CSR or Corporate Social Responsibility tends to be misunderstood as charity. Charity cannot help guarantee sustained growth or build the brand of a corporation. Even criminals use charity to support their "business" or to cover their guilt. Society recognises a corporation that does the right things, not merely good deeds. Let us explore practical and realistic CSR.
CSR or CSD? Very often CSR is understood as charity; hence it should be named CSD or CSC (Corporate Social Donation or Contribution). However, charity constitutes only a part of CSR. The major concerns of CSR are first to conduct business strictly under "hard" laws in order not to harm all beneficiaries, including shareholders, employees, suppliers, consumers, communities, and the public and the environment at large. The second concern is related to "soft" laws in terms of high professional standards of practice and ethics. The third is the generosity of corporations exhibited by charity, community capacity building, or social investment.
Responsibility is clear in itself and cannot be distorted into something else like volunteerism.
If CSR implies mainly charity, donations or social contributions, it would be mainly limited to the activities of large corporations, including multinationals and others with a lot of financial or other resources.
Critics of Charity: Charity-related activities show that a corporation is generous. These are fine but they don't build a brand or guarantee sustainable growth. They are considered face-lifting activities, soft sales, or advertising.
According to statistics, an ordinary person contributes 2.69% of his income to charity, for example religious, social or voluntary activities. Large corporations never spend this high a share of their revenues on CSR activities. That is why they rarely publicise the amount spent but only advertise their activities. However, they get great attention because they are big customers of the media.
Big Words: Social Investment: Charity has evolved to help the poor by giving them resources for capacity building, best exemplified in the famous phase, "Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for life." Lately, charity has been upgraded to "social investment", which implies the involvement of a corporation in helping to develop society beyond just the immediate community.
Of course, a large corporation is not a charitable organisation, nor a government agency, and is not obliged to become involved in such activity. Some large corporations really get involved in the community or in society. For example, producers of paper, herbal products or packaged rice may organise farmers to secure their supplies with more equitably shared profits as an incentive. A taxi cooperative or large massage school may organise hundreds of drivers or young masseurs to train and secure their business. This is a way of life for some businesses but it is not social investment.
Criminals and Charity: Charitable activities can also be used in an attempt to turn a bad image into a good one or even to a cover crime or guilt. Prior to the 2008 financial crisis, a large bank in Europe announced that only projects with high environmental recognition would be given loans. However, this bank went bankrupt because of cheating by its executives.
It has been observed that large corporations whose businesses have a high potential to destroy the environment tend to campaign heavily for the environment and the community. In addition, marketers of junk food or energy beverages that are harmful to health tend to invest a lot in charitable activities. The sale of drugs to hospitals also often involves bribery. Therefore, drug companies with a better image may give procurement officers a better reason to choose them over others.
Doing Right Things: Doing good deeds is simply a form of pr intended to build a good image on a temporary basis. It is a waste of money because it cannot help build a brand in the long run. The new paradigm involves encouraging corporations that do "right things".
In principle, a good corporation should compete on providing better and cheaper services or goods for customers, paying higher dividends to shareholders, and being more responsible for the betterment of employees and the community, society, and the environment.
In addition, a good corporation should pay more and more taxes as a responsible unit of society in order to enable the government to provide better services to citizens.
In the real world, however, many local or national governments are corrupt. Corruption is one story, but paying taxes is another. Currently, an arbitrary and anarchist idea to disobey the state and establish oneself in the society prevails among NGOs and some large multinational corporations. Large corporations may be too ambitious to secure the patronage of the public and to lead the society instead of the state.
Responsible corporations should not pay huge bonuses to executives during hard times, as happened in the US in 2009. Neither should they provide benefits that are too lavish to employees. For example, some corporations build very good car parks for workers while their customers have to park far away. Employees can use (almost) for free the services of some electricity and water companies or airlines. This comes at the expense of shareholders and is harmful for the corporation at large.
What to Do? To really be responsible to society, something more substantial needs to be done. For example, petroleum companies need to sell petrol at a competitive price and improve their service stations for customers. "Green" activities such as voluntary forest plantations can also be conducted as a secondary setting. Construction materials companies must provide quality goods compatible with foreign competitors and must control emissions; their conventional rural development or agricultural dams can be optional.
For banks, they must create smaller gaps between deposit and loan interest rates and their employees must not become involved in corruption regarding procurements within the bank. Customer confidentiality must be strictly adhered to. In turn, conventional fostering of cultural conservation might be another good deed but not at the heart of CSR.
These actions would really build trust on the part of consumers who will recognise the brand and the brand can then be maintained. In sum, a corporation should do things right and not violate hard and soft laws (professional standards of practices and ethics) and be generous to the beneficiaries involved; namely, shareholders, employees, suppliers, neighbouring communities, the environment, and the country at large.
The UN Global Compact: A realistic way to conduct the CSR of a corporation is to engage the United Nations Global Compact (UNGC). The CSR exhibited by the UNGC relates to human rights, labour, the environment, and anti-corruption, as demonstrated in 10 principles, as follows:
1. Businesses should support and respect the protection of internationally proclaimed human rights; and
2. must make sure that they are not complicit in human rights abuses.
3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
4. the elimination of all forms of forced and compulsory labour;
5. the effective abolition of child labour; and
6. the elimination of discrimination in respect to employment and occupation.
7. Businesses should support a precautionary approach toward environmental challenges;
8. undertake initiatives to promote greater environmental responsibility; and
9. encourage the development and diffusion of environmentally friendly technologies.
10. Businesses should work against corruption in all its forms, including extortion and bribery.
Performance in line with these 10 principles will help build trust among the beneficiaries of the corporation and help guarantee its sustainable growth. Hence, a strong brand with solid growth will emerge if a corporation strictly practises the UNGC. Brand value is based on a clean, reliable, "doing-right" business with full responsibility to the beneficiaries involved.