Corporate Social Responsibility Critics of CSR Claim

Question: Describe about the Corporate Social Responsibility for the Critics of CSR Claim. Answer: In the recent times, there has been a definitive shift from the shareholder theory in favour of the stakeholder theory which views a corporation as an active member of the society which should be sensitive to the concerns of the society. As a result, it is widely expected that companies engage in CSR activities so that societal issues could be addressed through proactive efforts. This is beneficial to the society and in turn enables the company to earn a positive image and hence seems to a win-win situation atleast theoretically (Crane and Matten, 2010). However, critics have indicated companies do not invest in CSR activities so as to benefit the society but instead engage in greenwashing and thus aim to garner incremental business in the pretext of being socially responsible (Smith, 2003). In wake of the above, the central thesis is to analyse if CSR amounts to mere rhetoric and tokenism and thus could is comparable to greenwashing. From the perspective of a business and the shareholders, engaging in CSR would make sense if the same would be reflected in enhanced financial performance. In this regard, it is noteworthy that Friedman opined on CSR that the responsibilities of the firm are limited to maximisation of profits for the shareholders. In this era of heightened sensitivity to environmental concern, the above definition may seem outrightly ugly (Sen and Bhattacharya, 2001). However, the available literature tends to support the above theory. This is despite the fact that the modern day corporations on the surface tend to be more sensitive to sustainability concerns, but quite often it is mere statements which they engage in so as to cope up with the growing sensitiveness in the society about these concerns (Crane and Matten, 2010). However, it is noteworthy that plethora of available literature does not conclusively develop a positive relationship between social environmental performance and financial performance. One of the reasons attributing to this conclusion is the fact that there is lack of objective measuring techniques for social environmental performance in financial terms. Even though, research is being done on developing accounting standards for sustainability but these are not considered reliable by the stakeholders and have limited use. As a result, the engagement of the managers in CSR activities is limited in size and scope and driven by a host of considerations. One of the key considerations in this regard is whether the spending on the CSR activities enables the companies to build value for the shareholders (Salzmann, Ionescu-Somers and Steger, 2005).. Further, certain empirical studies also point to CSR spending not actually amounting to tangible gains for the company. In their study, Pomering and Dolnicar (2009) argue that in the context of banks, the consumers in Australia were largely unaware of the CSR initiatives being pursued. Further, Vogel (2008) highlighted the fact that for majority of the customers, there are a host of factors that are significantly more influential as compared to CSR in the purchasing decisions. The segment of ethical products essentially remains very niche which does not make a strong case for businesses to engage actively in CSR. Besides, the firms also lack ethical consistency which makes the underlying decision making difficult for even ethical consumers. As per Sen and Bhattacharya (2001), negative CSR invoke reactions from all the consumers but the positive CSR only invokes reaction from only those consumers who support CSR. As a result, managers tend to extent support only to those positive acti vities of CSR which are justified on the basis of expected response from the consumers. In relation to CSR, it is widely seen as an expansive PR or Public Relation activity. Since the available literature suggests that CSR does impact the consumer behaviour, hence CSR is reduced to mere greenwashing for improving the image of the company and also to ward off the negative perceptions and concerns about the activities of the company (Kamani, 2010). A leading case related to this regard was filed against Nike in 2002. This case was filed in the US Supreme Court and accused the company of making false statement to overcome the criticism. The company defended its statements in the court by arguing that these were of commercial nature and hence cannot be assumed to be necessarily true. Nike also found support from other big corporates and media houses which advocated that claims made by the company in relation to the social issues, human rights and environmental concerns do not have to be legally correct or else the companies and their executives would have to stop issuing st atements all together (Corporate Watch, nd). The concern on the part of the companies and media houses about legal liability is conclusively reflexive of the fact that these statements in the public and press releases are a part of the PR exercise and essentially intended to highlight to the consumers that the company is sensitive to social and environmental concerns. However, it does not imply that the same would be reflected in the corporate decision making which essentially is driven by profiteering. Besides, it is also believed that companies engage in CSR activities so as to prevent regulation which the government may have to frame in response to negative externalities (Kamani, 2010). As a result, the companies especially engaged in businesses having significant negative externality such as mining tend to emphasise more on CSR activities as a measure to minimise the impact of the negative CSR. Thus, essentially CSR is reduced to the status of a PR exercise with the intention of creation of positive image (Crane and Matten, 2010). Hence, from the above discussion it is true that CSR does not amount to much more than greenwashing. The primary reason for the same as established from the above analysis is the fact that there isnt a strong business case for indulging in CSR activities for the companies. The decision making authorities tend to only respond to CSR projects which can be financially justified. Further, the benefits of CSR on financial performance are also not established by the existing literature. As a result, the endeavour of the firms is restricted to limiting the damage caused through negative PR. References Corporate Watch (n.d.), WHAT'S WRONG WITH CORPORATE SOCIAL RESPONSIBILITY? :The arguments against CSR, [Online] Available at https://corporatewatch.org/content/whats-wrong-corporate-social-responsibility-arguments-against-csr (Accessed on December 12, 2016) Crane, A. and Matten, D. (2010), Business Ethics, 3rd ed, New York: Oxford University Press Karnani, A. (2010), The Case Against Corporate Social Responsibility, Wall Street Journal, [Online] Available at https://www.wsj.com/articles/SB10001424052748703338004575230112664504890 (Accessed on December 12, 2016) Pomering, A., Dolnicar, S. (2009, April). Assessing the prerequisite of successful CSR implementation: Are consumers aware of CSR initiatives? Journal of Business Ethics, 85, 285-301 Salzmann, O., Ionescu-Somers, A. and Steger, U. (2005), The Business Case for Corporate Sustainability: Literature Review and Research Options, European Management Journal, 23(1), pp. 2736 Sen, S. and Bhattacharya, C. B. (2001), Does doing good always lead to doing better? Consumer reactions to corporate social responsibility, Journal of Marketing Research (JMR), 38(2), pp. 225-240 Smith, H. J. (2003). The shareholders vs. stakeholders debate, MIT Sloan Management Review, 44(4), pp. 85-90 Vogel, D. (2008). CSR doesnt pay. Forbes, [Online] Available at https://www.forbes.com/2008/10/16/csr-doesnt-pay-lead-corprespons08- cx_dv_1016vogel.html (Accessed on December 11, 2016)