The Case for Corporate Social Responsibility

Written by Pooja Narayanan

Milton Friedman once argued that businesses were not required to be socially responsible. His reasons: first, corporations are not experts on social issues, and second, Corporate Social Responsibility (CSR) creates an unintentional tax on consumers and shareholders. In Organizational Communications in Prague this year, we have been discussing whether corporations need to be socially responsible—and if so, to what extent?

While we need institutions that improve the welfare of society, should corporations be held to the same standard? Should they act purely in their own self interest? Or, is there a greater case for serving society?

We can define Corporate Social Responsibility (CSR) as: “a set of actions a company takes to address customers’ social concerns, improve brand reputation, and create positive reciprocal relationships with consumers.” Here, there exists a clear incentive to be socially responsible. For one, CSR generates positive media attention. In 2017, we have observed an increase in global awareness of conflicts, as well as an increased focus upon the complexities of a corporation’s global value chain. Consumers are more socially aware; therefore companies are forced to tread more carefully.

A company can not only generate positive brand perception, but also expand the reach of its brand to consumers who may purchase it simply because it is socially responsible. According to a 2012 paper at Claremont McKenna College, CSR increases revenues in the long term due to a larger customer base and the potential to increase prices. A 2010 survey by Penn Schoen Berland, a research-based consultancy, of over 1,000 online customers showed that 70% would be “willing to pay more for a $100 from a company they regard as responsible.”

Though there are undoubtedly financial benefits of CSR, companies are obligated as legal “individuals” of society to actively improve the communities in which they operate. Not only is it their responsibility as  “citizens” or “residents” of an area, but it also begins a positive cycle for sustainable operations. Take Coca-Cola.

Coca-Cola is in the vanguard of socially responsible corporations. In its Sustainability Report, Coke outlines three areas it is focusing on: Water, Women, and Well-Being. For its focus on Women, Coca-Cola has a ‘5by20’ Initiative in place that aims to economically empower  five million women by the year 2020. Currently, it has improved the lives of approximately 1.2 million women, offering access to capital and training to female entrepreneurs in developing societies around the world.

Though this initiative may seem odd for a soft drink company, it builds trust in the communities in which Coca-Cola operates. Moreover, it increases the purchasing power of women in relatively impoverished areas. In doing so, Coca-Cola gives women the opportunity to reinvest in the company, by buying products to consume or repurpose and resell (Coca-Cola sells products made from its packaging by these women).

There are many more examples of socially conscious companies, and several benefits of CSR that can’t all be covered in the short span of this article. However, companies have a responsibility to serve social interests, as they are powerful “individuals” operating in a global society. If they want to operate in the long-term, social responsibility is in their best interest. We must hold corporations to high social standards—if not legally, then as consumers, so that we can efficiently and effectively improve our communities.