Improving Economic Growth with Coporate Social Responsibility

Corporate social responsibility (CSR) refers to the awareness, acceptance and management of the wider implications of corporate decisions. (Michalaska, 2019). CSR is “the responsibility of a company for the totality of its impact” (Chandler, 2001) European commission states that it is expected from companies to understand the negative externalities coming from its business activities. And therefore, prevent, manage and mitigate any negative impact that they may cause. (European Commission, 2016) It is described as citizenship but for either term, it is important to remember that the social responsibility needs to extend beyond present members of society, CSR is a social contract, an essential measure towards the environment and future generations. (Ahmad et al, 2013) There is a wide understanding of what is Corporate Social Responsibility. The term embraces several approaches and actions, it may be in the form of improving its operations to create shared value, increase efficiency, reduce waste and diminish corporate environmental footprint. (Michalaska, 2019) The philanthropic approach to CSR implies that corporations must take responsibility beyond their core business activities, corporate philanthropy includes operations such as corporate giving, corporate volunteering or corporate foundations. (Lin-HI, 2010) 'Should a business be free to decide what level of its own corporate responsibility?'

Corporate social responsibility is very poorly managed. Corporations often do not know how to integrate CSR issues into their business routines and strategies. (Hsueh, 2014) Porter and Kramer pointed out that the prevailing approaches to CSR are so disconnected from business that they obscure many of the greatest opportunities for companies to benefit society and even themselves some studies have revealed that practising “CSR is no longer seen to represent an unproductive cost or resource burden, but, increasingly, as a means of enhancing reputation and credibility among stakeholders”. Companies have realised that CSR may offer opportunities to create shared value (Porter and Kramer, 2006). Business concept 2 – SCM The definition of “supply chain” seems to be more common across authors than the definition of “supply chain management”. (Mentzer, 2001) The difficulty of gathering a common agreement on the SCM definition comes from having so many works around it leading to a little consensus on what it means. Cristopher defends that a supply chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services delivered to the ultimate consumer (Christopher, 1992).

Even with little consensus on the definition, Michalaska tried to synthesise SCM as the management of the relationships and flows between operations and processes that produce value in the form of products and services to the ultimate consumer. (Michalaska, 2019) Supply chain management involves managing relationships and flows between the string of operations and processes that produce value in the form of products and services to the ultimate consumer. We may consider splitting supply chain in two. (Michalaska, 2019) The process at the “left”of the manufacturing process, essentially being the activities involving sourcing all materials used in the process of production of a company, and the management of this information in order to make the supplying as efficient as possible. At the “right” of the manufacturing lies the downstream supply chain it may be managed very differently from company to company, each company adapts its downstream supply chain accordingly with the industry in which they are into. The former are all the processes required to be done in order to their output reach the final consumers.

From an interaction between Corporate Social Responsibility (CSR) and Supply Chain Management (SCM), emerged Responsible Supply Chain Management (RSCM) as a response to human right violations, may be broadly defined as a voluntary commitment by companies to manage their relationships with suppliers in a responsible way. As a result of their purchasing activities, companies may have some opportunities to influence constructively their suppliers’ practices. (Parida et al, 2014) Whatever mechanism is used, the most effective way to achieve sustained improvement over time is through the development of a long-term collaborative relation between corporate buyers and their suppliers, through which suppliers can internalize change by participating in the shaping of social and environmental performance objectives, based on their own perception of their business capacity and needs. (Cooper, 2017) We’ll be focusing our attention on the income inequalities, defined by the unequal distribution of wealth that usually is in a larger quantity in the hands of a small percentage of a population. It has been described as the gap between the richest and the rest. The introduction of new technologies and the great bargaining power in the hands of big corporations, are two of the biggest factors leading to the wealth flowing upwards. Companies take huge advantage from its smaller suppliers, such as David Bentlage a small scale farmer, in the United States he said that his family farm has been around for 80 years.

Margin of profits are now way down. When negotiating its contract with a big corporation, the latter offered a greedy deal where the farm income would drop 50 percent. Bentlage believes nothing in the grocery store has dropped 50%. The farm profit margins are very low they had in annual revenue 320k and spent 300K in expenses. We now understand why the median wage has gone nowhere all the money went upwards, a lot of small scale suppliers have seen their income vanish along the years. Companies have huge negotiation power, even if they can’t reach an agreement with a particular supplier they can always turn themselves to other suppliers, leaving the former in a very weak spot, seen that due to the size of the company he was working with, his income was mostly coming from that source. Big corporations have all this in mind, they go to the table of negotiation holding huge power, when they negotiate, each part tries to get the best to themselves, it is obvious that each one we’ll try to defend its interests the best they can.

This means small firms and small scale suppliers are very vulnerable to the power of bigger firms, when corporations are able to achieve its goals, get a better deal to themselves, they are only taking care of part of its stakeholders, the richest part, managers, owners and shareholders, this leads to this big gap between rich and poor, with more and more tendency to widen this gap. This scenario brings nothing good to society. We may look at evidence compare, societies, and see what inequality does, income means something very important within our societies, it shows where we are in relation to each other and the size of the gaps between us, even though the great accomplishments in technology, health care and development in a country like the UK, we still have a context where the rich are expected to live longer than the poorer. (Wilkinson, 2011). Moreover inequalities can impair growth, people with low incomes may suffer poor health and low productivity, as the poor struggle to finance their own education, health is first priority everything else is superfluous . Inequality may also contribute to the world's 'savings glut', since the rich are less likely to spend an additional dollar than the poor. As savings pile up, interest rates fall, boosting asset prices, encouraging borrowing and making it more difficult for central banks to manage the economy. (The Economist, 2015) Example of industry struggling with pressure. Crafting a response to rising inequality is tricky, however. Some of the negative impact of inequality on growth can be blamed on poor government. (The Economist, 2015) Over the past generation or two inequality has risen most in places where progressive policies, such as high top tax-rates, have been weakened.

A little more redistribution now might improve the quality and quantity of economic growth—and reduce the demand for more aggressive state interventions later.' (reference Search for it). Said that I would like to propose a new policy, giving Corporate Social Responsibility a bigger role within and for society, as we've got a formula for profit maximising we must also develop a formula for CSR performance maximisation. Standard revenue shared contract, the supplier charges the retailer a much lower wholesale price in exchange for a percentage of the retailer's revenue. Example of how to approprietly allocate resources in order to create shared value Hsueh and Chang (2008) demonstrated that system-wide optimization can be achieved by appropriately allocating social responsibility via monetary transfers among members in a SC network. The RS-CSR contract requires that the manufacturer invest in CSR and charge the retailer a wholesale price. After the retailer sells products, it will return a ratio of its revenue to the manufacturer. The objectives of the RS-CSR contract are threefold: (1) improve CSR performance; (2) improve total SC profits; and (3) ensure that each partner in the SC can benefit from the RS-CSR contract. To the best of our knowledge, the proposed RS-CSR contract is the first one that considers CSR variables in a revenue sharing contract. (Hsueh, 2014)