What is the impact of corporate social responsibility on a company?
Corporate social responsibility (CSR) is a relatively new concept in the marketing sector. So far, it mainly referred to politics and economics, because it was the economic situation of many countries that led to the emergence not so much of a concept, but of a new model of activity of both state-owned enterprises and, in later years, private enterprises. While citizens only react en masse to corporate social responsibility in crisis situations or under the influence of a movement caused by crowd psychology, in the long run the lack of greater involvement on the part of entrepreneurs may be surprising.
Two main factors influenced the creation of the concept and its use in practice. The first was related to the technological leap that took place at the turn of the 19th and 20th centuries. It was then that most innovative inventions were created. Numerous discoveries had a huge impact on the changing mentality of society, which emigrated en masse to larger cities. This is where many factories were built, bringing with them previously unavailable products and services. The increasing progress of civilization made people strive to expand their wealth. This is how private enterprises began to emerge, which years later grew into international corporations that function efficiently to this day.
Companies accumulated more wealth and therefore employed large numbers of workers. Thanks to the fact that their products stood out from the competition, huge profits translated into international expansion. The first problems appeared with it. Enterprises started striving to maximize profits – over time, what mattered most was expanding their assets. This approach was felt by lower-level employees who, being dependent on their subordinates, had to work hard for a minimum wage. This, in turn, affected the quality of previously innovative products, as employees lacked motivation to continue working. On the other hand, entrepreneurs completely forgot about the natural environment – the creation of new factories resulted in air and nature pollution on an unprecedented scale.
World War II had a huge impact on the shape and concept of corporate social responsibility. During it, over 72 million people died around the world, and Europe suffered the greatest losses among developing regions. The post-war crisis took advantage of the United States, whose losses did not affect them as much as the rest of the world. It was American corporations that began to use monopolistic practices on a large scale, and Europe, devastated by losses, had to adapt to new conditions due to the economic collapse. As a result, mass criticism of monopolistic practices began on the Old Continent, which led to the development of CSR.
The first problem of CSR (corporate social responsibility) was described on a large scale by Andrew Carnegie, in relation to the monopolistic practices of corporations and methods intended to protect society against growing exploitation. His definition was based on two principles. The first is the principle of charity – it tells the rich to help the poor. However, this solution was not widely adopted. This is hardly surprising, since it was associated with the risk of huge material losses that could be incurred by the richest people. As the 20th century entered, society became increasingly aware of its needs and could therefore avoid work if it had a guarantee of corporate support. It is worth emphasizing, however, that this principle has been adopted primarily in the awareness of states – all kinds of assistance in cases of extreme poverty or due to unforeseen disasters (earthquakes, fires) are guaranteed even today by state authorities.
But let’s get back to private enterprises. The second principle is related to them, i.e. the principle of fiduciary trust. According to its assumptions, the richest should manage goods on behalf of other people, so wealth should be managed in a way that is socially accepted by other citizens. Based on this approach, the following were created: banks and insurance companies that started managing the assets of other social groups, with their explicit consent.
The problem of CSR was visible to the poorest even in the 1980s. The world, and especially Europe, could not recover from the crisis on which many corporations arose long after World War II. These, focused mainly on expanding their wealth, did not care about the difficult conditions of average citizens. The first serious actions in this matter on a global scale began with the creation of the concept of „sustainable development” – action aimed at development that meets the various needs of a given person at the same level (children, grandchildren and subsequent generations). It also covers areas such as agriculture, environmental protection, energy and demography. In 1983, the UN issued an appeal for global environmental protection, and in the following years numerous laws were passed that stopped the unethical development of corporations. It would seem that taking care of corporate social responsibility should be in the interest of all companies. And yet, to this day, we hear in the media about only a few cases of such action.
One of the CSR researchers – AB Caroll – was a supporter of the most popular, although rarely used in practice, model – After profit obligation. According to him, the basis of CSR is economic responsibility – the company’s primary goal is to expand wealth. However, it is closely related to legal responsibility – in order to increase profits, one must comply with the law (this applies to both environmental protection and ensuring fair conditions for employees). Only then do we have ethical responsibility, which is desired by society (though not required), and finally philanthropic responsibility – e.g. getting involved in helping the poorest.
In practice, however, entrepreneurs benefit only from economic (main goal) and legal (enforcement by states) liability. To a large extent, this is simply due to the company’s desire to enrich itself – if we participate in philanthropic activities, we must take into account the costs incurred. But is this model really unprofitable for companies?
Let’s look at another model, called Before Profit Obligation. First of all, it is about activities that will help those most in need – moral values are an essential element of the company’s functioning. It may seem that it sounds a bit unrealistic nowadays, but contrary to appearances, this model is practiced by large enterprises. It is most often used by companies founded by existing corporations. The purpose of such action may be an attempt to strengthen the brand in social awareness by focusing on charity activities.
A good example on the Polish market is the establishment of the Polsat Foundation, a company affiliated by capital within the Polsat group. Thanks to charitable activities, Polsat television itself also benefited, and in the opinion of viewers across the country, it is perceived as socially responsible. Another example is the Danone company, which for many years has been associated not only with dairy products and yogurts – food collections are organized every year, which enjoy growing public interest.
Taking care of the development of corporate social responsibility means, above all, taking care of the development of word-of-mouth marketing. Unlike one-off promotional campaigns or media advertisements, philanthropic activities are remembered for longer, allowing the brand to increase sales of products and services. Even in the new technologies industry, we can find such an example – since Bill Gates became the largest donor in the world, having already donated over half of his wealth to those in need, society has forgotten his unethical monopolistic activities at the time when he sued Netscape due to monopolistic practices.
Small and medium-sized enterprises most often ignore the issue of CSR because they first strive to develop and expand their own capital. On the other hand, large companies and corporations, although they can, do not see the point in similar activities. It is worth recognizing the potential in this type of practices, because even if they involve your own contribution at the beginning, in the long run they may be a more profitable step than various forms of advertising or public relations activities. Voluntarily offered help is always better perceived than promotional campaigns for your products/services or advertising. There is no need to worry too much about the excessive costs of CSR activities. Sometimes, even the activity of company representatives is enough – e.g. by delivering a hot meal or cleaning the forests. If the community gets involved in the campaign, our company will be noticed quickly. What matters most is the willingness to help and a keen interest in the local environment – this is where we should start our efforts by helping in our immediate surroundings. Working towards socially responsible development may pay off for entrepreneurs more quickly than expected.
Supported by Norway through Norway Grants 2014-2021, in the frame of the Programme “Social Dialogue – Decent Work”.
