The Ethics and Profits of Social Responsibility in Corporations

When it comes to expanding a business internationally there are several factors that must be considered before making the big move. Expanding internationally takes time as there are ethical procedures as well as the fact that the way procedures are done in one country may be completely different in another and so in this essay, I will be discussing the concept of Corporate Social Responsibility, the implications of economic and political factors and the ways it will affect Multinational Corporations. It is hard to find a single definition as CSR is a relative concept and will have many meanings such as CSR being referred to as an ethical principle that an organization should be accountable for how it’s behavior might affect society and the environment. It is said that CSR is a responsibility to society and stakeholders. (Boyd et al, 2007)

The stakeholder theory (Mitroff, 1983) holds that a company has obligations not only to shareholders but to other parties that are affected by its activities, this theory is one in the same with CSR they are both based on doing the right thing. Being socially responsible keeps the micro-environment on board as they directly affect the way a company operates, for example, if a company treats their employees horribly, they would leave and if a company makes products that aren’t of quality or made ethically, consumers wouldn’t buy them. It would be said that the social responsibility of a business is to increase profits as in a way caring for the society allows a business’s image to be improved as well as their reputation, which would be helpful when going international as new markets or potential employees won’t be intimidated by what is produced. By being socially responsible companies are being more purposeful to the world rather than being just being companies that are constantly taking and not giving back. (Ledwidge, 2007)

When it comes to taking business international there has been some controversy when it comes to outsourcing suppliers in country’s that are less economically developed as many companies take advantage of the cheap labor, for example in Bangladesh which is home to more than 4,800 factories, 3.5 million people are employed for the garment industry, they work in harsh conditions to produce low quality clothes for some of the biggest brands. Corporate Social Responsibility comes into incidents like the factory collapse in Bangladesh (2013) which led to more than 1,000 people dying, this tragic incident could have been avoided. The factory was known to have been one of the main suppliers for Primark and other leading brands, there are many parties to blame, e.g. the factory’s owner as it can be said that he didn’t care about all the signs that would of told him that the building was not safe, he even ran away after the collapse which goes to show how irresponsible he was.

However, in the eyes of the public the blame was put on brands like Primark as they were the ones using them purely because they are a cheap source of labor, wages in 2013 was known to be around 10p an hour and so Primark should take responsibility as they had the duty of making sure that the workers were paid a decent enough wage. The company received major back lash and their reputation went on a decline. With the quote “The business of business should not be about money. It should be about responsibility. It should be about public good, not private greed.” (Anita Roddick, 2005) It can be said that had the pyramid of CSR been used then it could have prevented this event from happening. The Pyramid of CSR (Carroll, 1991) refers to a pyramid of 4 layers in which are interconnected for CSR to really work as you can’t hope to be successfully socially responsible by following only one concept. These layers are economic, which refers to producing goods and services that people wanted and to be as profitable as possible, being economic is the foundation for the rest. Legal responsibilities refer to following the law while ethical responsibilities refer to doing the morally right or just thing.

Lastly, there is Philanthropic responsibilities which refers to contributing back to society. Relating back to the previous paragraph, the use of this model would have allowed Primark to consider that they shouldn’t be exploiting cheap labor in their countries for their own gain or if they were to then they should use the ethical factor of implementing more than the minimum wage as they choose not to do this before. Had they considered this and safety precautions or insurance then this would have surely improved the future of the employees and more than likely would have prevented the collapse. The company did in the end act after receiving international backlash and with the help of other companies involved with the factory, they reached out to the family members of those involved and compensated them. However, their brand and reputation were severely hurt due to the unnecessary consequence incurred on the workers. Nike is another company that struggled with CSR more than 15 years ago with a documentary on the sweatshop and child labor accusations in Indonesia exposing the tough conditions workers were subjected to, workers were paid $1.25 per day and would work 15 hours a day 6-7 days a week. They were also censored by higher ups who didn’t want the truth to come out about these conditions. However, Nike slowly overcame these problems with a change of practice. They implemented Environment, Safety and Health committees, more training, became more involved when it came to workers’ rights, carried out management audit verification, forbade the use of child labor etc.

Nestle is a company that prides itself on creating shared value. They are constantly “enhancing quality life and contributing to a healthier society”, they pride themselves with the slogan of “Good Food, Good Life”. Examples of some of their contribution to society is setting up water facilities in schools for drinking, they introduced local-tree funding programmes and funded many clinics. They are constantly making the lives of billions better every day and are truly accomplished when it comes to maximizing CSR. They are the perfect example of an MNC that has used CSR to increase profit. They value and respect people, communities and the natural environment. Using sustainability and CSR has allowed companies such as Nestle to think outside the box when it comes to getting the most out of long-term satisfaction in all aspects from diversity to water resources, doing this has allowed Nestle to be recognized in almost every country as a place that helps to correct social problems caused by business especially business in LEDC countries as well as an organization that isn’t profit greedy. The problem with CSR is that when It comes to doing the right thing, it isn’t something that can be objectively stated as there is no one right answer when it comes to dealing with ethical issues, it’s all relative.

There will always be the question of being ethical or maximizing profits. (Robinson et al, 2006) It can also be added that what may be considered right in one country may not be the case in another country but then again as we are moving towards a more digital world, ideas are becoming more intertwined. Another problem is that some problems are out of an operations control, for example climate change is something that can only be improved upon if every single person is doing something that will help combat this, however it ca be said that there are other ways to help such as promoting the use of eco-friendly products or use marketing schemes to help raise awareness. Overall, social responsibility will always be a two-way debate as there are those who believe in a free market view which refers to the belief that the job of a business is to make the shareholders wealthy and a CSR view of being concerned with social issues. It all depends on the person who has the power of making the decisions and whether they want to be ethical. There are some who strongly believe in the capitalist system and people needing to be oppressed as that is how it’s supposed to be, it’s a rich get more rich society and so they’d have no interest in looking at things or people with intrinsic value.