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Strength limitation and challenges of ethically and socially responsible business practic

Related Articles In this brief essay, I would like to discuss the growth of CSR first more generally and then in Japan, provide some suggestions to enable firms to improve the effectiveness of their CSR efforts, and offer some general reflects as to what CSR can and cannot accomplish. While investors still expect firms to maximize profits, the public has become increasingly aware of the importance of the social and environmental impact of businesses.

Firms are now expected to make every reasonable effort to reduce their negative externalities—or such harms as pollution that they cause while pursuing their business activities—and to increase their positive externalities, or their impact on addressing important social and environmental problems, such as poverty reduction.

The expansion of economic globalization has created a political backlash: Many citizens regard its benefits as insufficient and its social and environmental costs too great. It has been associated with increased inequality, economic insecurity, human rights abuses, and environmental degradation. In addition, many governments, particularly in developing countries, appear either unable or unwilling to control the conduct of global firms and their complex global supply and distribution networks.

This has created a marked imbalance between the power of large global firms and national government regulations: The former frequently appears to be overwhelming or undermining the latter.

There is considerable evidence that business norms have changed: CSR is now widely regarded as a legitimate dimension of global corporate decision making. Survey evidence reveals that CSR has become a more important priority for managers and that its importance and legitimacy have steadily increased.

Evidence of the increased importance of CSR includes: Industry codes now exist for firms in virtually every global sector including chemicals, finance, mining and minerals, tea and coffee, toys, textiles, diamonds, sporting goods, and electronics.

These codes have established standards for responsible corporate behavior, primarily with respect to employee rights, working conditions, and environmental impact. Some are governed by the firms themselves, while others, such as Fair Trade International and the Forest Stewardship Council, involve partnerships with nongovernmental organizations. In some sectors, such as forestry and clothing, there are multiple industry codes.

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Thus the United Nations Global Compact now has more than 7,000 corporate signatures from 130 countries. Likewise the Equator Principles, which established social and environmental criteria for project finance, have become a global standard, endorsed by nearly every bank that engages in this kind of lending.

In short, CSR has become globalized. ISO 14000 is an environmental process standard which is used by many large firms, especially in Western Europe, to select their suppliers. What, then, can firms do to improve their CSR performance?

Clearly, the CSR agenda of a financial institution will differ from that of an oil company or a clothing manufacturer. Thus the challenge for every firm is to formulate their own CSR strategies. How then should a firm go about developing its CSR strategies? The following is not meant to list action items in order of importance but rather in sequence: One way to begin is to focus on the defensive aspects of CSR.

These involve the reputation or, in some cases, the financial risks faced by a firm by being perceived as not sufficiently responsible.

Firms need to identify and anticipate their CSR-related business risks.

  1. In short, CSR has become globalized. Or you might be interested in extending your business operations into another country, either by making it a part of your supply chain or as a source of new customers.
  2. They are strongly engaged and very persistent, facing key social issues and offering new ideas for large-scale change. The key objective should be to avoid being surprised or caught unaware.
  3. Many citizens regard its benefits as insufficient and its social and environmental costs too great.
  4. Social responsibility in environmental matters has resulted in the adoption of practices that go beyond the basic duties of both citizens and organizations. It is increasingly assumed as a management practice that must be incorporated into organizational strategies with clearly established programs, lines of action and concrete objectives which are constantly measured and evaluated.
  5. To achieve its objectives, a company needs the cooperation of individuals; And these, in turn, when they are admitted to the company, bring with them needs, aspirations and expectations that they expect to be satisfied in exchange for their work.

Who is likely to criticize your firm and for what reasons? What damage to your firm are they likely to cause? In other words, how, where, and for what is your business likely to be vulnerable? Investments in CSR can be usefully understood as a form of reputation risk insurance.

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In this context, managers should carefully monitor similar firms that are currently being criticized, since this may provide them with advance notice of the challenges their firm will be facing. Another useful proactive strategy is to develop informal relationships with reporters, investigators, and activist groups, as these can help you anticipate future media and NGO activities. Firms need to develop advance procedures for responding to CSR-related crises.

The key objective should be to avoid being surprised or caught unaware. This is not only an important exercise but a challenging one: It requires a firm to engage in a comprehensive life cycle analysis of its products or services that includes a focus on where and how they are sourced, how they are transported, how they are processed, how they are sold, how they are consumed, and how they are disposed of.

After identifying these problems, the next step is to figure out what role your firm might be able to play in addressing or ameliorating one or more of them.

This important exercise requires you to think beyond your company to the broader society in which it is embedded. It may turn out that there is little overlap between many of these problems or ills and your business operations, in which case, there is little or nothing for your firm to do. Alternatively, it might well be the case that your firm has some unique competences that overlap the social or environmental problems you have identified and which your firm can then play a role in addressing.

The fourth approach to developing a CSR strategy is to examine it from the perspective of your business operations. Given your business goals and strategies, in what ways can CSR help you achieve them?

  • This important exercise requires you to think beyond your company to the broader society in which it is embedded;
  • In addition, they are committed to disseminate these new solutions and persuade the whole society to take these new leaps as well;
  • Manufacturers are working together with suppliers and customers are making the practices increase the environmental sustainability.

It might be the case, for example, that you need to attract better trained and highly motivated employees. Or you might be interested in extending your business operations into another country, either by making it a part of your supply chain or as a source of new customers. There might be an important constituency whose support your business needs. How can CSR assist you in achieving these business objectives?

Each of these four steps—identifying your CSR risks, identifying your overall CSR impact, identifying the broader social problems that need addressing, and identifying which business objectives CSR can assist you in meeting—are designed to accomplish a similar goal: Taking Specific Steps After formulating your CSR priorities, the next challenge is to determine what specifically your firm should do.

It is important to think creatively and broadly about this, for there are many ways in which a firm can improve its CSR performance and thus net its positive social impact. These include philanthropy—the most traditional form of CSR—permitting or encouraging employees to actively participate in various community initiatives, changing your product mix, changing the criteria by which you select contractors or suppliers, improving the monitoring of your supply chain, and improving the environmental efficiency of your own operations.

In undertaking these efforts, managers need to think beyond their own organization. The large and growing number of industry codes represents an important resource for companies.

Many of these codes have already developed specific standards for corporate conduct as well as specific strategies and policies for implementing them. In this context, an important way for a firm to leverage its core competences is to directly partner with nongovernmental, nonprofit organizations. These partnerships need to be carefully managed, but there is considerable evidence that cross-sector partnerships can provide a firm with significant benefits: They can often result in better results than a company can achieve on its own.

  • Thus the United Nations Global Compact now has more than 7,000 corporate signatures from 130 countries;
  • The Brazilian furniture industry has been standing out in the recent decades for the quality of its products and the competitiveness achieved;
  • Some are governed by the firms themselves, while others, such as Fair Trade International and the Forest Stewardship Council, involve partnerships with nongovernmental organizations;
  • Moreover to the extent that CSR is viewed as a form of public relations risk insurance, then investments in it certainly make business sense—even if these benefits are not always easier to measure.

Many firms experience shortcomings in their CSR programs because they are insufficiently clear about their goals. You need to clearly define what you hope to accomplish by your CSR initiatives and then develop clear metrics or measurements for these goals. These metrics are an extremely important business tool: They also represent an important way of communicating to the public about what you want to and can accomplish, and how well you are achieving the goals you have set for yourself.

  1. They also represent an important way of communicating to the public about what you want to and can accomplish, and how well you are achieving the goals you have set for yourself. Several raw materials are used and several final products are generated, so it is a very diversified industry.
  2. Today, it is not enough to generate jobs, pay taxes, pay your employees and partners well, fulfill and honor commitments, manufacture correct products, use clean technology, provide convenience services, maintain a good institutional image and avoid manipulation. There certainly is potential for firms to improve their effectiveness of their CSR efforts, but we must also recognize the extent to which a highly competitive global marketplace constrains those efforts.
  3. Firms need to develop advance procedures for responding to CSR-related crises. Strategy, as a standard, means looking at the past behavior, and strategy as a plan means looking ahead, looking to the future.
  4. Firms need to identify and anticipate their CSR-related business risks.
  5. Strategies are linked to scenarios and to Wright 2005 , scenario building is a strategic thinking approach that recognizes the uncertainty and unpredictability of the future.

Moreover, developing clear CSR goals and publicly reporting on your progress in meeting them represents a critical—even essential—vehicle for establishing the legitimacy of your CSR initiatives. Such objectives should not be written in stone.

  • Who is likely to criticize your firm and for what reasons?
  • These metrics are an extremely important business tool;
  • The approach was made directly by the researcher to the company's management and the respondent managers;
  • New currents of thought, such as ecological economics or environmental economics, insert the ecosystem and its limitations into the discussions and decisions of how to conduct the global economy.

On the contrary, they should be periodically reviewed. It provides a way of making sure they are realistic and achievable. Alternatively it may alert you to shortcomings in your CSR performance which you can then address. Finally, firms need to think comprehensively, strategically, and creatively about the business benefits of CSR. In some cases, the business benefits of CSR can readily be measured. They may, for example, help to develop new markets for your existing products and services or even lead to new or revised products or services.

Likewise, they may improve the efficiency of your operations by reducing energy use. One reason why environmental initiatives have become so popular among firms is that they often result in reduced operating costs, which can be readily measured.

But more typically, measuring the business benefits of CSR is much more difficult. But the fact that some of the business benefits of CSR may be difficult to quantify does not make them unimportant; they may still be valuable.

The hard-to-measure benefits of CSR can include a better corporate reputation, improved employee morale or the reputation risks to which you firm was not exposed. There are business benefits for acting more responsibly. They include a better corporate reputation, improved employee morale, better relations with stakeholders, more efficient use of resources, and more effective and innovative marketing.

Moreover to the extent that CSR is viewed as a form of public relations risk insurance, then investments in it certainly make business sense—even if these benefits are not always easier to measure.

Corporate Social Responsibility: Potential and Challenges

It is these benefits that explain why so many global firms have expanded their CSR programs and initiatives. But while the good news is that more responsible firms do not perform any worse financially than less responsible ones, the discouraging news is that neither do they perform any better. This, in turn, reduces the amount of resources many firms may be able or willing to devote to improving its CSR performance.

There certainly is potential for firms to improve their effectiveness of their CSR efforts, but we must also recognize the extent to which a highly competitive global marketplace constrains those efforts.

We need both to acknowledge and applaud all that CSR has accomplished while at the same time also recognizing its limitations. Many important global problems, such as reducing corruption or coping with the risks of global climate change, are simply beyond the scope of profit-seeking firms to effectively ameliorate.

They can only be adequately addressed with the support and cooperation of governments.