IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON FIRMS PERFORMANCE
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IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON FIRMS PERFORMANCE
Chapter one
INTRODUCTION
1.1 Background of the Study
In the corporate sector, the primary “responsibility” of corporations has always been to earn money and grow shareholder value. In previous worlds, corporate financial responsibility has been the sole driver of bottom-line results.
However, over the last decade, a movement that defines larger corporate obligations for the environment, local communities, working conditions, and ethical practises has gained traction and taken hold. This new driving factor is referred to as Corporate Social Responsibility (CSR).
The corporate “triple bottom line” refers to a company’s financial, social, and environmental performance in conducting business.
As the commercial sector invests in corporate social responsibility in its three usual ventures (the workplace, the market, and the community), USAID has a unique opportunity to form corporate partnerships that will help expand, enhance, and sustain its health efforts in developing countries.
Reality demonstrates that businesses have recently been able to adapt to a changing world not only economically, but also socially and ethically. A company’s goal remains based on a development strategy that not only benefits its shareholders but also encourages other stakeholders to participate, either directly or indirectly, in the production process.
A firm is an open system, and in order to achieve its primary goal, it must be able to combine two broad groups. Profitability and stakeholder interest. Given that a system of exchange and mutual influences has been established between stakeholders and the firm
management must be able to assess the aims, resources, and strategy of common groups of stakeholders to be considered, as well as its own potential to mobilise other stakeholders.
Given their higher importance than other stakeholders, the customer has taken on a central role, leading enterprises to satisfy ethical value. A strong evidence of this has been the growing number of enterprises that have decided to take’socially responsible’ action (see Masimo and Podd; 2008; Podd and Vegalli; 2008).
This is when the notion of corporate social responsibility (CSR) emerged and began to enter common lexicon, and it is increasingly being employed by academics and economists to ensure economic development sustainability.
As is often the case when new phrases are invented, they lose their intellectual precision, leaving only their evocative power, which is diluted by the variety of varied meanings and contexts in which they are used.
The notion of corporate social responsibility (CSR) has taken on several connotations depending on the business or group that employs it. Some people tend to emphasise certain qualities that they consider are more essential than others, such as ethnicity, the environment, safety, education, or human rights.
Definitions frequently change because they reflect historical and social differences between countries. Indeed, certain definitions underpin a certain issue because they are more important in that state; at other times, the notion of corporate social responsibility reflects a country’s economic and, thus, social development levels.
Due to the various weight attributed to the phrase by different countries, the World Business Council for Sustainable Development (WBCSD) has provided the following definitions:
“Corporate Social Responsibility is the task of a business to contribute to sustainable economic development working together with workers, their families, the local communities and the society in general to improve quality of life.”
Lewis (2002) defines corporate social responsibility as the connection between a firm and the social environment in which it operates.
Corporate Social Responsibility is also defined as the process of considering, managing, and balancing the economic, social, and environmental consequences of one’s activities (PJC 2006).
The concept of Corporate Social Responsibility as an integral element of a corporation’s main business activities, rather than a separate “add on,” distinguishes it from corporate philanthropy, which may be funded by practices that harm the communities in which the firm or business operates.
In recent years, there has been much debate about how much firm directors and management should consider social and environmental factors when making business choices, rather than focusing solely on short-term accounting gains.
1.2 Statement of the Problem
The practical application of Corporate Social Responsibility (CSR) is widely debated and criticised. Proponents claim that Corporate Social Responsibility (CSR) has a solid business case because corporations benefit in a variety of ways from functioning with a broader and longer perspective than their own immediate short-term profit.
Critics argue that Corporate Social Responsibility (CSR) diverts attention away from a company’s fundamental economic role; others argue that it is merely window dressing; and still others argue that it is an attempt to preempt the government’s role as a watchdog over powerful multinational corporations.
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