Corporate social responsibility recognizes the potential for corporations to shape the globe.
There is no universally accepted definition of corporate social responsibility, but "Making Good Business Sense," a publication of the World Business Council, defines it as "the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large." As a starting point, this definition focuses corporate social responsibility on the quality of management and the impact on society, while emphasizing that it is a voluntary process.
Quality Management
Perhaps no two forces are so thoroughly and historically opposed as that of capital and labor. And yet, in the face of centuries of disputes, one of the core principles of corporate social responsibility is that businesses do better when they pay higher wages and better working conditions. One theory is that by voluntarily accommodating workers, businesses can forestall governmental regulations that would arise from political pressure. Another is that social responsibility generates social capital for business that can be transferred into profits through effective branding and marketing. Both concepts of corporate social responsibility emphasize that quality management recognizes the many facets of workforce productivity.
Social Impact
In terms of social impact, corporate social responsibility runs the spectrum from companies attempting to reduce their environmental impact to businesses whose entire function is to create and proliferate sustainable technology and business practices. Though the environment seems to get most of the focus, corporate social responsibility extends to practices like the fair trade movement, which is about local populations receiving the benefit of their natural resources through fair pricing that funds development projects. Corporate social responsibility is concerned with providing basic necessities like food and medicine to at-risk populations through a network of government agencies and NGOs while also addressing the causes of obesity in other countries.
The Role of Businesses
While both aspects of corporate social responsibility are subjects of considerable debate and disagreement, all sides begin with an acceptance of the long-term impact corporations have on the world. Whether one accepts that corporations have an obligation to contribute to the well-being of society, few if any argue that they are one of the powerful forces that shape it. In an article published in the economist, Ian Davis, the worldwide managing director of McKinsey & Co., suggests that corporations that ignore social issues are actually blind to their own self interest. Not only can going against public interest erode profitability, taking the lead on social issues can recast corporations as positive forces rather than, as they are all too often portrayed, the villains.
Controversy
One of the major controversies concerning social responsibility is that corporations are owned by shareholders, whose only concern is to generate profit. Under this thinking, executives are duty bound to focus only on making money and spending capital on social issues is theft of shareholder value. The most common approach to this issue is to cast corporate social responsibility as an integral part of profitability. Along similar lines, Mallen Baker, a corporate strategy advisor, suggests that the goodwill generated by enhanced relatioships with employees, customers and other stakeholders is an important part of a company's intangible value that should be recognized accordingly.
