A businessman is happily laughing with his wife at the dinner table having a wonderful meal.  He is in an exceptionally good mood today. He has just invested almost all of his retirement money in a business called WorldCom.  Thankfully, their stock is soaring higher than they had ever expected.  He decides to invest all of his spending money and spare cash, too.  It seems like a good investment.  About a month later, WorldCom is caught falsifying their accounting records to make their losses seems like profits.  Their stock price falls from $64.50 per share to $0.20 (“The WorldCom story”).  The man has lost all he has. In a moment of depression, he jumps off his work building and dies.

          On the other side of the world, an Indian worker comes home. He is very happy because Coca-Cola has just announced that they are building a water bottling plant in a local village.  This means there will be more jobs and money for everyone.  A couple of years go by and things are different.  Coca-Cola dried up or contaminated all their water sources in the surrounding area, and now the man’s family is dying of thirst (Jayaraman).

            These are extreme examples of what can happen when corporations do not care about corporate social responsibility.  With the collapse of WorldCom and the scandal of Coca-Cola, people realized that corporations need to be kept to a higher standard.  Investors want and need to know that when they invest in a corporation the business is sound and the information they portray is accurate.  If not, investors will not feel safe investing. Without investors, businesses will not be able to raise capital, which will eventually lead to the demise of the company.  Another reason for corporate social responsibility is that with transportation now becoming faster and faster and people being able to communicate across the globe, people are no longer bound by geographic borders.  Companies get involved in the health of workers, the education of employees and their children, working environment safety, and the pensions that sustain workers in retirement.  Businesses have now become more powerful than governments.  Just as in early modern Europe, when power shifted from the church to the government, it is now moving from governments to corporations.  With the rise in power of corporations, people are demanding that businesses start acknowledging corporate social responsibility (Schwab).   

            Corporate social responsibility requires a business not only to make profits, but also to take care of employee, stakeholder, society, and environment.  Business leaders today consider it critical to meet with shareholders, local communities, and others affected by and interested in what they do.  This statement carries with it many implications, including the need for corporate governance structures, the implementation of workplace safety standards, the adoption of environmentally sustainable procedures, and philanthropy (Schwab).  No longer are corporations just responsible for making money.  The term triple bottom line is used to describe the new meaning of successful business.  Profits are only one of the bottom lines. Just as important is meeting expectations for social and environmental responsibility.  Individuals are not the only ones who are pushing corporate social responsibility—businesses are now encouraging it as well.  More than 3,000 companies in about 120 countries have signed on to the UN Global Compact, a framework of ten core principles to guide business behavior in areas such as human rights, the environment, labor practices, and corruption (Schwab). 

            Corporate social responsibility has direct implications for employees.  Corporate social responsibility tells corporations that employees are not the same as the machines they operate.  Corporations’ employees have dreams, aspirations, and families.  The idea of paying employees as little as they will work for is not correct anymore.  Corporations like Nike used to pay employees very poor wages and make them work in miserable and unsafe conditions.  They wanted to make huge profits at the expense of their employee.  They did make more money originally, but the media eventually exposed them.  People started protesting and boycotting Nike’s products.  In the end, Nike realized what other corporations have realized: it is better to be considerate of their employees.  Giving their employees a fair wage ended up being a better business decision, because their employees have pride in their company and work better.

            Corporations constantly need funds to run their business.  The corporation sells stock to people in return for money used to invest in the company.  Corporate social responsibility requires companies to listen to the stockholder.  Today, the stockholders are caring more and more about being green and investing in environmentally safe equipment.  In 2005, researchers found that investors put $2.3 trillion into environmentally friendly companies even though they knew the companies were not going to do as well (Henderson).  The stockholders have spoken. They want companies to care not only about profits but also about the environment.  Fair-trade products are on the rise. People do not mind paying a little extra if it means the workers were treated with dignity.  Businesses that are not listening to the stockholders are paying the price.  Toyota has portrayed themselves as been environmentally friendly, causing their car sells to increase, while Ford and General Motors are struggling.  Toyota sold over 510,000 Prius hybrids, even though each costs over $7,000 more than comparable models (Henderson).

            In today’s world, corporations cannot exist without affecting society one way or the other. Companies contribute to political campaigns and help out with disaster relief and the local community.   Corporations that want strong relationships with their community need to be actively helping and protecting it.  When Hurricane Katrina struck Louisiana and Mississippi, Wal-Mart was the first to respond, not the government.  Wal-Mart realized that not only was its action socially responsible, but it was also good for business.  The people in Louisiana and Mississippi were costumers that lived in communities with Wal-Mart stores. They would not forget what Wal-Mart had done for them in their time of need.  The humanitarian aid cost Wal-Mart initially, but it helped its image (Featherstone). 

            Corporations need to be concerned about government in society because an unstable government makes for an unstable business environment.  Governments make laws and regulations that affect what corporations can and cannot do.  Also, if a government is unstable or the country is in turmoil, both employees and consumers will not be as productive.  It is helpful to corporations ethically and economically.  Sometimes a business interferes with the government to promote itself.  It uses bribery and lobbying to make laws that unfairly help the company but hurt society.  When society discovers the illegal practices, the company’s reputation will suffer.

            Palestine is considered by many to be one of the most volatile places on earth.  It is ripe with conflict.  The government has been trying for years to resolve the fighting between the Israelites and the Palestinians, but to no avail.  Headway is being made, however, by business.  Groups like Institution for Global Ethics, or IGE, have been pushing businesses to exhibit social responsibility by trying to bring peace between the Israelites and the Palestinians. Businesses are creating jobs where both Israelites and Palestinians work together side by side. They are creating economic prosperity so neither Palestinians or Israelites will feel as threatened.  If this conflict is ever going to be resolved, it may have to be by the business world and not by the government (Kidder).

            Not only does corporate social responsibility involve the social environment, but also the natural environment. Corporation must interact with the environment.  If corporations neglect their responsibility to the environment they will end up destroying it.  Companies using natural resources must be good stewards of resources or they will deplete them.  Corporations in the early twentieth century, like oil and steel companies, thought nothing of polluting the lakes, rivers, and air.  Conditions got so bad that rivers caught fire, costing countless dollars in damages. People started getting sick and cities became covered in smog.  What corporate social responsibility points out, and what companies failed to realize in the early twenty century, is that corporations must resided in and employee people in the areas they pollute.  Their children will have to live on this earth. Thoughts like these have motivated corporations to keep the environment clean.

            Corporations like Nestle try to make money while doing what is socially responsible.  Nestle has a bottled water plant and it is constantly researching ways to use less water.  It is also trying to create as little pollution as possible.  Nestle may be spending more money now but it is also reaping many advantages.  Nestle workers appreciate what the company is doing, which raises morale. Also, plants will be able to stay in operation longer (Schwab).  Using corporate social responsibility was the better financial choice for Nestle.

          Businesses have found that there are many advantages to living up to the corporate social responsibility code.  If they try to dodge their responsibility,   governments, activists, and the media will keep them in check.  Regardless of whether or not businesses want to, corporations are finding that they have to follow the principles of corporate social responsibility.  Ignoring corporate social responsibility can hurt corporations.  Wal-Mart’s slogan is “Always low prices.”  It tries to cut prices so much that it must resort to outsourcing to third world countries where the employees’ human rights are abused and wages are low.  When people discovered Wal-Mart’s outsourcing, its reputation was not only damaged but also people completely boycotted the stores.  Target, though not much different, has tried to portray itself as being more considerate and environmental friendly.  This has allowed it to compete better with Wal-Mart in the business world.

            Businesses so often view corporate social responsibility as a pain that society and their stock holders have forced them to follow.  It is often viewed as just a cost, a constraint, or even a charitable deed.  Corporate social responsibility can be so much more than that.  If corporate social responsibility is truly implemented as a change in the overall way companies do business, they would realize what Toyota, Whole Food Market, and Volvo have discovered—if used correctly, corporate social responsibility is a source of innovation and competitive advantage (porter).  In today’s business environment, being socially responsible can only help a business.  It needs to be sure that it is intelligent in the ways it spends money to be socially responsible, but corporate social responsibility can truly be a great business tool.

            Proctor and Gamble have built a business on corporate social responsibility.  They have hundreds of very different products in different markets, ranging from baby shampoo to dog food to Pringles.  It has many different marketing and production strategies, but one thing that does not change is its commitment to corporate social responsibility. Proctor and Gamble puts its employees first, encourages integrity, and continually tries to improve its products both in efficiency and environmental cleanliness. It is committed to making the world a better place.  All of its agendas seem at a glance to cut into its bottom line, but it cares more about its triple bottom line.  These decisions have made its workers better employees, and stockholders and consumers value Proctor and Gamble’s name (“Social responsibility”).

          Society and stock holders want corporations to be socially responsible. But if they demand it of the businesses, people must notice it.  People have a responsibility to investigate which corporations are successfully implementing corporate social responsibility and reward them accordingly (Schwab).  The media needs to notice and report when a corporation is implementing corporate social responsibility and when a corporation is disregarding it.  One of the reasons corporate social responsibility sometimes fails is because people match corporations against society instead of trying to make them work together (Porter).  Corporations are viewed as the evil that people need to fight against.  People should view cooperation between society and corporations as the best way to improve the world and advance society.

          Corporate social responsibility requires a business not only to make profits, but also to take care of employees, stakeholders, society, and the environment. It is complicated and cannot be easily stated.  The principles of corporate social responsibility are subjective, but they are extremely important if society wants to prevent tragedies due to irresponsibility.  Tragedies like the fall of WorldCom and Coca-Cola’s water pollution have a crippling effect on society, making it all the more important to stress corporate social responsibility. Every time a corporation tries to be socially responsible and society rewards it for its decision, the community is one step closer to making a better world.

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Work cited

 

• Featherstone, Lisa. “Wal-Mart to the Rescue!” The Nation. 13 Sept. 2005.The Nation.13 Sept. 2008. 
• Henderson, M. Todd, and Anup Malani. “Capitalism 2.0.”  Forbes. 181. 5 (March 10, 2008): 30. Student Resource Center – Gold. Gale. Twin Valley Middle School. 15 Sep. 2008.
• Jayaraman, Nityanand. “No Water? Drink Coke!” India Resource Center. 28 May 2002. IRC. 13 Sept. 2008.
• Kidder, Rushworth M. “Businesses for Middle East peace-building: a framework for engagement.”  Journal of Business Strategy. 27. 3 (May-June 2006): 30(8). Student Resource Center – Gold. Gale. Twin Valley Middle School. 15 Sep. 2008.
• Klaus Schwab, “Global Corporate Citizenship,” Foreign Affairs, Vol. 87 Issue 1, Jan/Feb 2008, p. 107-18
• Porter, Me. “The five competitive forces that shape strategy.” Jan. 2008. Harvard Business Review. 13 Sept. 2008.
• “Social responsibility.” Procter and Gamble. 13 Sept. 2008. P & G. 13 Sept. 2008.
• “The WorldCom story.” CBC news. 26 Sept. 2006.CBC Network News.15 Sept. 2008.