Corporate Citizenship: How Responsible Leads to Profitable

By Emad Rahim, DM, PMP

CTU Business Degree - Corporate CitizenshipBusiness organizations that currently do not use social responsibility initiatives don’t have a clear understanding of how social responsibility can be beneficial to the company’s success.  However, this perspective is not common. According to Bowen, CSR (corporate social responsibility) began as a field of study in 1946 when Fortune magazine published an article in which the editors suggested that the term CSR meant that businessmen were responsible for the consequences of their actions in a sphere somewhat wider than that covered by their profit and loss statements. The phenomenon gained traction in later years as evidenced by the establishment of business communities, such as Business for Social Responsibility (BSR) in 1992 and Ethical Corporations in 2001.

Citizenship vs. Social Responsibility 
Corporate citizenship uses the same themes and concepts as corporate social responsibility. A corporation is regarded as a legal entity that possesses many of the rights, duties, and powers and also assumes some of the same obligations as those of the individual citizen. Just as there are expectations that individuals will act as a responsible citizens by performing duties that contribute to the common good and welfare of the community at large, these actions are also expected of organizations. Advocates of the corporate citizenship theory employ the same themes and concepts as corporate social responsibility. These advocates believe that maintaining a positive image or good reputation as responsible citizens would greatly enhance the organization’s long-term success. 

Leveraging Responsibility
A trend in contemporary literature emphasizes the use of corporate social responsibility as a public relations and marketing strategy. Many research studies have found that consumers do care and are paying attention to corporations contributing to the betterment of society. Consumers care deeply about societal problems, such as cancer, the environment, child labor, and human rights and will make purchasing decisions based on corporate social responsibility. Business leaders should take note. 

Research reveals that by engaging in CSR activities, private firms can increase earnings growth in the long-run. In addition, CSR can enhance a firm’s competitive advantage, leading to stakeholders, and stockholders gain.  The firms identified as socially responsible and ethical have a greater returns than S&P 500 companies, hence confirming it pays to be ethical.

CSR in Action
Starbucks Corporation is an organization that has an official CSR statement in which they refer to it as a global responsibility, or the “shared planet” initiative. The program is a major component of Starbuck’s franchise objectives.  As part of their global responsibility initiatives, Starbucks emphasizes the following activities: coffee purchasing practices, growth and expansion, environmental impacts, health and wellness, and workplace practices.

Ben & Jerry’s Homemade Holdings, Inc. is another organization known for its extensive CSR program. To demonstrate the practice and value of CSR consider that Ben & Jerry’s hosted a Social Mission Summit, held in Burlington, Vermont, home of the organization’s headquarters, which included company leaders from around the world.  The goal of the “Social Mission Summit” was to present CSR and social initiatives the company had undertaken.  They outlined their major initiatives including: furthering the cause of peace and justice, harmonizing their global supply chain and leading global sustainable practices.

Although Starbucks and Ben & Jerry’s are smaller in scale than organizations such as Ford, IBM, or Microsoft, these companies are good examples of what organizations are doing in terms of their social responsibilities.  As mentioned before, the efforts displayed by these pioneers are huge leaps from 50 or 60 years ago when the concept of corporate social responsibility was emerging.  A study completed by Pederson outlined the current business environment relative to CSR.  Pederson discovered that corporate activities have broad impacts on society, but the findings from the analysis indicate that managers still have a relatively narrow perception of societal responsibilities, which can be summarized as taking care of the workers and making products and services that the customers want in an environment-friendly way. According to Pederson, this perception is narrow as a result of the traditional line of thought that the organization is running soundly if profit margins remain high and stakeholders are satisfied.

The current dilemma with more organizations adopting corporate social responsibility initiatives similar to Starbucks and Ben and Jerry’s is that they often a lack a clarity of what is an effective and viable approach. In addition, business effectiveness is measured in other intangible factors beyond  financial and individualistic emphases.  Business behavior has both economic and non-economic impact. As Ben Cohen, author and co-founder of Ben & Jerry’s indicates, once consumers see examples of prosperous companies integrating social concerns into their business practices, they are emboldened to demand the same of other businesses.

Where do you stand on corporate citizenship? Have you personally supported a business as a result of their social responsibility practices?

Image credit: Flickr/Rakka