The survival and failure of firms in the present era are being determined by their stakeholders – shareholders, analysts, customers, suppliers, regulating bodies, Social activists, workers unions, employees, community establishments and newsmedia. Therefore, firms are also compelled to recognize the need to do better in nonfinancial areas like employee rights, quality of work life, environment concerns, philanthropies, Social development and workplace problems. It is Corporate Social Responsibility (CSR) which draws the attention towards the good code of conduct and ethical behavior for corporate reputation in the business environment1. In the present era of business world with severe competition, firms find it even more difficult to manage the pressure of various external stakeholders without social investment2. Surveys prove that CSR initiatives can add to the reputational advantages like better trust in investors, new market openings and optimistic results of capital markets3. When a company has CSR initiatives, employees are more proud of it and committed to the organization4.
Advantages of CSR to the organization
The companies those have a systematic CSR policy may get many positive outcomes.
- Improves financial performance: Many studies prove that CSR practices boost the financial performance of the company. Palmer (2012) conducted a survey of 333 firms and observed that Corporate Social Performance (CSP) and Corporate Financial Performance (CFP) have significantly positive relationship in both the directions5. If CSR encompasses through the business organization, it brings a feel of responsibility among the employees which makes it a habit among them. This is highly proved that the consciousness of social and environmental responsibility of the organization helps in reducing operating costs6.
- Increases the brand value of the organization: Implementing CSR policy in an organization generates a trusting relationship that leads stakeholders to be committed to the organization through their actions like customer loyalty, stakeholder investments, etc.7. Edelman (2008) opines that in the global market place a firm’s investments in social and environmental aspects is considered as key trust issues8. The Economic Times conducted an online poll in 2007 in which 75% of the respondents opined that CSR practices enhance the brand equity of the firm. In a study conducted by Maheshwari et al. in 2013 on Indian firms it was proved that integration of innovative CSR strategies into marketing communication strategies increases the corporate image and brand value of the firm9.
- Boosts employee engagement and good work culture: When companies show that they are dedicated to improving their communities through corporate giving programs, they are more likely to attract and retain valuable, hardworking, and engaged employees. Corporate social responsibility helps attract and retain engaged and productive employees. Nalini Krishnan opines that if CSR is used properly, employee volunteerism will definitely benefit the business organization by boosting morale, team spirit and self -worth among the employees.
- Attracts and Retains Investors: A better CSR policy increases the brand image of the firm which in turn attracts the investors. When the company encourages CSR activities the investors don’t care just for profits. By linking CSR practices with increased customer value, firms can be benefitted. Lipponen (2013) through his study found that CSR is present in investor relations, as it is a significant part of business strategies these days. However, his findings suggested that the conventional investors are not interested in CSR. Yet, the socially responsible investors are focusing on CSR in their evaluation of their investments1o.
- Improves customer loyalty: The present day customer is health – conscious and environmental–conscious. So while purchasing products and services he not only considers the quality and safety but also the process of production i.e. he observes whether they are produced in socially and environmentally friendly way or not. When the company has a systematic CSR policy, the customer’s retention will be increased.
The moderating effect of corporate image between CSR and customer loyalty and satisfaction was identified by a study conducted by Ki Han Chung et.al. in 201511. This study finds that CSR and customer satisfaction and loyalty are mutually affected by each other positively.
In another study conducted with 489 respondents by Diallo et.al in 201612 to know the relationship between CSR and Customer loyalty in retail sector, it was found that there is a positive direct effect of CSR policy on loyalty and indirect effect through the mediation of customer trust and firm image. The study also indicated that the effect of CSR on loyalty is greater when the retailers use social discount communication.
6. Reduces Risk to the shareholders: Some studies proved that implementing CSR can reduce portfolio instability and enhances returns. The study of Jo and Na (2012)13 in US controversial industries during 1991-2010, proved that CSR engagement inversely affects firm risk after controlling various firm characteristics. In this study the top management agreed that CSR engagement helped them in risk management efforts. Nalini Krishnan opines that firms that are involved in environmental and social aspects are considered to be less risky than those do not.
7. Helps in having social license: When establishing some industries that are harmful to the environment, their immediate community rejects them on grounds that their normal life will be affected. For example the people of Kudamkulam village of Tamilnadu (India) have been rejecting the Atomic Power plant there since 1980s. Thus, it took long years to complete project. There are several cases of such kind in India and the world. Hence for the smooth conduct of any business, social acceptance or license is very much necessary. In India, the firms having SA 8000 certificate have the exemption from many inspections. When a company has well designed and implemented CSR policy, local communities generally do not resist their operations and hence CSR helps the firm in getting social acceptance.
Advantages to employees
Besides the positive returns to the organization by setting up CSR, there are several advantages to the employees working in it.
1. Positive Workplace Environment: When workers understand that they are in a company that has a conscience towards society and environment, they are more interested to be engaged in their work. It builds among them teamwork and better co-ordination which make them more productive. Corporations that care about the lives of people outside their business, definitely build a positive work place environment inside their walls.
2. Increase in Creativity: When employees understand that their firm is sincere in working for the local and global communities, they tend to be more inclined towards the firm. This makes them more productive. Working with a sample of 250 hotel employees in South Korea, Hur et.al 14 conducted a survey. The study revealed that (a) employees’ perceptions of CSR are positively related to employee creativity. (b) Compassion at work facilitates the positive relationship between employees’ perceptions of CSR and creativity. (c) Employees’ innate motivation mediates the positive relationship between employees’ perceptions of CSR and employee creativity.
3. Encourages Professional and Personal Growth: When companies have a culture of corporate social responsibility, they can easily promote volunteerism to their employees and encourage them to donate to nonprofits. Involvement in social activities makes collaboration which teaches team work, improve communication skills and provide a chance to learn new things etc., all these improvements help an employee’s professional growth. By offering a chance to employees to work with external teams the employee can grow up as a well rounded personality. He can also feel a sense of pride when they know that they work for a company that consciences community and encourages them to be fervent about valuable causes.
4. Promotes Individual Philanthropy: When employees notice and participate in charitable activities they themselves will be motivated to do them personally. With the strong sense of CSR that a company should adopt, employees are likely to branch out themselves and serve the community with donations and charities.
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