With reference to your own research and the item above, do you think that the ability of a business to act successfully in a socially responsible manner is mainly determined by the products it produces? Corporate social responsibility (CSR) is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. The level of corporate social responsibility that a firm upholds is determined, to an extent, by the nature of the businesses products.
This is demonstrated by BP, despite the company actively engaging in some CSR policies, goods such as oil are inherently harmful for the environment and therefore society. In 2010 BP failed to act successfully in socially responsible manner as 210million gallons of oil was spilled into the Gulf of Mexico. It can be argued that the main reason the company failed to act in a socially responsible manner is due to the nature of the product it produces as oil extraction is a complex process and any problems during extraction can have catastrophic consequences for the environment.
It is generally considered that people who buy oil from BP won’t be concerned with the environment as they are purchasing products that have notable negative externalities. This in turn limits the incentive for BP to engage in CSR as customers will purchase their goods regardless of CSR so significant CSR activities will only increase costs and reduce company profits. To the extent that the product determines whether a firm acts successfully in a socially responsible manner depends on how strong the demand is for the product and the customers and stakeholder’s views on CSR.
Similarly if a firm produces products for people who are concerned about the environment, the business may engage in a much higher level of corporate social responsibility as it is more important to their customer base. For example NIKWAX LTD creates waterproofing products for outdoor clothing for walkers. They engage in activities such excluding harmful chemicals from its products, minimising its carbon foot print and last year it invested more than ? 1million in conservation projects. It is essential for a business of this type to implement such a strong CSR ethos as it is important to the customers.
The customers who care about the environment will only buy products that are made in an environmentally friendly way, therefore it is essential for business’s that make such products to invest in CSR in order to stimulate demand, which generates sales, increases revenues and feeds into profit. The products NIKWAX LTD sells are to an extent the main influence on its successful CSR as the products wouldn’t sell as well without CSR so the business has an incentive to engage in such activates and the business would not be able to retain customers as they may switch to more CSR focused alternatives.
However contrary to the above, in some cases, the nature of a business’s products is not the main determinant of whether a business can act in a successful socially responsible manner. This is demonstrated by BAT who produces cigarettes which are considered to be bad for the environment as they create negative externalities. Surprisingly even though the business produces products that are not considered to be ‘socially responsible’, the company still has CSR principles embedded throughout the group.
Some of the CSR activities that the company engages in are campaigning to tackle under-age smoking and working to address human rights issues in its supply chain. These are issues that are important to society. In this case the main determinant of the companies CSR may be due to pressure from stakeholders to engage in CSR, for example if areas of CSR are important to shareholders then it is important for the business to act successfully in a socially responsible manner, as this will directly impact the demand for companies shares which will influence the price of the shares and value of the business.
Pressure from shareholders may also influence the CSR of the business if the business wants to grow and generate more revenue. For a company to grow it requires investment from shareholders and some shareholders will only invest if the business is acting in a successfully socially responsible manner. Another example that supports this argument is Velvet tissues which are a part of the SCA group. Many brands of toilet roles and other commodities sourced from trees are considered to be socially irresponsible as business’s engage in harmful activities such as deforestation.
However Velvet source their tissues from sustainable sources, they use recycled materials to reduce tree consumption, plant 3 trees for every tree they use, so far they have planted more than 4 million trees. In this case the main determinant of the companies CSR is not the product but the creation of a USP, which is used as a tool in marketing campaigns, which targets customers concerned with the environment. This allows the business to attract new customers and stimulate demand which increases revenues and feeds directly into profit.
The product’s a business sells has a significant influence on a business’s ability to act successfully in a socially responsible manner. However CSR and the business’s products do not act in isolation, many other factors both internal and external also affect the business’s ability to act in a socially responsible manner such as the culture of the business, the power of stakeholders, the objectives of the business and commitment of management. It is the strength of the combination of these factors that mainly determines a business’s ability to act successfully in a socially responsible manner.