Introduction
Currently, global companies make a significant impact on all aspects of life: economic, social, environmental, and even political, at times. Be it an energy company, or a fashion retail company – regardless of their field, the companies contribute in different ways to the society not only by their end-product but also by how they make it. A company, engaging social responsibility business models, is conscious of its impact on the society and environment, and contributes to them positively, whenever possible. Nonetheless, such consciousness might not be profitable for companies and, therefore, its investors that constitute its working, producing, trading, and distributing capacities. The debates on the issue are continuing, and the experts still did not come to a conclusion.
Social responsibility might be a key term in defining the profitability level of an organization, some say, though the experts view the issue differently. Some state that it will never be the key, while others agree upon the statement that corporate citizenship due to the various factors can raise the profitability of an organization. The following thesis is, therefore, ‘Is corporate social responsibility profitable for companies?’ will be investigated in this work. Likewise, the CSR definition, its dimensions, CSR companies’ relevance, and the possible ways the organizations profit from each of them by engaging or ignoring social responsibility business models will be considered.
CSR (Corporate Citizenship) Definition
Corporate citizenship, also called corporate social responsibility (CSR), is a controversial issue when identifying an organization’s profitability and sustainability levels. According to the United Nations Industrial Development Organization (UNIDO) (2020), a company engaging corporate social responsibility integrates social, financial, and environmental concerns in their business operations and interactions with stakeholders. UNIDO (2020) also describes CSR as “the way through which a company achieves a balance of economic, environmental and social imperatives, while at the same time addressing the expectations of shareholders and stakeholders” (para. 3). Thus, CSR may be related to the social, financial, and environmental performance of an organization.
UNIDO (2020) defines CSR key issues as following: responsible sourcing, stakeholder engagement, environmental management, employee and community relations, labor standards and working conditions, social equity, good governance, anti-corruption measures, and human rights. The organization relates the CSR with such economic performance issues as market share, supply chain, intellectual capital risk management, eco-efficiency, and political influence, as well. Such social performance issues as responsible marketing, economic development, working conditions, and diversity are among the ones related to the CSR. Finally, UNIDO relates the environmental performance issues such as climate change, product stewardship, and bio-diversity to the CSR business model.
CSR Dimensions and its Contribution to the Diverse Aspects of Life
Ethic Dimension
CSR dimensions may be divided into an ethic, environmental, and philanthropic (Yoong & Chung, 2018). The company’s employees are involved in social interactions on a daily basis. Working in a space on the same assignments or the ones related, they create an ethical climate, which has an impact on all aspects of organizational performance. According to the research conducted by Lee and Ha‐Brookshire (2018), “good employees with citizenship behavior support their organizations, which, in turn, increases those organizations’ performance” (p. 7). The authors focus on corporate organizational behavior (OCB) as a critical factor in improving a company’s sustainability level. They state that regardless of the organization size, the employees may strive to create and promote measures to create an ethical climate that would help to build OCB (Lee and Ha‐Brookshire, 2018).
The employees involved in a supportive work environment are more likely to reach out for help and receive it when needed. Whether it is a training process of a trainee or an exchange of experience of the other employees, the ethical and, therefore, supportive climate, may boost the organizational performance. Such a work environment not only may motivate the employees to improve their performance but also moderate the work process and work for the company on a long-term basis. Accordingly, a strong OCB, which constitutes a part of corporate citizenship and the ethical CSR dimension, may help to increase the company profitability performances.
Philanthropic Dimension
The philanthropic dimension constitutes a shared value by a company with its internal and external stakeholders. The stakeholders constitute the groups or organizations which can be affected by company operations and policies or affect them. They may, thus, be internal (managers or employees) or external (the community, individuals, the society as a whole) (Yoong & Chung, 2018). Corporate social responsibility refers to a wide range of people involved: employees, stakeholders, investors. The latter contributes to a company’s prosperity and financial income, which makes it possible for an organization to continue business transactions and operations. Yoong and Chung (2018) state that Sturbucks engages corporate social responsibility in the company concerns by offering educational support to the stakeholders, and McDonald’s provides housing and medical care to external stakeholders. Thus, the companies enhance the internal stakeholders’ family members’ well-being, and professional and personal development, providing them with favorable living conditions, which may motivate them to work for the company supporting them. Sharing value with some of the stakeholders guarantees a company a firm reputation, which, in turn, will provide it with lasting economic benefits.
Environmental Dimension
The environmental dimension is a highly controversial one – the dimension is changing over the years, with people becoming more environmentally aware. This dimension is difficult to measure since it is based on the population’s educational level, and education on many issues is now exponentially increasing due to the technology expansion. Having analyzed the data provided in the research on environmental awareness, Morrison and Beer (2017) state that 55% of the European population is aware of the impact made by a product bought or used. They also note that 50% of the consumers pay attention to an eco-label when purchasing a product. The research further shows that the most environmentally aware social group are middle-aged people with high education in their 40s, 50s, and 60s (Morrison & Beer, 2017). These consumers may be inclined to purchase a product or use the services of socially responsible and, in particular, environmentally aware companies. The latter, therefore, gain the clients’ trust and raise their profitability level.
CSR Companies’ Relevance
As it was stated before, not all the experts agree upon the CSR positively affecting the companies’ profitability. The following statement, “I argue that those companies that are socially responsible make their brands more attractive to consumers and more interesting to high-quality potential employees, eventually leading to high profits” can be reconsidered. Given all mentioned above, the companies applying the CSR business models make their internal and external policies more profitable for both types of stakeholders. For the internal ones, these companies develop a support system, whether it is a food provision, medical or educational support. Gaining the employees’ trust, a company ensures their employment on a long-term basis and attracts high-quality potential employees. For the external stakeholders, such a company provides a high-quality end-product that guarantees the demand.
At the moment, environmental responsibility is highly demanded from the companies. It might not be demanded yet by the government, but it is becoming more important for a customer using the company services. Morrison and Beer (2017) state that companies applying CSR policies attract more environmentally aware consumers when choosing goods or services to purchase. Nowadays, the population is concerned with global issues, be it social inequality, lack of education, water consumption, or energy saving. Companies that are engaging CSR models, thus, are becoming more attractive to those aware of the issues, making them choose socially responsible company services. Thereby, socially responsible companies might not be widely spread yet now, but they are becoming more attractive for both customers and employees.
Conclusion
With the diverse aspects of life being affected by the corporations’ policies, the necessity to engage social responsibility, business models increases. Though corporate citizenship may be controversial in terms of the company’s profitability. At the moment, the experts did not come to a conclusion whether the corporate social responsibility generates profits to an organization or not. However, the researches show that social and environmental awareness is present, and the consumers pay attention to the ways a company develops the internal and external policies, produces the end-product, or provides services. The consumers may tend to choose those companies applying the CSR models that raise companies’ profitability.
References
Lee, S. H. N., & Ha-Brookshire, J. (2017). The effect of ethical climate and employees’ organizational citizenship behavior on U.S. fashion retail organizations’ sustainability performance. Corporate Social Responsibility and Environmental Management, 25(5), 939-947.
Morrison, P. S., & Beer, B. (2017). Consumption and environmental awareness:
Demographics of the European experience. In Socioeconomic environmental policies and evaluations in regional science: Essays in honor of Yoshiro Higano (pp. 81 – 102). Springer Science+Business Media Singapore 2017.
United Nations Industrial Development Organization. What is CSR? 2020. Web.
Yoon, B., & Chung, Y. (2018). The effects of corporate social responsibility on firm performance: A stakeholder approach. Journal of Hospitality and Tourism Management, 37, 89-96.