Importance of Corporate Social Responsibility Essay

Q2) â€Å"Evaluate the relative importance of corporate social responsibility relative to other corporate objective† (40 Marks) Corporate social responsibility (CSR) is a firm’s decision to accept responsibility for its social, environmental and ethical actions. A firm’s decisions whether to adopt and rank importance to CSR should be due to a variety of reasons, like the financial stability of the company aswell as the culture of the organisation. But one definitive factor would be a firm’s corporate objectives, corporate objectives are a quantifiable statement of a business’s goals which should include measurable targets. Essay will look to examine the relative importance of CSR in relation to other corporate objectives. Many companies underlying corporate objective is profit maximisation, with this goal ranking higher than any other. This party due to the share holder value theory which makes profit a priority, therefore resulting in many firms qu estioning whether to become more socially responsible is worth the additional costs which would result in reduced profit for the company and key stakeholder’s groups. Primark offers a perfect example to this point, Primark is a retail firm in which offers exceptionally low prices through exploiting cheaper labour from abroad. If the company was to become more socially responsible they would have to sacrifice their unique selling point of low prices which may cause the company to fail. Thus proving how many businesses will see little importance in CSR relative to profit maximization. On the other hand companies whose key corporate objective is profit maximisation should take into account that CSR represents a long term commitment which can help to improve reputation and image of the company. This is due to consumers becoming more and more aware and concerned over where goods are sourced from and how they are made. CSR is therefore likely to route to profit maximization in the long term due to consumers now looking for socially responsible companies, which may rank over price therefore resulting in higher sales and therefore higher profit. This can be seen in the company Marks & Spencer who launched their bag for life campaign promising to reduce the wastage of plastic bags, and also presented an opportunity for Marks to charge for bags resulting in higher profits. Marks & Spencer is therefore a great example of a company who has looked to become more socially responsible and as a result improving their brand and reputation and even creating opportunities to improve profits, therefore demonstrating the relative importance CRS can have with profit maximisation. In contrast profit maximisation should always remain key as CSR in cases can only help to maintain brand value having little effect on overall profit maximisation. In addition, another key corporate objective is market growth, to gain market growth companies invest heavily in advertising costs amongst other promotional campaign, therefore leaving many organisation questioning whether CSR is another cost which is not sure to be beneficial to the business. However supermarket giant Tesco main corporate objective is market growth, but Tesco has recently reported that targets had been underperformed, therefore CSR could be important to this objective. During times of market growth CSR can act as a USP to differentiate the company from competition, which could be why marks & Spencer received higher profits this year after launching their bag for life campaign promising to cut down on plastic bag wastage. Due a recent change in customers views and attitudes towards the environment, becoming more socially responsible could be vital to gain an edge over competition when aiming for market growth. Then again CSR can be dependent on each individual company on whether it holds any importance to key corporate objectives. For example many oil companies whose product is in such high demand that it isn’t necessary for the business to adapt any CSR strategy as the product is so inelastic that people will by it regardless of image or reputation. This is controversially not the case for the oil provider giant BP who recently suffered a massive public relation nightmare after a massive oil spill, leading to a big hit in their reputation and brand image. BP has now ironically made CSR one of their core objectives to help rebuild the reputation and gain market growth. To conclude it is clear that CSR holds an apparent importance to other corporate objectives of a business, with it able to acting as a unique selling point for a business who is looking for market growth this can be seen in the company velvet who recently launched their triple velvet range which promised to plant a tree for every pack sold. CSR can also help in profit maximization as CSR represents a long term commitment which is likely to route to profit maximisation in the future and merits priority. But alternatively CSR is not a law requirement and has been proven that It is not always necessary depending on each company’s products, for examples oil is in such high demand that whether the company adopts CSR or not will not matter as the product is in such high demand it will be purchased regardless. Finally many companies already have a strong brand image and reputation so do not need to adopt CSR within their corporate objectives but can rely on other existing qualities to help to full fill objectives. For example apple offers a unique product with a strong reputation for quality and brand image. All of these factors can help to contribute towards profit maximisation, with image and quality allowing for increased added value to their products helping to increase profit margins. As well as strong brand image and loyal customer base helping to drive companies forward through times of market growth.