Question

The following quote appeared in an article entitled ‘Business and society in the coming decades’, which was available on the website of McKinsey & Company (accessed in October 2015).

“There are compelling reasons companies should seize the initiative to drive social and business benefits. First, in an interconnected world facing unprecedented environmental and social challenges, society will demand it. Increasingly, a basic expectation among customers, governments, and communities will be that the companies they do business with provide a significant net positive return for society at large, not just for investors. This will be part of the implicit contract or license to operate”.

Required:

a) Explain the above statement in the context of corporate social responsibility. [Word limit 150-200 words]

b) Further, do you think such a statement would impact the perceived ‘legitimacy’ of companies? Explain. [Word limit 200 – 250]

Answer 1

a) The statement mentioned clearly states that in the coming decades society will demand and expect net positive return from the companies. The world is now open to all and interconnected world is facing societal & environmental challenges which could then pressurize businesses to do something for the society whatever is the position for business. Currently companies are involved in CSR activities because it helps them build an image in the society, gain trusts and thus promote growth. It is believed that an organisation earns from society so it is their moral duty to give it back to both environment and society. CSR is not an compulsion on companies (exceptbut it could become a compulsion seeing the expectations and challeges faced by society and environment so it has been argued that companies should seize these activities. CSR not only helps build a brand and image in public eye but also brings in customer loyalty and better financial performance. CSR should never be viewed as a burden on an organisation but as an opportunity and moral obligations which brings in various benefits to the organisation. CSR can address social imbalances.

b) The above mentioned statement may cause a dilemma for the organisations performing their corporate social responsibility and benefitting from the same. CSR should never be a pressure for an organisation, there should always be wiilingness to perform duties and obligations. Such Statement may result in organisations withdrawing from CSR activities which would then hinder growth of society. Apart from this organisations who are very well aware about the benefits derived from CSR activites would never get impacted by such statements and continue doing what they do. A pressure from society will definitely affect the percieved legitimacy of companies as they would then try running away from the responsibility imposed on them as and when their financial position depletes. According to my opinion CSR should never be mandatory for organisations as it would impact their legitimacy, however it could be made mandatory only after an organisation crosses a certain turnover. Policy should be made such regarding CSR such that it does not affect the legitimacy of companies. Companies should be made aware about their responsibility towards society and environment without putting any pressure or affecting its working. Also society should understand that it cannot expect much organisation as it would then hinder its growth and ultimately affecting the economy as a whole.