Corporate Social Responsibility and Corporate Finance

The modern business world can be characterized by a considerable focus on corporate social responsibility (CSR). Companies cannot simply make money as they are expected to contribute to the development of the society (Postrel, 2017). Moreover, paying money is already insufficient as corporate citizens are encouraged to invest their “time, talent, and resources” (Bloomgarden, 2017, para. 4).

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Otherwise, people will not use these companies’ products or services but will search for other options that are available. Therefore, CSR is an important element of competition (Sullivan, 2017). However, the corporate finance industry is quite specific, and some principles of corporate social responsibility can be difficult to apply. These peculiarities may be one of the reasons for financial organizations’ poor results in the sphere of CSR (Reputation Institute, 2017). One of the most controversial aspects of CSR in the world of finance is associated with disclosure. This paper deals with the ways financial companies use to be corporate citizens and some obstacles the face.

One of the most common areas where corporate citizens excel is related to environmental protection. Businesses invest millions in the development of sustainable technologies as well as their application in various settings (Ang, 2017; Smith, 2017; Xu, 2017). Consumers and business analysists praise company’s efforts, which results in a favorable image and increased profits for companies (Ismail, 2017). Financial organizations also donate to various environmental projects.

Governments and international institutions encourage companies to be active corporate citizens (Mohan, 2017). Smith (2017) states that large financial companies are very active in terms of environmental sustainability. A recent study involving 20,000 companies shows that organizations try to become corporate citizens in many spheres (Williams, 2017). European companies tend to be leading players in the field of CSR. In other areas, such as labor practices and fair business ethics, financial institutions also try to use the best practices.

Some of these strategies were discussed by key players in many sectors during an event held by Fortune. Financial corporations acknowledge the need to take into account the peculiarities of the modern world (Akingbolu, 2017; Bloomgarden, 2017). One of the most effective strategies in the sphere of human resources management is the development of the environment where people do not simply do tasks but collaborate and co-create. It has been acknowledged that corporate citizens can attract talented millennials who are not satisfied with high salaries only. Millennials seek a better working environment and a larger CSR impact.

Importantly, many companies fail to apply such principles and use methods that harm their reputation. For example, Amazon is regarded as an employer that has to make considerable efforts to become a corporate citizen in the sphere of human resources (Postrel, 2017). Postrel (2017) stresses that the company should ensure that the principles of CSR are a part of the culture of its new headquarters. As has been mentioned above, workplace environment is one of the key elements of sustainable practice.

Another challenge the contemporary society has to face is associated with terrorism. Millions of displaced people are seeking shelter and employment in western countries (Horwood & Avery, 2017; Avery, 2017b). Financial organizations have the necessary resources and can contribute significantly to the development of effective solutions to these problems (Avery, 2017a). However, many key players tend to allocate their funds rather ineffectively (United Nations Development Programme, 2017).

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As for effective strategies employed by corporate citizens, it is possible to consider an example of Indian financial organizations. Indian banks invest millions of dollars in the development of Indian communities (“Corporate social responsibility spending,” 2017). Companies collaborate with the country’s government and contribute to the development of educational, healthcare, and other spheres. Moreover, some financial institutions address the government with their initiatives (Joshi, 2017).

For instance, microfinance is regarded as one of the most effective solutions for the area. The development of a network of banks for the poor can help the government address the most urgent social issues (Patel, 2017). Key players in the financial sectors can contribute to the development of this network.

Nevertheless, the application of CSR principles in the sphere of finance can be hazardous for company’s profitability. On the one hand, transparency is highly valued in the modern business world, but the line between transparency and disclosure is quite slim (Hardyment, 2017). Financial companies should be cautious when providing their reports or announcing some events or news. A recent study shows that the use of CSR principles can be risky for CEOs of financial institutions as they can lose their jobs (“Heads-up, CEOs,” 2017).

It is stressed that the major organizational goal of any corporation is gaining profit. Therefore, if CEOs make decisions that lead to the decrease in profit (even if the decisions are examples of CSR integrity), these executives are likely to lose their jobs. It is noteworthy that the decisions based on CSR principles that result in gains are highly praised. In simple terms, CEOs are expected to make their companies corporate citizens, but this cannot happen at the expense of profits.

In conclusion, it is necessary to note that corporate social responsibility is regarded as one of the most appropriate approaches to doing business these days. Many financial companies manage to become corporate citizens and contribute significantly to the development of the communities they are operating in or the entire society. These achievements are specifically valuable in the sphere of corporate finance as it can be difficult to apply CSR principles in the field. The contribution of the leading players in the corporate finance sphere shows that the existing issues can be addressed effectively.

References

Akingbolu, R. (2017). Awakening values through CSR. This Day Live. Web.

Ang, V. (2017). Companies in the business of doing good. The Business Times. Web.

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Avery, H. (2017a). Why finance, not just aid, is the key to dealing with humanitarian crises. Euromoney. Web.

Avery, H. (2017b). Where’s the refugee impact fund? Euromoney. Web.

Bloomgarden, K. (2017). Why companies can’t just write checks to do good. Fortune. Web.

Corporate social responsibility spending can go up to rs. 14,000 crore: Arun Jaitley. (2017). NDTV. Web.

Hardyment, R. (2017). Creating room for sustainable business to fail. Eco-Business. Web.

Heads-up, CEOs – corporate social responsibility may get you fired, study finds. (2017). Web.

Horwood, C., & Avery, H. (2017). David Miliband: How we can keep the globalization bargain. Euromoney. Web.

Ismail, A. H. (2017). Environmental reporting. Oil & Gas Financial Journal. Web.

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Joshi, M. (2017). Run small finance banks like a social business: Grameen Bank’s Muhammad Yunus. Live Mint. Web.

Mohan, V. (2017). Centre launches interactive online platform to give corporate push to Ganga cleaning. The Economic Times. Web.

Patel, D. (2017). CSR norms: From hospital to missionary group, 32 major entities in ‘violation’. The Indian Express. Web.

Postrel, V. (2017). Amazon has a chance to redefine corporate responsibility. Bloomberg. Web.

Reputation Institute. (2017). LEGO group leads global ranking of best CSR reputation. Nasdaq: GlobeNewswire. Web.

Smith, S. (2017). Safety and the supply chain: CSR investments lower global risk exposure. EHS Today. Web.

Sullivan, R. (2017). Sense in sustainability: The changing focus for boards. Board Agenda. Web

United Nations Development Programme. (2017). Financing for development and 2030 agenda. Web.

Williams, W. (2017). LEGO comes top for CSR. ProBono Australia. Web.

Xu, K. (2017). Got a do-gooder gene? 3 tips for launching a successful CSR initiative. Entrepreneur. Web.

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