BUS608: Ethical and Strategic Management

Most arguments both for and against CSR are based on how a company's attempts to be socially responsible affect its bottom line.

Learning Objectives

Contrast the views in favor of and opposing corporate social responsibility

Key Takeaways

Key Points

• Proponents of corporate social responsibility (CSR) argue that socially responsible practices can have a positive impact on the bottom line.
• While some evidence links CSR to financial performance, its proponents also point to non-financial rewards as well as to benefits to the environment and social welfare.
• Some critics see CSR as unrelated to the primary aim of the business: making a profit for its shareholders.
• Critics may also see some CSR efforts as attempts at public manipulation or greenwashing.

Key Terms

• shareholder: One who owns shares of stock in a business.
• bottom line: The final balance; the amount of money or profit left after everything has been tallied.

Corporate social responsibility, also referred to as CSR, can be described as embracing responsibility for a company's actions and encouraging a positive impact through its activities on the environment, consumers, employees, communities, and other stakeholders.

Corporate social responsibility (CSR): CSR refers to the practice of companies integrating ethical, social, environmental, and other global issues into their business operations and in their interaction with their stakeholders (employees, customers, shareholders, investors, local communities, government).

While some evidence links CSR practices to business performance, most organizations point to the non-financial benefits of their efforts. Proponents of CSR argue that socially responsible practices can have a positive impact on the organization by improving employee recruitment and retention, managing environmental risks by reducing harmful accidents, and differentiating brand to achieve greater consumer loyalty. CSR proponents may also argue for the recognition of a "triple bottom line" performance that includes not only financial returns for owners but also social and environmental benefits for the greater society.

Milton Friedman and other conservative critics have argued against CSR, stating that a corporation's purpose is to maximize returns to its shareholders (or shareholder value) and that it does not have responsibilities to society as a whole. Part of the critics' argument is that managers should not select social causes on behalf of a diverse set of owners. Rather, CSR opponents believe that corporations benefit society best by distributing profits to owners, who can then make charitable donations or take other socially responsible actions as they see fit.

Other critics, rather than targeting the concept of CSR, point to examples of weak CSR programs. For example, the term greenwashing refers to instances where businesses have spent significantly more resources advertising being "green" (that is, operating with consideration for the environment) than investing in the environmentally sound practices themselves. Critics view these as misleading, even cynical, attempts to shape public perception about a company without its actually having to benefit the environment.