Corporate social responsibility (CSR) might seem to be a strange pairing of words. Yet, according to the World Health Organization, or WHO, increasingly consumers, employees, investors and even managers expect corporations, particularly multinational ones, to go beyond their traditional role of producing goods and services for a profit. These stakeholders expect corporations not only to avoid doing things that harm the planet, but also be proactive in promoting business ethics that benefit local communities and the planet.
Rationale
The Food and Agriculture Organization (FAO) of the United Nations explains the increasing demand for CSR as a reaction to corporate scandals and globalization. Expectations vary by political system and level of economic development. The demand is greatest in wealthy countries with a democratic tradition and the least in poor countries. The explanation the FAO offers for this pattern is that once countries meet their physical needs, they then turn to social and personal growth needs.
Social Responsibility Investing
The WHO calls the trend toward social responsibility investing a "boom." These investors include individuals, corporations, universities, hospitals, nonprofits, foundations, insurance companies and pension funds. They may avoid corporations that engage in what they see as undesirable products or activities such as alcohol, tobacco, gambling and animal testing. The may also reward organizations that have philanthropic and worker and environment-friendly policies.
Brand Value
Since the compensation and maybe even the jobs of top management depend on increasing shareholder value, corporations have an interest in meeting these demands. Having an image as a responsible corporate citizen can also enhance a corporation's brand. In order to meet these demands and reap these benefits, corporations support cultural activities and educational programs and adopt environmentally friendly policies. Businesses even tailor their social responsibility programs to areas relevant to their businesses.
Codes of Conduct
A corporation that supports good causes but continues to do bad deeds will be seen as hypocritical by investors and customers. In order to avoid this fate, a significant number of U.S. corporations have adopted codes of conduct. Companies are particularly sensitive to charges of harsh working conditions or child labor. For instance, Starbucks introduced a code of conduct for its coffee bean suppliers after it received hundreds of letters from customers and investors demanding that its suppliers improve their working conditions.
