Does a company do well, by doing good?

In my previous blog post “Look out! Stop the ‘Killer Jeans’!” you could learn more about ethical and unethical garments and about companies which follow the green trend and produce organic and substantial clothing like H&M with its Conscious Collection as well as Nike and C&A.

The fact that an increasing number of companies is aware of environmental and social responsiblity and that Corporate Social Responsibility (CSR) becomes more and more popular recently caught my attention and encouraged me to continue writing about that topic. In this blog post I want to get to know more about Corporate Social Responsibility and I also want to find responses to the questions I recently asked in my blog posts. I want to learn what CSR is all about, whether CSR is just a current trend and whether and how companies are benefiting from it.

What does Corporate Social Responsibility mean?

According to the German Ministry of Labour and Social Affairs Corporate Social Responsibility means the 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 the local community and society at large.

CSR is one of the newest management strategies where companies try to create a positive impact on society while doing business. CSR is one of the buzz words nowadays and is very important for a lot of companies which want to set a sign against corruption, child labour, bad working conditions and pollution of the environment. (By the way my blogmates Martin and Viola wrote some very interesting articles about corruption, child labour and bad working condition, if you are interested, click on the corresponding keywords.)

Is CSR just a current trend?

“It is more than just a trend—it is becoming the new expectation for businesses.”

This is  Jorge Haddock’s statement who wrote an interesting blog post with the title “Corporate Social Responsibility: Not Just a Trend” He argues that companies worldwide are becoming more and more aware of the CSR topic and know the importance of the CSR principles. He commented that every company has other CSR objectives which they want to achieve.

Some of the targets named in his blog post are:

  • helping hungry and homeless people in the 3rd world
  • acting against corruption
  • supporting education and formation
  • engaging in sustainability projects
  • operating ethically
  • commiting community

Dermot Egan’s blog post agrees with Jorge’s and comments additionally that CSR has become so popular that more and more companies are joining and communicating their efforts in CSR reports. These reports show all the positive impacts such as charity donations and employee volunteering to supporting renewable energy production and promoting diversity. However, CSR is not just well-regarded because it improves a company’s branding and attracts new consumers by showing people worldwide how ethical the company works, it also can save money as AWC Austin revealed in his blog post “Is CSR a trend?”. AWC Austin reports that the multinational retailer Wall Mart saved $200 million with green initiatives reducing packaging and transportation costs and also other companies like Johnson and Johnson saved millions of dollars by acting environmental-friendly and social responsible.

Although the first attemped to institutionalize CSR failed in the 1970s it looks differently these days. More non-profit-organisations and political actors are working together. As there is also the strategy policy initiative for businesses of United Nations Global Compact which is a principle-based framework for businesses, stating ten principles in the areas of human rights, labour, the environment and anti-corruption, Corporate Social Responsibility looks this time not just like a current trend – it looks more than a business strategy which may have a long lasting impact on our future.

Does a company well by doing good?

Managers hear more often that companies worldwide which are aware of substantial, ethical business are making more profit than others. The firms would gain a competitive edge by attracting more and more environmental and socially oriented customers, shareholders and employees.

The idea of environment and social acting companies to create a better world is attractive and tempting. In Professor David Vogel’s opinion nevertheless the evidence is rather weak that companies who are doing well are doing good!

He disagrees with Dermot Egan’s and AWC Austin’s blog posts and reports that  companies for example like Exxon Mobil, which has the world’s poorest environmental reputation, is more profitable and in this sense more successful than its competitor BP which recently changed its brand name to Beyond Petroleum to unterline the companies willingness to act more responsible. Although BP tries to reduce the world’s dependence on fossils fuels and the green house effect it is often difficult to distinguish between social and environmental responsible and irresponsible companies. In this case BP tries to be the “better” firm, however Exxon-Mobil has recently been far more successful in the prevention of accidents and avoiding oil spills. It is thus not easy to say which company is the more “responsible” one.

The good news is that firms with superior CSR performance have not performed any worse than their less virtuous competitors. But the disappointing news is that neither have they done any better.

For most firms, most of the time, CSR is largely irrelevant to their financial performance. Managers should try to act more responsibly. But they should not expect the market to necessarily reward them–or punish their less responsible competitors.

by David Vogel

What do you think about it, do you agree with David?

Look forward to hearing from you, guys! See u next week!

Kathrin

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6 Comments

  1. annehwr

     /  December 21, 2011

    I think that David Vogel is right at least partly, for CSR doesn’t directly reward the companies financially. But CSR can also be regarded as some kind of marketing strategy, for it makes the brand a “better” one and more people might be willing to buy the products. Therefore I believe that responsible acting can have a great indirect impact on the company. (http://anderes-marketing.de/2011/08/12/der-einfluss-von-csr-auf-das-marketing-–-kreative-kommunikation-mit-dem-kunden/) This link is in German, but nevertheless I think it underlines my point. :)
    I really liked your topic, as well as your overall structure. It was nice how you referred to your last post and also to your fellow group members, and how you used the bullet points to loosen up your text a little. Furthermore I thought that you prepared your post very critically and thoughtful, which I liked very much. Well done!

    Reply
  2. I in addition to my pals have been checking out the great guidelines found on your web site and so at once developed a horrible suspicion I never thanked you for them. Those people had been certainly happy to study all of them and have now in truth been tapping into those things. Many thanks for really being considerably kind and also for going for certain remarkable ideas millions of individuals are really eager to be informed on. My personal honest regret for not expressing appreciation to you sooner.

    Reply
  3. Katharina

     /  January 5, 2012

    Hi Kathrin!
    I think it is great how you took on the criticism on your last post. With this one, you really show that you read the comments and understood what people meant. I remember reading your last one and this one is far more elaborated! You look at the topic from different angles and provide concrete examples for it.
    The only thing that could be improved is the length and especially the length of the introduction which is half a post itself.

    Reply
  4. Hey Katharina
    Thank you for your comment! You are right, my blog post and especially the introduction were too long! I will try to shorten them the next time! I am pleased that you follow my posts!

    Reply
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