MNCs and Corporate Social Responsibilities (CSR): Why do MNCs (any corporation for that matter) engage...

MNCs and Corporate Social Responsibilities (CSR):
1. Why do MNCs (any corporation for that matter) engage in socially attractive activities?
2. Who write the standards and codes of CSR?
3. Is there a business case for CSR? Explain.
4. Some people are against CSR, explain why.
5. Is there enforcement mechanism for CSR? How do we know if a MNC’s CSR has a real social, economic, and environmental impacts?
6. Discuss why IKEA’s and Walmart’s CSR implementation records are different. That is, why IKEA followed most of the CSR standards and codes, but Walmart didn’t.
7. An alternative approach to CSR practices is for a government to collect tax from MNCs and undertake activities that correct the negative externalities of MNCs. Do you support this approach? Explain why.

Expert Solution

a) Corporate Social Responsibility refers to the obligation of organisational management to make decisions and take actions that will enhance the welfare and interests of society as well as the organisation.I.e. responsibility is no longer limited to economic and legal domains.

Firms engage in socially attractive activities because:

A commercial benefit of having CSR related strategies that the company will often have broader discretion and may get control over markets, resources and individuals at lower costs.
A corporation's brand and reputation improves by having, which is essential for maintaining customers', investors', and generally society's trust and confidence in the entity.
CSR improves public image and good will
CSR prevents criticisms.
CSR prevents government regulation.
CSR is good for profits and shareholders.
CSR results in self enlightenment as the organization feels that it has done something good and valuable for the society and it should continue to undertake such initiatives in future.

b) Corporate Social Responsibility (CSR) is defined in ISO 26000 as the responsibility of an organization for the impacts of its decisions and activities caused in society and the environment through transparent and ethical behaviour.

Some Important Standards are:

Global Reporting Initiative (GRI) is an independent institution established in 1999 with the mission to provide a reliable and credible framework for preparing sustainability reports that can be used by organizations regardless of size, sector or location. The guidelines issued are the international standards that are to be followed to prepare sustainable reports.
ISO 26000 is developed by ISO and guides the organization's on how to implement CSR.
Standard SA 8000 is a voluntary management standard developed by SAI (Social Accountability International) of the United Nations, published in 1997 on working conditions and an independent control system for the ethical production of goods and services as well as suitable working conditions.
AA1000 standard focusses on Accountability with the goal of integrating management, auditing and communication CSR aspects.

c) The Business Case for CSR

It does not claim that CSR is the right thing to do, but that it is to the company's advantage to adopt CSR "being socially responsible is good business"

The Market for Virtue (business case)

If CSR is profitable, then the profit opportunities in CSR should be sufficient to induce managers to lead socially responsible companies. The demand for CSR comes from customers, employees, investors, and other groups that are willing to express their desire for CSR in the market place (pay more for products made responsibly).

Socially Responsible Investment "SRI" (Business case)

Through their actions, investors are registering their concerns about the social impact of business by engaging in SRI (screening their investments and removing objectionable ones)

Investor Advocacy (business case)

It refers to where SRI funds use their position as shareholders to pressure companies' management and seek change through shareholder resolutions.

d) Criticism of CSR

Some people criticizes CSR on following ground :

Business is responsible to shareholders, not society
Social programs are the responsibility of governments.
Business lacks training in social issues.
Involvement in social matters can lead to increased cost and failure of the business..
It becomes costly for small business to implement CSR as compared to big organizations.
Due to lack of skill and competence: professionally qualified managers may not have the aptitude to solve the social problems.
Sometimes the organization's adjusts the cost of CSR activities in the form of high price to consumers and low wages to workers.

Rahul Sunny answered 2 years ago

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