What is Corporate Social Responsibility (CSR)?
CSR is a management technique that accepts various responsibilities of corporate stakeholders. CSR is said to be aimed at improving corporate reputation or brand image rather than improving corporate profits. However, there is also a view that interprets it as having a direct or indirect effect on corporate profits. In summary, CSR is performed to meet the social needs expected by corporate stakeholders. It analyzes the social, legal, and economic interests of stakeholders in the business area in which the company is involved and actively applies the analysis factors to management activities.
The Impact of CSR on the business
At first, companies were not interested in social responsibility arising from corporate activities. However, as society developed, people became alert to environmental problems such as global warming. As they became aware of social issues such as unethical labor practices, consumers began to demand management, including social responsibility, from companies. Then what happens to companies that don’t have social responsibility? Consumers will buy other companies’ products, and companies will fall out of the market and face financial difficulties. A survey of consumers also found that about 70% of consumers prefer products from companies responsible for environmental and social problems. In addition, CSR affects its brand image, so it also affects attracting talent, employee satisfaction, and employee maintenance. In other words, companies that do not value corporate social responsibility can lose top talent to other companies. In addition, employees of companies with social consciousness have a sense of goal due to management with corporate social responsibility. With the advent of social media, corporate social responsibility is emerging as a more important corporate management policy. If companies with unethical practices are exposed to social media, their reputation will fall in a moment. On the contrary, in the case of companies operating ethical practices and eco-friendly companies, exposure to social media improves corporate reputation and even has advertising effects. For this reason, many companies recognize the importance of social responsibility and make all operating policies based on social responsibility.
Impact of Changes in Social Responsibility on Corporate Performance
Corporate social responsibility is not an activity that a company must do due to external pressure or coercion. It is to ensure that the company voluntarily executes to maintain relationships with the company’s stakeholders and to plan activities to create social and public interests. Legal requirements for companies’ socially responsible activities must be observed. Spontaneous corporate social responsibility activities that meet legal requirements have a positive effect on all company’s stakeholders. For example, positive interactions occur by requiring what corporate stakeholders want from the company and responding to the demand. If this effective interaction is not achieved, it can lead to bad consequences such as boycotting consumers and harming corporate reputation. Thus, companies should establish efficient social responsibility strategies and develop effective plan implementation measures, recognizing that corporate social responsibility has a huge impact on corporate profits and brand image. There are factors to consider in planning and implementing corporate activities related to social responsibility. The representative elements are interest in people, environment, and corporate profits. Interest in people refers to identifying what corporate stakeholders require and planning corporate activities in response. The next factor, environmental interest, refers to identifying factors contributing to social interests in the industrial environment in which a company belongs and reflecting them in planning. The final element, ‘interest in corporate profits,’ means that when a company plans social responsibility activities, it must consider matters related to its profits. Of course, it is important to have a positive effect on society with social responsibility, but the ultimate goal of a company is to generate profits. Most importantly, corporate social responsibility activities must be carried out voluntarily. In addition, since activities organized to comply with the law are recognized as mandatory activities rather than social responsibility activities, companies are required to engage in social responsibility activities beyond legal requirements established by the state or government.
ethical issues in Samsung
South Korea-based Samsung is a global company that ranks eighth among the world’s most valuable brands. With creative smartphone development and effective marketing, it is one of the best companies competing with Apple in the European market and the Asian market. However, some ethical problems have also been revealed in the global company. According to a survey by Ethical Consumer, which measures the brand value and ethical rankings of various companies worldwide, ethical issues related to Samsung’s contract to start building and designing nuclear power plants in the United Arab Emirates have been revealed. In this process, Samsung likely committed anti-social financial activities about the maintenance cost after constructing the nuclear power plant. In addition, Samsung is expected to have tax havens in several foreign countries, according to the research. The representative of Samsung announced that it would not do tax evasion activities that violate the law. However, the investigation office explained that the risk of tax avoidance seems high due to the absence of reports by overseas branches or official reports explaining the purpose of high-risk affiliates. The problems described above appear to be illegal related to finance, but tax evasion is also included in ethical issues because it is also an anti-social problem. It is because the goal of ethical management is the benefit of society as a whole. In addition, according to a survey by PAX, a Dutch peace organization, Samsung has invested heavily in companies closely related to the manufacture and sale of cluster bombs. Cluster bombs are considered weapons of mass destruction that harm human dignity. Finally, Samsung was fined in 2018 for deliberately slowing down its smartphone to induce consumers to repurchase. According to a survey by the Monopoly Monitoring Organization, Samsung’s smartphone update caused a serious malfunction and induced cell phone replacement. In addition to these issues, Samsung also revealed some ethical issues in human rights issues, such as overseas child labor exploitation. Samsung seems to work more on ethical management as a global company that contributes to various industrial fields.
The Importance of Ethical Considerations in Business
As the scope of activities of many companies expands globally, companies must also consider ethical and legal issues of international business in revising their goals, policies, and strategies. In other words, when companies expand their business overseas, they must be aware of ethical considerations for successful expansion. Ethical problems that may arise from expanding overseas business can occur at outsourcing contracts, the establishment of working conditions and standards. In addition, it can cause ethical issues related to the country’s religion, politics, environment, and human rights. Companies that want to expand internationally should identify these ethical considerations and plan to expand in compliance with the law. Cultural considerations of countries where companies aim to expand a branch are also essential considerations for the success of the corporate expansion. Each country has a variety of cultures, histories, and traditions. Understanding the country’s culture and incorporating it into business plans positively will be the first step toward success. If business activities are planned according to the country’s cultural and ethical values, it will be advantageous to attract customers and gain the market competitive advantage. As international business growth accelerates, experts related to global markets, international business practices, and cultural and ethical considerations and issues in each country are becoming busy. If it is the first company to expand overseas, it would be efficient to hire such experts.
The way to improve ethical management
In modern society, companies must operate companies based on transparency and ethical management to succeed in the market. Thus, companies should continue to improve their ethical aspects to benefit society as much as possible and to increase corporate profits. Corporate ethical management refers to management activities to prepare and establish various systems for practicing social and environmental corporate ethical activities. When planning the corporate activity, companies must be aware of economic and legal-related matters. The role of executives and employees is the most important for the ethical management planned by the company to be carried out effectively. A company composed of ethical employees can help the company both inside and outside the company. In other words, ethical management planned by the company is possible by instilling ethical awareness in employees. If the number of ethical employees held by a company increases, the company’s reputation improves, and the customer’s loyalty to the company also increases, increasing the company’s profits. Therefore, many companies are trying to instill ethical awareness in their employees. When corporate managers plan ethical management, they prepare ethical education programs or code of conduct lists for employees. Employees of a company should be able to distinguish whether it is a moral behavior. One way is to refer to a company’s code of ethics to develop the ability to recognize whether its actions are ethical or unethical. If a company wants to train its employees in this way, it is one of the good ways to develop a compensation system that allows employees to maintain and motivate ethical behavior. Inviting an instructor from outside to ensure that employees receive periodic ethics lectures can also be the way. Sometimes, judging whether an action is moral can be less objective inside a company, so expanding the objective perspective of employees through special lectures can also help strengthen ethical awareness in the workplace. Finally, improving ethical awareness for employees is to set an example for employees by setting an example for ethical management pursued by companies to be more helpful to society and the environment. It is because employees’ self-esteem and belonging can be further strengthened due to the ethical management of companies in the same direction as their ethical consciousness.
Benefits of CSR Activities to Stakeholders
Ethical management is the management method created by companies to fulfill their social responsibilities. In other words, CSR activities are the same as corporate ethical management. CSR activities are related to various stakeholders of the company. CSR is to accept the needs and expectations of stakeholders and reflect them in the company’s operation plan. As a result, both stakeholders and companies benefit from social responsibility activities and have a positive impact on society.
- Proper CSR activities improve corporate reputation. CSR activities, which are steady and beneficial to society and the environment, have a good reputation with customers, employees, and investors. On the contrary, companies that neglect social responsibility cannot expect a good reputation. In particular, in modern society, where the Internet and social media are developed, a momentary mistake can determine the existence of a company because corporate mistakes or irresponsible activities quickly spread.
- Customers’ preferences can be obtained through CSR activities. According to a survey, consumers in modern society tend to prefer companies with similar ethical values. In other words, customers prefer products from companies that fulfill their social responsibilities. In modern society, where people’s interest in social issues has increased compared to the past, companies are evaluated with more factors and the price and performance of their products or services. One of the factors that customers evaluate a company is CSR activities.
- CSR also has a positive effect on employees. Employees will be proud that their companies fulfill their social responsibilities through ethical activities. Through CSR, employees value ethical awareness more, and work satisfaction can be improved with the pride of doing good work. Improving work satisfaction will soon lead to increased productivity of companies.
- Factors such as increased customer preference, improved brand reputation, and improved employee job satisfaction related to improved corporate profits. It is the stage of evolving into a more valuable company. Companies whose profitability continues to improve are bound to be noticed by investors. In other words, CSR activities can result in not only enhancing corporate profits but also attracting investment.
- CSR is also a way to solve regional and global problems. Since corporate social responsibility activities are corporate programs for society and the environment, they also help local communities and the environment. Furthermore, the CSR program of the UN, established to prevent war and maintain world peace, also contributes to solving global problems because its scope of activities is global. Continuous corporate social contribution activities not only impress consumers but also induce the same strategy to competitors, resulting in a synergistic effect of competitors’ social contribution.
- Finally, CSR activities serve as a device that connects local communities and companies. Forms such as corporate volunteer or fundraising are one of representative CSR activities. In addition, by hiring employees in the community, companies build trust between the company and the community and increase the satisfaction of employees employed.
References
Corporate Social Responsibility: What it is, Why it Matters, & How it Impacts Business in 2016, https://mondo.com/corporate-social-responsibility-2016/ [Accessed Mar 25, 2022].
What is the Corporate Social Responsibility? https://terms.naver.com/entry.naver?docId=2274744&cid=42251&categoryId=51121 [Accessed Mar 26, 2022].
Samsung Group, https://www.ethicalconsumer.org/company-profile/samsung-group#:~:text=In%202019%20Samsung%20also%20faced,Samsung%20disputed%20these%20claims. [Accessed Mar, 27, 2022].
Ethical Considerations in International Business, 2016, https://online.uttyler.edu/degrees/business/mba/general/ethical-considerations-in-international-business/#:~:text=Some%20of%20the%20most%20common,the%20environment%2C%20bribery%20and%20corruption. [Accessed Mar 29, 2022].
7 Benefits of CSR for UK Businesses, Their Stakeholders and Society, Helen Hopper, 2021, https://www.diligent.com/en-gb/blog/benefits-of-csr/#:~:text=The%20Benefits%20of%20CSR%20to%20Stakeholders&text=More%20engaged%20employees%20are%20happier,creating%20a%20win%2Dwin%20situation. [Accessed Mar 31, 2022].
