Question

(1) why do corporations have a social responsibility; (2) what is the extent of the this responsibility; and (3) how should a corporation decide what CSR activities to undertake?

Answer 1

1. Corporations have social responsibilities for a number of reasons. Firstly, corporations do not exist in isolation from the society. Corporations are part of the larger society. Also, they use resources from the society such as skilled workforce, land, infrastructure (ports, roads, etc.), the natural resources and environment, judiciary, etc. to achieve their business objectives. Therefore, since corporations take from the society to fulfill its goals, they should give back to the society as well to ensure sustainable development of various aspects of the society. Secondly, CSR helps firms engage with the larger society in a better way. This helps a firm create a favorable image. Thirdly, if corporates operate in an irresponsible way, it will be unsustainable for them in the long-run. Corporations cannot keep on polluting the environment, engage in unethical sourcing, an overuse natural resources, etc. without threatening the sustainability of future generations. Therefore, corporates should act in a socially responsible way.

2. There is no fixed extent of the social responsibility of the corporates since it is a subjective and debatable thing. However, I think the responsibility of a corporation should be at least equal to the social cost imposed by it. Also, the social responsibility of a corporation should be in accordance to its market position and financial health. Corporates with strong financial health should take up a larger responsibility to address the overall social problems.

3. A corporation should undertake CSR activities on the basis of its own core values and ethics. Every corporation has certain core values, beliefs and ethical standards which give shape to its culture and management practices. The CSR activities undertaken by a corporate should be in accordance with these core values. This will ensure success perusal of the CSR activities. In addition, the CSR activities are undertaken by a corporation also depends on its areas of operations and expertise. CSR activities require active participation by the corporate and it is always beneficial that the corporate has expertise in that field. So, a private educational institute might effectively conduct CSR of spreading education and community services, whereas a fast-food chain might conduct CSR related to use of recyclable materials and ethical sourcing.