Corporate Social Responsibility (CSR)
When a company is established all they look for is sales, profit and market share. Without these, a company cannot survive for long. But there comes an instance where finance is not only the key to survival. Financially oriented marketing has been highly criticized as this objective may lead to socially irresponsive practices (Sirgy and Lee, 1996). The company not only has the responsibility to their stakeholders but the society in which they operates. Social responsibility marketing is a way in which the company manages marketing responsibly, which contributes to the society in which it operates for the well being of the society (Brassington and Pettitt, 1997). This doesn’t mean that the company is responsible to resolve all the issues in the society and it’s not practically possible too. What a company should do is to find out which issues to focus on depending on their resources so that they create a shared value and gain a competitive advantage (Porter and Kramer, 2006). This may not be same in different countries. The nature in which the stakeholders view corporate social responsibility is highly influenced by the cultural values and differences (Kampf, 2007). As the company view to corporate responsibility evolve and develop, at the same time the public opinion also matures. So the company should look ahead and predict the changing awareness of society on the issues (Zadek, 2004). The social responsibility marketing helps company to grow substantially in a responsive manner (Moir, 2001).
The way how organizations view Corporate Social responsibility may be different. Many companies practice it for a public relation campaign to promote themselves trying to become a good citizen. The result of this kind of corporate social responsibility investment has proved to be wrong; with the organization not getting profit for their good work and also not generating any social changes (Porter and Kramer, 2002). Zadek suggest that there are five stages in which a company handles Corporate Responsibility. First is the defensive stage where the organization denies or rejects the unexpected criticism. For example, when there was a protest against the sweatshop conditions at Nike’s overseas suppliers, they claimed that it was not their responsibility to worry about other countries labour conditions. Second is the compliant stage where company adopt a policy based compliance approach. They establish a corporate policy as a cost of doing business in order to protect their reputation. Third is the managerial stage where the company understands this as a long term problem and give managers the responsibility for the social problems and its solution. Fourth is the strategic stage where the organization integrates the social issues into their company strategy. They believe that this will give them competitive advantage and will contribute to the long term success of the company. For example the automobile industry develops environmental safer mobility because their future depends on it. The final stage is the civil stage where the organization has collective action to address social issues. For example alcohol companies such as Diageo have taken educational initiatives which promote the responsive drinking (Zadek, 2004).
Although company have realized that addressing social issues is very important for them, they have been struggling how they can integrate corporate social responsibility into corporate strategy (Hirschland, 2005). Out of ten organizations, six have no strategy for corporate social responsibility and much of these companies are not clear on how they can effectively predict which social issue will influence their overall strategy (McKinsey and Company, 2006). So how is it possible for the corporate social responsibilities build into strategy? A company Mission shows why they exist, what they are trying to achieve and their long term goal. If a cosmetic company mission is to make better products and they make products that do not harm animals then they have addressed a social concern that is animal brutality. Building corporate social responsibility into the mission needs the company to understand the environment properly. There are various problems in the society and not all are yet the social issues (Galbreath, 2009). The company should take into consideration the geographic, demographic, psychographic and behavioural aspects in order to get their target market (Kotler and Keller, 2007). There is also a social dynamic variable. In an attire industry, customers are interested in how and where the cloths are made, especially due to sweatshop practices (Galbreath, 2009). Customer needs is what a company focus on to make new products. The cultural factor, social factors and personal factors are important to look at (Kotler and Keller, 2007). But so is the analysis of unmet social needs and concerns. The company should not view this as a threat but should realize that this is an area of opportunity for innovation. By this way a company can create a new market segment. One of the features of strategy is matching the resources of the company with the outside environment which is changing all the time in a form that improves the company performance. For an instance let us consider an industry which invests resources in technology which reabsorbed the heat released from the smokestacks and then turn it into some kind of energy. What is the outcome? The company saves their cost and it also benefits the public. So it is doing well to both itself and society, addressing the social issue. Company can gain a position in the market or a competitive advantage if it addresses the unmet social needs and social concerns (Galbreath, 2009). For example let us consider Whole Foods Market which specialized in organic, natural and healthy food product. They have a differentiation strategy which not only addresses a social concern about healthy, nourish foods but they have been successful financially. Whole Food Market saw the concerns of the society and grabbed the opportunity to get a competitive advantage. They created shared values which benefited both the society and the company stakeholders (Porter and Kramer, 2006).
In 1995, Shell (UK) decided that they would dispose a redundant oil rig, Brent Spar into the North Atlantic and sink it and proceeded with the government’s full support. The other alternative they had was to break the rig onshore and recycle materials which were suitable for recycling. But this would have cost more and would also have negative environmental side effects. If it was not intervened by Greenpeace then this dumping would have gone unnoticed. They used internet, press and posters to maximize the media coverage and to let people know what shell was doing. In UK, the initial response was not good and the prime minister still had strongly supported Shell’s position. But when the campaign was done in Germany, Denmark and Netherlands, the story was different. The people there seemed to be more environmental sensitive. Motorist began to boycott Shell petrol. One of the Shell station in Germany was firebombed. The petrol revenue dropped by between 20% and 30% in Germany. The company said that it lost millions of dollars and had its brand image destroyed (Brassington and Pettitt, 1997; Kirby, 1998.) So from this we can see how socially irresponsible companies are affected in the long term. This has a devastating effect on the company’s goodwill (Sirgy and Lee, 1996).
There is a view that social responsibility marketing contribute to the financial performance of an organization. The consideration of social and environmental factors while making corporate decision has been a greater subject recent year than just focusing on short term profit. A shareholder approach says that the social and environmental aspect must be taken into consider to increase the long term financial return while decision making. While trying to find the relationship between social responsibility marketing and financial performance, it was found that there was no statistically significant relationship between the two (Brine et al., n.d.). Organizations that hold on to the social responsibility marketing are understanding that long term profit of the organization and acting wisely in the interest of the stakeholders are not mutually exclusive. In a research carried out in Australia, the result showed that there was increase in sales and equity and decrease in return in asset with firms practicing social responsibility marketing (Brine et al., n.d.). Some people have theorised that there is negative relation between social responsibility and financial performance and to back up their view they said that the high investment for the social responsibility results to additional cost. Others have argued that there is a positive relation (Balabanis et al., 1998). McGuire et al. (1988) cite that the company who have been involved in social responsibility may face relatively less labour problem compared to those companies who do not involve or may be the customers will be happily inclined to their products. Social responsibility marketing improves the company reputation and relation with the investors and government official which is financially beneficial (Balabanis et al., 1998). According to the research conducted in top business companies in UK, social responsibility marketing seemed to be affected by the gross profit to sales ratio in the past and corporate social responsibility disclosure was linked with concurrent financial performance. So the combination of social responsible marketing and corporate social responsibility disclosure is found to have a positive effects on company overall financial performance (Balabanis et al., 1998). The impact of Social responsibility marketing is found different on the area in which it operates. In environmental activities, which is said to have a higher cost, social responsible marketing was found to be negatively related to financial performance where as the enhancement of women position, which is said to have relative lower cost was found to be positively related to financial performance (Balabanis et al., 1998). Viewing things from this perspective we can get an idea that social responsibility marketing and financial performance varies from culture to culture.
Social responsibility market has a positive influence in the company itself. It is an important factor that attracts and retains the employees. Any employee working for a social responsible firm will be proud of working there. The workforces who operate in these conditions are highly motivated which affect their performance and this ultimately leads to higher productivity. Operational efficiency is increased with the companies who are socially responsible because it provides the chance to reduce the present and future cost of the company (Brine et al., n.d.). Also the practice of social responsible marketing helps company identify the unmet social needs and issues which can be viewed as a great opportunity for innovation (Galbreath, 2009). This leads to a differentiation, like the example we considered of Whole Food Markets and also provides the competitive advantage for the company (Porter and Kramer, 2006). As the consumers have very high expectation of corporate social responsibility (Podnar and Golob, 2007), they will consider such companies compared with others and will maintain a long term relationship with them. The relations with the government official, investors and bankers are improved if a company is known to practice the social responsibility marketing who are the providers of the capital needed for the company (Balabanis et al., 1998). Organizations operate because of the society who has given them the permission to. If these companies do not become socially responsible then they have the risk of losing their licence to operate (Porter and Kramer, 2006). So we can see that adaptation of social responsibility marketing gives the company benefit that they couldn’t get otherwise. Employee motivation, innovation, reputation, competitiveness, market position, operational efficiency, licence to operate, investor relations and the access to capital are among the key drivers that help any firm to run smoothly and survive in the long run (Brine et al., n.d.).
It has been realized to the marketers that the environment resources are finite and some are already very scarce, so the social and environmental impacts of marketing should be considered (Feldman, 1971). Earth is the only planet where life is possible and it’s also the duty and responsibility of any organization to conserve and protect her. So looking at all these different aspects, it is highly recommended for the management to practice social responsibility marketing.
References:
Balabanis, G., Phillips, H. C. and Lyall, J. (1998) Corporate social responsibility and economic performance in the top British companies: are they linked? European Business Review. 98 (1), 25-44.
Brassington, F. and Pettitt, S. (1997) Principles of Marketing. London: Pitman Publishing.
Brine, M., Brown, R. and Hackett, G. (n.d.) Corporate social responsibility and financial performance in the Australian context [online]. Available from:
http://www.treasury.gov.au/documents/1268/PDF/04_CSR.pdf [Accessed 20th November 2009].
Feldman, L.P. (1971) Societal adaptation: a new challenge for marketing. Journal of Marketing. 35 (3), 54-60.
Galbreath, J. (2009) Building corporate social responsibility into strategy. European Business Review. 21 (2), 109-127.
Hirschland, M. (2005) Taking the Temperature of CSR Leaders [online], Business for Social Responsibility. Available from:
http://www.reportesocial.com/Files/Taking_CSR_leaders.pdf [Accessed 1st November 2009].
Kampf, C. (2007) Corporate Social Responsibility: WalMart, Maersk and the cultural bounds of representation in corporate web sites. Corporate Communications: An International Journal. 12 (1), 41-57.
Kirby, A. (1998) Brent Spar's long saga [online], BBC News. Available from:
http://news.bbc.co.uk/1/hi/sci/tech/218527.stm [Accessed 15th October 2009].
Kotler, P. and Keller, K. L. (2007) A Framework for Marketing Management. 3rd ed. New Jersey: Prentice Hall.
McGuire, J., Sundgren, A. and Schneeweis, T. (1988) Corporate social responsibility and firm financial performance. Academy of Management Journal. 31 (4),854-872.
McKinsey and Company (2006) The McKinsey Global Survey of Business Executives: Business and Society [online], McKinsey & Company. Available from:
http://www.mrcpa.org/pdf/606aa.pdf [Accessed 16th November 2009].
Moir, L. (2001) What do we mean by corporate social responsibility? Corporate Governance. 1 (2), 16-22.
Podnar, K. and Golob, U. (2007) CSR expectations: the focus of corporate marketing. Corporate Communications: An International Journal. 12 (4), 326-340.
Porter, M. E. and Kramer, M. R. (2002) The competitive advantage of corporate philanthropy. Harvard Business Review
Porter, M. E. and Kramer, M. R. (2006) Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review
Sirgy, M. J. and Lee, D. J. (1996) Setting Socially Responsible Marketing Objectives. European Journal of Marketing. 30 (5), 20-34.
Zadek, S. (2004) The Path to Corporate Responsibility. Harvard Business Review.
The way how organizations view Corporate Social responsibility may be different. Many companies practice it for a public relation campaign to promote themselves trying to become a good citizen. The result of this kind of corporate social responsibility investment has proved to be wrong; with the organization not getting profit for their good work and also not generating any social changes (Porter and Kramer, 2002). Zadek suggest that there are five stages in which a company handles Corporate Responsibility. First is the defensive stage where the organization denies or rejects the unexpected criticism. For example, when there was a protest against the sweatshop conditions at Nike’s overseas suppliers, they claimed that it was not their responsibility to worry about other countries labour conditions. Second is the compliant stage where company adopt a policy based compliance approach. They establish a corporate policy as a cost of doing business in order to protect their reputation. Third is the managerial stage where the company understands this as a long term problem and give managers the responsibility for the social problems and its solution. Fourth is the strategic stage where the organization integrates the social issues into their company strategy. They believe that this will give them competitive advantage and will contribute to the long term success of the company. For example the automobile industry develops environmental safer mobility because their future depends on it. The final stage is the civil stage where the organization has collective action to address social issues. For example alcohol companies such as Diageo have taken educational initiatives which promote the responsive drinking (Zadek, 2004).
Although company have realized that addressing social issues is very important for them, they have been struggling how they can integrate corporate social responsibility into corporate strategy (Hirschland, 2005). Out of ten organizations, six have no strategy for corporate social responsibility and much of these companies are not clear on how they can effectively predict which social issue will influence their overall strategy (McKinsey and Company, 2006). So how is it possible for the corporate social responsibilities build into strategy? A company Mission shows why they exist, what they are trying to achieve and their long term goal. If a cosmetic company mission is to make better products and they make products that do not harm animals then they have addressed a social concern that is animal brutality. Building corporate social responsibility into the mission needs the company to understand the environment properly. There are various problems in the society and not all are yet the social issues (Galbreath, 2009). The company should take into consideration the geographic, demographic, psychographic and behavioural aspects in order to get their target market (Kotler and Keller, 2007). There is also a social dynamic variable. In an attire industry, customers are interested in how and where the cloths are made, especially due to sweatshop practices (Galbreath, 2009). Customer needs is what a company focus on to make new products. The cultural factor, social factors and personal factors are important to look at (Kotler and Keller, 2007). But so is the analysis of unmet social needs and concerns. The company should not view this as a threat but should realize that this is an area of opportunity for innovation. By this way a company can create a new market segment. One of the features of strategy is matching the resources of the company with the outside environment which is changing all the time in a form that improves the company performance. For an instance let us consider an industry which invests resources in technology which reabsorbed the heat released from the smokestacks and then turn it into some kind of energy. What is the outcome? The company saves their cost and it also benefits the public. So it is doing well to both itself and society, addressing the social issue. Company can gain a position in the market or a competitive advantage if it addresses the unmet social needs and social concerns (Galbreath, 2009). For example let us consider Whole Foods Market which specialized in organic, natural and healthy food product. They have a differentiation strategy which not only addresses a social concern about healthy, nourish foods but they have been successful financially. Whole Food Market saw the concerns of the society and grabbed the opportunity to get a competitive advantage. They created shared values which benefited both the society and the company stakeholders (Porter and Kramer, 2006).
In 1995, Shell (UK) decided that they would dispose a redundant oil rig, Brent Spar into the North Atlantic and sink it and proceeded with the government’s full support. The other alternative they had was to break the rig onshore and recycle materials which were suitable for recycling. But this would have cost more and would also have negative environmental side effects. If it was not intervened by Greenpeace then this dumping would have gone unnoticed. They used internet, press and posters to maximize the media coverage and to let people know what shell was doing. In UK, the initial response was not good and the prime minister still had strongly supported Shell’s position. But when the campaign was done in Germany, Denmark and Netherlands, the story was different. The people there seemed to be more environmental sensitive. Motorist began to boycott Shell petrol. One of the Shell station in Germany was firebombed. The petrol revenue dropped by between 20% and 30% in Germany. The company said that it lost millions of dollars and had its brand image destroyed (Brassington and Pettitt, 1997; Kirby, 1998.) So from this we can see how socially irresponsible companies are affected in the long term. This has a devastating effect on the company’s goodwill (Sirgy and Lee, 1996).
There is a view that social responsibility marketing contribute to the financial performance of an organization. The consideration of social and environmental factors while making corporate decision has been a greater subject recent year than just focusing on short term profit. A shareholder approach says that the social and environmental aspect must be taken into consider to increase the long term financial return while decision making. While trying to find the relationship between social responsibility marketing and financial performance, it was found that there was no statistically significant relationship between the two (Brine et al., n.d.). Organizations that hold on to the social responsibility marketing are understanding that long term profit of the organization and acting wisely in the interest of the stakeholders are not mutually exclusive. In a research carried out in Australia, the result showed that there was increase in sales and equity and decrease in return in asset with firms practicing social responsibility marketing (Brine et al., n.d.). Some people have theorised that there is negative relation between social responsibility and financial performance and to back up their view they said that the high investment for the social responsibility results to additional cost. Others have argued that there is a positive relation (Balabanis et al., 1998). McGuire et al. (1988) cite that the company who have been involved in social responsibility may face relatively less labour problem compared to those companies who do not involve or may be the customers will be happily inclined to their products. Social responsibility marketing improves the company reputation and relation with the investors and government official which is financially beneficial (Balabanis et al., 1998). According to the research conducted in top business companies in UK, social responsibility marketing seemed to be affected by the gross profit to sales ratio in the past and corporate social responsibility disclosure was linked with concurrent financial performance. So the combination of social responsible marketing and corporate social responsibility disclosure is found to have a positive effects on company overall financial performance (Balabanis et al., 1998). The impact of Social responsibility marketing is found different on the area in which it operates. In environmental activities, which is said to have a higher cost, social responsible marketing was found to be negatively related to financial performance where as the enhancement of women position, which is said to have relative lower cost was found to be positively related to financial performance (Balabanis et al., 1998). Viewing things from this perspective we can get an idea that social responsibility marketing and financial performance varies from culture to culture.
Social responsibility market has a positive influence in the company itself. It is an important factor that attracts and retains the employees. Any employee working for a social responsible firm will be proud of working there. The workforces who operate in these conditions are highly motivated which affect their performance and this ultimately leads to higher productivity. Operational efficiency is increased with the companies who are socially responsible because it provides the chance to reduce the present and future cost of the company (Brine et al., n.d.). Also the practice of social responsible marketing helps company identify the unmet social needs and issues which can be viewed as a great opportunity for innovation (Galbreath, 2009). This leads to a differentiation, like the example we considered of Whole Food Markets and also provides the competitive advantage for the company (Porter and Kramer, 2006). As the consumers have very high expectation of corporate social responsibility (Podnar and Golob, 2007), they will consider such companies compared with others and will maintain a long term relationship with them. The relations with the government official, investors and bankers are improved if a company is known to practice the social responsibility marketing who are the providers of the capital needed for the company (Balabanis et al., 1998). Organizations operate because of the society who has given them the permission to. If these companies do not become socially responsible then they have the risk of losing their licence to operate (Porter and Kramer, 2006). So we can see that adaptation of social responsibility marketing gives the company benefit that they couldn’t get otherwise. Employee motivation, innovation, reputation, competitiveness, market position, operational efficiency, licence to operate, investor relations and the access to capital are among the key drivers that help any firm to run smoothly and survive in the long run (Brine et al., n.d.).
It has been realized to the marketers that the environment resources are finite and some are already very scarce, so the social and environmental impacts of marketing should be considered (Feldman, 1971). Earth is the only planet where life is possible and it’s also the duty and responsibility of any organization to conserve and protect her. So looking at all these different aspects, it is highly recommended for the management to practice social responsibility marketing.
References:
Balabanis, G., Phillips, H. C. and Lyall, J. (1998) Corporate social responsibility and economic performance in the top British companies: are they linked? European Business Review. 98 (1), 25-44.
Brassington, F. and Pettitt, S. (1997) Principles of Marketing. London: Pitman Publishing.
Brine, M., Brown, R. and Hackett, G. (n.d.) Corporate social responsibility and financial performance in the Australian context [online]. Available from:
http://www.treasury.gov.au/documents/1268/PDF/04_CSR.pdf [Accessed 20th November 2009].
Feldman, L.P. (1971) Societal adaptation: a new challenge for marketing. Journal of Marketing. 35 (3), 54-60.
Galbreath, J. (2009) Building corporate social responsibility into strategy. European Business Review. 21 (2), 109-127.
Hirschland, M. (2005) Taking the Temperature of CSR Leaders [online], Business for Social Responsibility. Available from:
http://www.reportesocial.com/Files/Taking_CSR_leaders.pdf [Accessed 1st November 2009].
Kampf, C. (2007) Corporate Social Responsibility: WalMart, Maersk and the cultural bounds of representation in corporate web sites. Corporate Communications: An International Journal. 12 (1), 41-57.
Kirby, A. (1998) Brent Spar's long saga [online], BBC News. Available from:
http://news.bbc.co.uk/1/hi/sci/tech/218527.stm [Accessed 15th October 2009].
Kotler, P. and Keller, K. L. (2007) A Framework for Marketing Management. 3rd ed. New Jersey: Prentice Hall.
McGuire, J., Sundgren, A. and Schneeweis, T. (1988) Corporate social responsibility and firm financial performance. Academy of Management Journal. 31 (4),854-872.
McKinsey and Company (2006) The McKinsey Global Survey of Business Executives: Business and Society [online], McKinsey & Company. Available from:
http://www.mrcpa.org/pdf/606aa.pdf [Accessed 16th November 2009].
Moir, L. (2001) What do we mean by corporate social responsibility? Corporate Governance. 1 (2), 16-22.
Podnar, K. and Golob, U. (2007) CSR expectations: the focus of corporate marketing. Corporate Communications: An International Journal. 12 (4), 326-340.
Porter, M. E. and Kramer, M. R. (2002) The competitive advantage of corporate philanthropy. Harvard Business Review
Porter, M. E. and Kramer, M. R. (2006) Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review
Sirgy, M. J. and Lee, D. J. (1996) Setting Socially Responsible Marketing Objectives. European Journal of Marketing. 30 (5), 20-34.
Zadek, S. (2004) The Path to Corporate Responsibility. Harvard Business Review.
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