Question

Some argue against corporate involvement in socially responsible behavior because the costs incurred by such behavior place the organization at a disadvantage in a competitive market. Discuss the merits and flaws of this argument. 

Answer 1

The costs of socially responsible behavior include those associated with environmental protection, improving worker safety, and affirmative action. In the short run, when one firm incurs these costs and its competitor does not, the latter has a competitive advantage over the former. However, the socially responsive firm can maximize its profitability in the long run by accruing goodwill in society and avoiding the negative effects of government regulations.

Socially responsible costs initially disadvantage but lead to long-term profitability, goodwill, and regulatory compliance benefits.