The objective of this paper is to review the current status and future trend of corporate social responsibility concept practiced by companies. In doing so, the term corporate social responsibility is defined with the regulations governing it. Then the benefits of performing such responsibilities are elaborated. Finally, the role of the public sector is discussed in assisting the business firms for practicing social responsibility. The examination of various available literatures revealed that, investing in social responsibility activities pays the firm in terms of improved brand image, skilled and motivated employees, better risk management etc. Finally, this paper concluded that, social responsibility compliance and stockholders value are not mutually exclusive tasks, rather they compensate each other in achieving the ultimate goal of sustainable economic development

Ahmed Sarwar U.

Uchida Shigeru

Ahmed, Sarwar U.

Uchida, Shigeru

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Corporate Social Responsibility : Benefit, Current Status and Future Trend

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KEIEI TO KEIZAI, Vol.86 No.3, December 2006 169Corporate Social Responsibility: Benefit,Current Status and Future TrendSarwar U. AHMED tShigeru UCHIDA :j:AbstractThe objective of this paper is to review the current status and futuretrend of corporate social responsibility concept practiced by companies.In doing so, the term corporate social responsibility is defined with theregulations governing it. Then the benefits of performing· such respon-sibilities are elaborated. Finally, the role of the public sector is dis-cussed in assisting the business firms for practicing social responsibility.The examination of various available literatures revealed that, investingin social responsibility activities pays the firm in terms of improvedbrand image, skilled and motivated employees, better risk managementetc. Finally, this paper concluded that, social responsibility complianceand stockholders value are not mutually exclusive tasks, rather theycompensate each other in achieving the ultimate goal ofsustainable eco-nomic development.Keywords: corporate social responsibility, global instrument, .benefits, public sector1. IntroductionCorporate social responsibility (CSR) has developed into a widely recog-nized topic for business firms. But the question as to whether and how theyt Sarwar U. Ahmed: Research Associate, Faculty of Engineering, Nagasaki University:j: Shigeru Uchida: Professor, Faculty of Economics, Nagasaki University170 KEIEI TO KEIZAIshould practice CSR is still vague and widely debated. There are also fewmodels that show the positive relation between investment. in CSR andbenefits to the company. However, gradually governments and variousglobal instruments are imposing CSR standards on companies to follow.Hence, in near future companies would not be able to decline CSR activities.Thus, it is high time for business firms to assess the cost and benefits of in-vesting in CSR activities. Accordingly, this paper reviews the meaning,regulations, benefits and future trend of CSR activities. The results of thisstudy are expected to provide a baseline for initiating a future study on theimpact of practicing corporate social responsibility by banks.CSR of financial intermediaries has been played very important role bothin the economy and society. In the decade of 1960s, CSR of manufacturingenterprises particularly those of heavy industries caught certain attentions ofpeople for coping with public nuisance and environmental destructions. Afew economists and managerial scientists such as Mishan (1969) who isknown by exploring amenity right and others, Rome Club and Meadows etal. (1972) giving us consideration about limit and implementation of economicgrowth to harmonize environmental conditions, and others have conductedrelevant researches.This might be the first era of researching CSR. This line of studies on en-vironmental sciences involving environment economics or environmentmanagement has widely been tackled by scientists in many fields to developmethodologies and practices of keeping the earth and global environments inappropriately sustainable conditions.Since 1990, we have observed the second trend of investigating CSR.Some interesting topics have been presented even for revitalization of deve-loped economies such as optimal settlement of governance status amongCorporate SoCial Responsibility: Benefit, Current Status and Future Trend 171stakeholders, corporate citizenship, business ethics, corporate culture, andso forth.2. Corporate Social Responsibility (CSR)Corporate social responsibility, as the name implies, refers to the respon-sibility of the company to the society or community. This term is defined bythe World Business Council for Sustainable Development (WBSD, 2002) as"the commitment of business to contribute to sustainable economic de-velopment, working with employees, their families, the local community andsociety at large to improve their quality of life." Thus CSR refers to theresponsibility of the business firms to improve the relationships among thestakeholders, which includes customers, investors, employees, local com-munity and the society. Figure 1 depicts the role that CSR activities play inachieving the ultimate goal of sustainable economic development for thestakeholders.3. Current Global Instruments for CSRPresently, there are several "global instruments" which provide code orstandard to guide international business regarding non-financial perfor-mance, i.e., corporate social responsibility, namely, GECD Guidelines forMultinational Enterprises, Caux Principles for Business, Global ReportingInitiative, Global Sullivan Principles, Principles for Global CorporateResponsibility: Benchmarks, Social Accountability 8000 (SA8000), UNGlobal Compact. The objective of these guidelines is to develop internation-ally agreed principles to reduce misunderstanding and promote assurance172 . KEIEI TO KEIZAIamong business, labor and societyas a whole (Gordon, 2001). Acompari-son of these instruments in reference to the corporate {'ocial responsibility isshown in Table 1. From the table we can see that, Principles for Global Cor-porate Responsibility: Benchmarks and OECD Guidelines for MultinationalEnterprises covers the CSR topics more widely compared to the other globalinstruments.4. Does Corporate Social Responsibility Pay?The question whether practicing social responsibility benefits the businessfirm is a subject of debate among the researchers. There are two contrastingviews with respect to the objective of the firms: Adam Smith and MiltonFriedman argue that the companies are solely responsible. to their ownersand their social responsibility is to make profit (CPD, 2002) .On the otherhand, socia-political maximalists relate that social responsibility of a compa-ny is unlimited and the objective of profit maximization should come next.The opinion of these economic arguments has different goals for a firm, butthey have one thing in common, which is they considered social responsibili-ty and shareholders value as mutually exclusive. Still now to many firms thebenefits of practicing social responsibility are not clear. Thus the lack of wil-lingness on the·part of. many firms to develop concrete corporate socialresponsibility program indicates that, these activities are costly andproblematic with no obvious benefit for the firm (Murry and Vogel, 1997).However if we consider another viewpoint the stockholders value and so-cial responsibility are not mutually exclusive, rather they compensate eachother. A business firm which aims at maximizing stockholders value shouldalso invest in performing social re-sponsibility by increasing accountabilityTable 1. A comparison of the topics referred in'the global instruments for corporate responsibilityOECD Caux Global Global Principles Social UN GlobalGuidelines Principles fQr Reporting Sullivan for Global Accountability Compactfor Business Initiative Principles Corporate 8000 (issued inMultinational (issued in (issued in (issued in Responsibility: (SA8000)- 1999)Enterprises 1994) 1999) 1999) Benchmarks (issued in(revised in (revised in 1998)2000) 1998)Accountability 0 X -0 X 0 0 6.Business Conduct 0 !1 X !1 0 X XCommunity involvement !1 0 X !1 0 X XCorporate Governance !1 0 !1 X 0 X XEnvironment 0 X !1 X 0 X XHuman Rights !1 X 0 0 0 0 !1Marketplace/consumers 0 !1 X X !1 X XWorkplace/employees !1 !1 X X 0 !1 XNote:. 0 strongly referred; !1 moderately referred; X weakly referredSource: Compiled from Gordon, 2001(").a~Vlo()....e:.~.eo::l'"gq"t:O~~(")c~Vl~'"§0-~~[>-'--.:JC'-'174 KEIEI TO KEIZAIand transparency. Thus a firm can satisfy both the goal of making profitsand performing social responsibility. Among others the benefits which a bus-iness firm can expect to receive from exercising social responsibility mightbe divided into direct (short-term) and indirect (long-term) benefits and areexplained below.4 . 1 Direct Benefitsa) Practicing· corporate social responsibility increases accountability andtransparency of the firm, which in turn results in better risk managementby restricting the management from opting hidden risky transactions.Table 2 Public sector roles in enforce CSRRoles ActivitiesCommand andRegulators Legal andMandatingcontrol legislationand fiscal penaltiesinspectorates and rewardsCreating CapacityFacilitatingEnabling legislation incentives buildingFunding support Raising Stimulatingawareness marketsPartnering Combining resourcesStakeholderDialogueengagementEndorsing Political supportPublicity. and praiseSource: Fox et al., 2002b) This also increases the image of the company through good publicity inthe community and the society.c) Fulfilling social responsibility ensures the welfare of the employees and.their development and guarantees the continued flow of skilled and moti-vated workforce.d) Firms investing in exercising social responsibility are also valued highlyTable 3 Long-term strategic benefits form practicing corporate social responsibilityCentrality Specificity Proactivity Voluntarism Visibility Value createdPhilanthropic Computer Accustom new Community Customercontributions donations to users to firm's support loyaltyschools by products vscomputer mfrs. competitorsEngineeringresearchfellowshipsEmployee benefits Health New or Employee Internal: ProductivityDay care uncommon loyalty and Employee gainsFlex-time benefits Higher morale loyalty andemployee loyalty moraleEnvironment New products Patent or Learning curve Positive Public relations New productsmanagement (health, safety, ' , innovation edge advantage relations with and/or or marketse.g., greenpollution) . Process in product or regulations marketinginnovation process advantagedevelopment.Political activity Favorable New business Pre-positioning New product or(PAC, lobby or information change in opportunities if for changes in geographicindependent or industry) economic and pre-positioned to regulations marketsocial regulations take advantage of opportunitiesnew rulesProduct or service related Product Patent or Environmental First-to-market New product oncharacteristics, innovations reformulation innovation edge scanning to or leadership new marketsor processes e.g. 'green' first-to-market create edge benefits Edge inImproved brand loyalty in design or meetingdesign, e.g., fue product ideas emergencyefficiency needsNew products,e.g., airbagsSource: Burke and Logsdon (1996)(1,a~CIloD.e:.~{I)'0o::l{I)~~t;:j~'"~ICIl~{I)~p..~~l.....--'J01176 KEIEI TO KEIZAIby the market indicators in terms of non-financial indicators.4. 2 Indirect BenefitsAlso there are various indirect and long-term benefits. Burke and Logsdon(1996) elaborated the long-run strategic payoffs from CSR. These are ex-plained through Table 3.5. Role of Public Sector in Strengthening CSRIn the current state where the benefits of CSR activities are not still clearto the business firms~ government of each country can play an important rolethrough the public sector. Government can assist in building an 'enablingenvironment', which would create a policy environment encouraging busi-ness firms to minimize environmental and social costs and maximizing eco-nomic gains (Fox et aI., 2002).· In this regard, the public sector can playfour roles, e.g., mandating, facilitating, partnering, and endorsing the cor-porate social responsibility themes to the business firms (see Table 2.for de-tails) .6. Concluding RemarksThe main objective of this study is to assess the current status and futuretrend 'of corporate social responsibility practiced by the business firms. Indoing so this paper presented a part of the literature survey. The findings ofthe study might be summarized and concluded as follows:(1) Whether or not the business firms recognize the benefits, performingcorporate social responsibility is becoming an inevitable task for theCorporate Social Responsibility: Benefit, Current Status and Future Trend 177companies due to the increasing enforcement of both national andglobal instruments.(2) However, practicing social responsibility brings both short and long-term benefits to the business firms in this ever increasing era of cor-porate image and globalization.(3) Investing in social responsibility and maximizing shareholders valueis not a contrasting task. They both are two sides· of the same coinand lead to the same objective of improving the quality of life andeventually sustainable economic development.(4) In addition to the benefit driven motivation form the companies toperform social responsibility, public sector should act as catalyst inmandating, facilitating, partnering and endorsing business firms inperforming social responsibility.Though there might be quite a few literatures about CSR of financial serv-ices industries both in first and second periods, we could recognize thatsome of them would have their own basic features or worthy points commonto manufacturing or other industries to be surveyed here in this paper. Final-ly this study is just a baseline survey for grasping the concept of corporatesocial responsibility. Our next objective is to expand the concept to banksand study the corporate responsibility of banks by initiating both theoreticaland empirical analysis.ReferencesBurke, L. and Logsdon J.M. (1996) How corporate social responsibility pays off, LongRange Planning, 29-4, pp. 495-502.CPD (Center for Policy Dialogue) (2002) Corporate responsibility practices in Bangladesh:results from a benchmark study, Paper No.IS.178 KEIEI TO KEIZAIFox, T., Ward, H. and Howard, B. (2002) Public sector roles in strengthening corporate so-cial responsibility: a baseline study, Corporate Responsibility for Environment and De-velopment Programme, International Institute for Environment and Dev:elopment(lIED) .Gordon, K. (2001) The OECD guidelines and other cooperate responsibility instruments: acomparison, OECD Working Papers on International Investment, 2001/5, OECDPublishing.Meadows, D.H., D.L.Meadows, ].Randers and W.W.Behrens ill (1972) The Limits togrowth: a report for the Club of Rome's project on the predicament of mankind, UniverseBook **~j\~~!*i:~ WRJt*0)~JU1~ : 0-'"'<" . :J '77' rA~O):I1tmJ v~- LJJ 5'. /j'"1'-t-Y F:tl:, 19721j:.Mishan, E.]. (1969) Growth: the price we pay, Staples Press. 1'ftHf&mA!*i:~ WM;ttfRJt*O)1tfrIlU:!fi~ i!iItL 19721j:.Murry, K.B. and Vogel, C.M. (1997) Using a hierarchy-of-effects approach to gauge the ef-fectiveness of corporate social responsibility to. generate goodwill toward the firm:financial versus nonfinancial impacts, Journal of Business Research, 38, pp. 141-159.WBSD (World Business Council for Sustainable Development) (2002) The Business Casefor Sustainable Development, Geneva.

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