Corporate Social Responsibility: An Ethical and Economic Argument

Corporate Social Responsibility can also be defined as corporate’s payment to the society for using its resources. A corporate uses infrastructure, land, labour and a lot of such resources from the society to run a successful business and earn profits.

CSR is a way to give a part of that profit back to the society. This was then made mandatory, with set of rules and regulations, by the government in the year 2013. CSR can also be approached by two point of views. One being the Business or the Economic view and second being the Societal or the Ethical view. Seeing from the economic view point, the corporates give back to the society in terms of employment, taxes and services. Where as seen from the Ethical point of view, because the corporate uses resources from the society to run its business, the society becomes a stakeholder, and it is the corporates’s responsibility to look after stake holder’s personalised interests.

Being responsible does not necessarily mean being ethical. There are two major approaches taken by a corporate while performing CSR. It can be based on two forms of ethical reasoning. One is, consequentialist(utilitarian), assessment through quantity. That is the greater number of people affected by the CSR spending, greater the good. Another is, categorical(Kantian), working according to the core principles of CSR, regardless the outcome of the activity. Now one can argue that the first approach taken by the corporates should be deemed better as it actually looks at the outcome and number of people getting benefited by the CSR activities performed. Other argument would be that the second approach is better as the core principles of performing CSR activities are strongly taken into consideration in it.

The second approach might also work as a loophole for the corporates who do not really believe in giving back to the society but have to follow the CSR guidelines given by the government to avoid penalties in the future. Showing the allocation of money for CSR in the books, or on paper, without really showing or caring about the results can defy the whole purpose of CSR. If seen in a general sense, the first approach seems to be more ethically inclined for corporates when compared to the second as it focuses on the number of people directly benefited through the CSR activities rather than just allocating money for the same. This ensures more number of people getting back from the profits that they helped the corporates make in the first place. These ethical guidelines that fulfils the societal expectations, in return becomes the social license for the firms.

Corporate Social Responsibility is very advantageous for firms, from an economic point of view. Its an argument of economic self interest for the firms. CSR allows the firms to show the importance of the needs and values of its stake holders, which in future creates a greater value of the firm in the societal standards and gain the trust and loyalty of the stake holders as well. In simple terms, it provides the corporate a mechanism to match the operations with the values and interest of the stake holders which is constantly growing.

CSR also provides a competitive advantage in the marketing of firms. Incorporating CSR in the operations gives a potential point of differentiation and an upper hand to the firms in the market. Being socially responsible and actively giving back to the society while keeping the values and needs of stake holders in check makes the firm more reliable and dependable in the eyes of the society. This shows that social contribution is economically viable for corporates in the long run.

In today’s time, the working of corporates is becoming more and more transparent everyday. This makes CSR of utter importance as the businesses growing and surviving directly from consumers need to show their interest in the betterment of the society to keep their societal standards in place.  If not, they risk ruining their brand name and success by being tagged as socially inappropriate. This concludes that being ethical in CSR and incorporating it in its operations, for corporates, is good for its brand name, advertising, place in the market and is economically beneficial as well.

Varun is an Economics graduate and the Youth Editor of CSRLive.in. He paints, plays guitar and loves the idea of traveling. He doesn’t have much to say about his achievements, but definitely have much to do, much to dream, much to make true.