impression. Employees value authenticity greatly as they wish to work in a place that is compatible with their goals and values. The employee’s positive perception can lead to increasing job performance and a productive work environment.
When applying for a job, some applicants initially care more about the company’s financial picture, ranking, the location, the pay and the benefits rather than the moral value of the company. However, I encourage you to put the company value and mission into question and ask yourself if you believe that you are in congruence with the job you are applying to. Indeed, not everyone of us has the luxury of picking the company with the best CSR reputation, but if the choices are available under your circumstances, then it is important that you weigh in the ethical value of the company. When working for a company with compatible integrity and values, it will positively affect how you grow professionally and whether you will form a long-term commitment to that firm.
In summary, please be wary that CSR is sometimes used as a shenanigan to “trick” employees, consumers, and investors into believing that the firm is running ethical business practices. Furthermore, it is important to note that I am not making a statement implying that you should support the products that come from corporations which have good CSR reputation. As students, it is hard to buy products that cost $100 more because it is better for the environment or the company did not use child labor in the manufacturing process. It is understandable that we have budget constraints and we feel the need to consume products that are financially beneficial to us. Nevertheless, if your buying power increases as you are more financially stable in the future, it is recommended to choose the products that are produced by companies that demonstrate a strong commitment to CSR.