Evaluating CSR Policies and Their Impact on Business Practices

BUSINESS LAW AND ETHICS

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Introduction

The current study analyzes in detail the CSR policies adopted by different companies and whether these companies take the CSR policies seriously. Properly evaluating the articles “Asset Managers to clean greenwashing”, “Volkswagen’s faulty CSR practices” and “The real truth of CSR”, it has been made clearly evident that the companies do not take these CSR policies seriously at all. They mainly pay “lip services” since they comply superficially only to show that they abide by such policies. It is done to view the CSR policies which form one of the core elements in modern business and are unutilized in the real world.

Backdrop of CSR

“Corporate Social Responsibility” or CSR refers to the policies through which businesses display their commitment to behave ethically by addressing the three important Ps. These Ps include “people, planet, and profits”. In other words, ethics must be followed by the companies so that benefits can be brought about for the overall people and the environment (Sheehy and Farneti, 2021). As such the company is able to make sustainable profits as well.

Historically, the origins of CSR date back to Ancient Greece, where Aristotle and other philosophers facilitate the powers and utilization of reasons and “virtual ethics” (Matos, 2019). Based on his theory, he mentions that an action is considered to be ethical if it is performed by a virtuous person. It marks the beginning of ethics.

In the reformation period of the 16th and 17th centuries, individualism developed through the movements caused by leaders such as Martin Luther and others who developed selfhood. In this regard, virtual ethics were replaced by “rights ethics”. At this time, ethical behavior included supporting peoples’ rights and faiths rather than good work.

Then comes the Enlightenment Period in the 18th-19th century. This era viewed the emergence of utilitarian ethics since this was the age of reason and better knowledge obtainment, freedom along rational humanity (Lu and Wang, 2021). The main proprietors of this age include Jeremy Bentham who believed that actions are ethical if they provide individual happiness.

Whereas, in the 20th century, ethics and CSR extended beyond individuals to cover business activities as well. With the emergence of the “Combined Code on Corporate Governance” in 1992, there was the adaptation of a “free market” approach to different ethics where businesses must abide by ethical rules (Hintz and Płuciennik, 2020). It did not focus on compliance but on providing encouragement to the businesses.

Based on the “Combined Code on Corporate Governance” 1992, there is a balance between business freedom and ethical conduct. By recommending CSR measures, businesses to be more responsible socially and maintain their autonomy in the market as well (Mytum, 2021). However, the flexible nature can lead to evading such CSR measures in modern contemporary businesses.

There are 3 main theories that relate to CSR. they include the “Caroll Theory” which states that businesses can operate efficiently only when they fulfil their major responsibilities. These responsibilities include legal, ethical, and philanthropic. Through them, the companies can be more moral and make positive contributions to the 3 Ps. “The Triple Bottom Line”. The theory propagates that leaders must assess economic, social, and environmental teams to ensure long-term profits, Through the same, social sustainability can be achieved. “Stakeholder Theory”. It is majorly associated with the people who abide by CSR in a company. It also focuses on ethics in different contexts such as community and society.

Example of CSR as viewed from the articles

There are various positive instances of CSR in the modern contemporary world. Notable instances can be taken of that of TESCO. The company started the “Community Food Connection Program” in 2019, where, in association with FareShare and FoodCloud, the excess food is provided to charities and local community groups. It reduces waste and provides food help. Another instance is that of “Vodafone’s Digital Social Initiative” in 2020, where the company connects underserved areas so that the company expands network infrastructure to support economic development and other opportunities.

However, as viewed from the provided articles, it has been viewed that none of the mentioned companies have adhered to the ethics and moral principles. As viewed from the first instance, when the asset managers, who are the most crucial people in shaping decisions regarding investments and allocation of resources, engage in greenwashing, leads to CSR issues (Vishwanathan, et al. 2020). Proper CSR here would have involved such managers taking concrete steps and ensuring accuracy. In the second case, Volkswagen actually displays faulty CSR in installing cheat engine software to evade emission tests. In this case, genuine CSR would have been the company adhering to ethical practices and being transparent to all by showing accountability. The third article it has been viewed that CSR itself has CSR now is complicated and limited. It requires assessments, the determination of measurable goals, and others to be more effective for the environment and societies (Fallah Shayan et al. 2022). Following such policies can satisfy the 3Ps associated with ethics “people, planet and profits”.

Importance of CSR

CSR plays an extremely crucial role in the contemporary world for businesses as well as individuals. It provides benefits both in terms of being competitive and self-regulatory. They include More productivity since with the employment of better CSR policies the companies can satisfy their employees and make them more involved. With the employees believing that they contribute to the well-being of society and the environment, they tend to be more improved and productive. Moreover, better quality is also promoted as CSR practices develop sustainable and ethical production techniques. Through the same, the overall quality is enhanced. In addition, a better reputation is also gained (Diers-Lawson et al. 2020). When the customers and other stakeholders are aware of a company’s positive CSR practices, the company is able to develop a better reputation and brand image for itself.

It aids in attracting new customers and retaining the existing ones with proper performance. There is also more customer loyalty since customers also prefer to be loyal to the companies that contribute to the betterment of society, community, and the environment effectively. Finally, the companies following better CSR policies also are in a better position when compared with their rivals as the investors tend to invest more here, and strong emotional connectivity is developed with the customers, employees, and other associated stakeholders.

In addition, CSR is also extremely essential for companies since through the same, businesses can self-regulate themselves. Through the same Large corporations can be better regulated. Trees companies are so large that their operations can resemble mini-states with quite significant influence on society. By voluntarily following ethical, environmental, and social means, the expected standards can be better maintained. Therefore, public backlash and misconduct can be prevented. Moreover, through these policies, different business organizations can better address ethical issues in a proactive manner. By determining specific standards and goals the companies can align their goals with the wishes of the stakeholders and the community (Bianco, 2020). Along with that, sustainable growth can also be availed by the companies through the same. Businesses can develop a long-term perspective on sustainability. In addition, better decisions can be formulated by the companies and they can serve society better through these types of regulatory measures.

Reasons for not taking CSR seriously

Based on the provided articles, various instances are viewed where the companies have neglected their CSR responsibilities. One of the most notable was “Volkswagen’s Emissions Fraud”. In this case, Volkswagen was scandalized for installing software to cheat emission tests (Forbes, 2015). Through this, both the customers and the regulators were deceived into believing that the company was practicing good CSR, where it was pouring poison into the environment in the dorm of carbon emissions. Similarly, in the first case, it has been viewed that different companies such as “BlacRock”, “Vanguard” and others (Ft, 2022). These companies greenwashed their investors into believing that their assets are aligned with “zero-carbon emissions” by 2030.

There are also different reasons owing to which companies do not take CSR policies seriously. The foremost among them include an emphasis on the protection of the Free Market. The existing legal frameworks often prioritize the interests of the shareholders and the free market, overshadowing CSR concerns. When a company has a separate legal identity, business risks are taken to enhance profits leading to neglecting CSR. The “Shareholder Primacy Theory” depicted in “subsection 172 of the Companies Act, 2006” states that the interests of the shareholders are greater than the stakeholders. Therefore, to satisfy their requirements, CSR is neglected. It is a part of the “hard law”. As mentioned by Milton Friedman in 1970, the law sentiment of the companies must be to increase profits above all else.

Another reason for neglecting CSR policies includes weak enforcement of soft laws. They lack “robust enforcement mechanisms” since they are not mandatory and lack compliance (Wang et al. 2020). A third reason for such neglecting CSR policies is voluntary accountability to different stakeholders. As such the companies are allowed to display CSR only as per their own discretion. The companies, as such only display CSR to the extent only that is beneficial to the entire company. Therefore, they can overlook the overall CSR practices. The cost-benefit analysis is another essential reason for not taking CSR seriously by the companies (Hbr, 2015).

In certain aspects, businesses make comparative analyses of the cost of CSR implementation and the fine for non-compliance. Since in most cases, the cost of CSR implementation is more, major companies choose to neglect the same. It is viewed in the provided article on Volkswagen as well. Finally, ethical complexity is another major reason why companies do not consider CSR policies seriously. Companies often argue that CSR is both subjective and challenging. In addition, it is difficult for business leaders to determine ethical and fixed policies as mentioned by Milton Friedman. Therefore, in most cases, ethics are neglected and substituted with profit maximization.

Recommendations

However, the companies existing in the contemporary business environment can undertake certain suggestions so that better CSR policies can be undertaken by all the companies in a more effective manner. The first recommendation includes making the “Code on Corporate Governance” mandatory for all businesses. It can aid in balancing the rights of the businesses with the rights and requirements of the other associated stakeholders.

The legal mandation of CSR considerations along with accountability aids in prioritizing the employees, communities, and others. Therefore, such policies can be enforced and made compulsory for all types of businesses. In addition, the notion of the “Free Market” must also be redefined to shift the maximum importance from the wealthy shareholders to provide considerable importance to the other stakeholders, communities, and others (Nazir and Rahman, 2021). The “Free Market” must be made more inclusive to be more responsible and sustainable. It must contain overall satisfaction for the interests of different groups equally. It is necessary so that everyone can have an equal say in business decisions and CSR policies.

Moreover, other ethical measures can also be taken good care of which include maintaining better transparency, upholding human rights in every form possible, and quality determination. In addition, the companies can also prevent accidents and hazards in the business as viewed from the last article provided. Along with that, a proper MIS approach must be included with the mandatory punishment of evaders (Nguyen et al. 2021). The implementation of robust policies can make the CSR policies more binding on the companies and therefore, can result in their proper utilization in business. It ensures that the business is linked with CSR policies, morals, and ethics. Therefore, political, social, and other aspects are taken proper care of while performing business activities in the modern competitive market.

Conclusion

Based on the above discussion, shreds of evidence have been gathered on the fact that CSR policies are extremely crucial for any company since they depict the morality of the companies. However, it has been found, based on the articles provided that the majority of the companies abide by such policies only superfrcially. The examination of the reasons why businesses do not take CSR seriously states that CSR initiatives are associated with superficial compliance and are merely treated as optional rather than a serious commitment to be abided by mandatorily. There are lack of legal guidelines and weak enforcement of laws, coupled with ethical complications that contribute to its negligence. Therefore, all companies must seriously follow the same and make it a habit to ensure that sustainable practices are followed. Only through this, CSR can be made more effective in the contemporary business environment.

References

Journals

Bianco, G.B., (2020). Climate change adaptation, coffee, and corporate social responsibility: challenges and opportunities. International Journal of Corporate Social Responsibility, 5(1), pp.1-13.

Diers-Lawson, A., Coope, K. and Tench, R., (2020). Why can CSR seem like putting lipstick on a pig? Evaluating CSR authenticity by comparing practitioner and consumer perspectives. Journal of Global Responsibility, 11(4), pp.329-346.

Fallah Shayan, N., Mohabbati-Kalejahi, N., Alavi, S. and Zahed, M.A., (2022). Sustainable development goals (SDGs) as a framework for corporate social responsibility (CSR). Sustainability, 14(3), p.1222.

Hintz, M. and Płuciennik, J., (2020). Patterns of protestant ethics and modern culture in greta thunberg’s public appearances. Journal for the Study of Religions and Ideologies, 19(57), pp.63-80.

Lu, J. and Wang, J., (2021). Corporate governance, law, culture, environmental performance and CSR disclosure: A global perspective. Journal of International Financial Markets, Institutions and Money, 70, p.101264.

Matos, A.D., (2019). A narrative of a future past: historical authenticity, ethics, and queer Latinx futurity in Aristotle and Dante Discover the Secrets of the Universe. Children’s Literature, 47(1), pp.30-56.

Mytum, H., (2021). Ethics and practice in the excavation, examination, analysis, and preservation of historical mummified human remains. Historical Archaeology, 55, pp.96-109.

Nazir, O., Islam, J.U. and Rahman, Z., (2021). Effect of CSR participation on employee sense of purpose and experienced meaningfulness: A self-determination theory perspective. Journal of Hospitality and Tourism Management, 46, pp.123-133.

Nguyen, N.T.T., Nguyen, N.P. and Hoai, T.T., (2021). Ethical leadership, corporate social responsibility, firm reputation, and firm performance: A serial mediation model. Heliyon, 7(4), p.e06809.

Sheehy, B. and Farneti, F., (2021). Corporate social responsibility, sustainability, sustainable development and corporate sustainability: What is the difference, and does it matter?. Sustainability, 13(11), p.5965.

Vishwanathan, P., van Oosterhout, H., Heugens, P.P., Duran, P. and Van Essen, M., (2020). Strategic CSR: A concept building meta‐analysis. Journal of Management studies, 57(2), pp.314-350.

Wang, H., Gibson, C. and Zander, U., (2020). Editors’ comments: Is research on corporate social responsibility undertheorized?. Academy of Management Review, 45(1), pp.1-6.

Provided materials

Forbes, (2015). Volkswagen and the Failure of Corporate Social Responsibility. Available at: https://www.forbes.com/sites/enriquedans/2015/09/27/volkswagen-and-the-failure-of-corporate-social-responsibility/

Ft, (2022). Asset managers told to clean up greenwashing and net zero claims. Available at: https://www.ft.com/content/f1367ab4-ac6f-486d-8bd2-e7659448055d

Hbr, (2015). The Truth About CSR. Available at: https://hbr.org/2015/01/the-truth-about-csr