Corporate social responsibility (CSR) forms the basis of the need to support law, ethical principles, and societal norms in an organization. This is because CSR defines the responsibility of a business to the environment, customers, and the social good of the local community members (Petkoski & Twose 2003).
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On the other hand, corporate social responsibility is instrumental in promoting sustainable realization of corporate strategies through assured competitive market and commitment of employee to its goals and objectives. Owing to the importance of CSR to the larger community, laws dictating for such policies have been established. The author gives a critical evaluation of the concept of corporate social responsibility as it relates to the Coca Cola Company. Still discussed in this paper is the importance of CSR and how such are reflected in the corporate strategy of Coca Cola Company.
The concept of Corporate Social Responsibility (CSR)
Corporate social responsibility is defined as the process of managing the business actions of an organization towards the realization of a sustainable positive impact in the community. In other words, corporate social responsibility encompasses two major issues of consideration by the organization. First, the organization should qualify the quality of its internal management.
This entails management aspects such as promoting the social, economic, and health wellbeing of its employees; typically referred to as positive employee engagement practices (Keinert 2008, p.36). Another internal circle aspect of corporate social responsibility is consideration of the quality of management of the production process in the organization.
The second issue of consideration in a corporate social responsibility policy is the; nature, significance, quality, and quantity of impact the company’s operations have to the various aspects of the community (Lockwood 2004). Of importance in this consideration is the issue of environment conservation to promote safety of the local community members. In addition, the operations of a company are not without interference to the social and economic lives of the local community members. It is due to this reason that a corporate social responsibility should engage portion of company resources in community development projects.
Available literatures have claimed a strong relationship between ethical business practices and corporate social responsibility. Indeed, ethical business practice finds much appreciation as a subset of the large understanding of corporate social responsibility (Asongu 2007, p.87). Based on this reasoning, the concept of social responsibility extends the responsibility of an organization to its customers and stakeholders. Effective corporate social responsibility policies must promote quality, reliability and trust to customers (Petkoski & Twose 2003).
On the other hand, it should promote the confidence of stakeholders to the management and operations of the company. This entails strengthening financial performance of the organization as such are used by stakeholder in analyzing the potential future survival of the company.
In addition, the concept of corporate social responsibility dictates for social accounting, auditing, and reporting (Lockwood 2004). This is one of the legal requirements for ensuring that companies comply with the existing laws of corporate social responsibility in the US. For a company it be defined as engaged in ethical business practices, it must clearly qualify how its economic actions impact of the social, economic, and environmental aspects of the local society as well as the larger human community (Lockwood 2004). This has the implication that corporate social responsibility remains a crucial tool in determining the corporate accountability.
The importance of CSR
Corporate social responsibility brings numerous benefits to an organization and the community at large. CSR has been praised for improving human resource requirements in an organization. An effective CSR policy is instrumental in determining the success of human resource department in recruiting, training, engaging and retaining a strong workforce for the organization (Banerjee 2007, p.124).
This is based on the fact that CSR involve practices addressing the social, economic, and health wellbeing of company employees. True to the letter, it is a common practice by candidates to inquire of a company’s social responsibility policy during interview. Thus, a positive corporate responsibility is crucial in ensuring confidence of qualified employees seeking to work in the institution.
In addition, the perception of employees to their company is quite important not only in promoting their commitment to the objectives of the organization but more in portraying reputable image of the organization in the public. Corporate social responsibility in an organization finds its impact in promoting individual employee commitment to community development activities.
This is because it improves their economic stand in the community as well as instilling in them the need to engage in community volunteering activities (Chandler & Werther 2006, p.79). It is worth appreciating that the strength of a corporate social responsibility is best defined by the personal values of the individual employees. On the other hand, defining a CSR policy is instrumental in influencing positive personal values among members of the company.
Another importance of corporate social responsibility is in enhancing risk management practices. This is because it mitigates incidences of unethical business whose eminence only compromises the reputation of the organization. Such are closely attributed to the fact that CSR policies serve to create and promote a strong culture of doing what is right in the company. Success and collapsing of an organization is heavily dependent on its corporate culture; much of which is well defined by corporate social responsibility policies (Chandler & Werther 2006, p.81).
As an emphasis to this is the sudden downfall of major American public corporations such as Enron and WorldCom between 2001 and 2002. According to available information, the collapsing of these institutions was driven by financial scandals and poor corporate governance in the corporations (Lockwood 2004). Thus CSR is a vital component in defining ethical conduct in a company.
Moreover CSR enhances customer loyalty, an element which functions to ensure sustainable competitive advantage of the company in the marketplace (Chandler & Werther 2006, p.91). Customer loyalty depends on the quality of customer services offered by an organization. With an effective CSR policy, companies instill the sense of employee commitment to the objectives of the organization, mainly production and customer service provision.
This brings with it the competitive advantage of promoting customer satisfaction to the services and products provided by the company. It is worthy noting that in a competitive economy, the realization of a sustainable large consumer pool for company products remains a key factor in achieving the long-term economic survival of the organization.
Also, CSR policies help in mitigating liability burdens in the organization. This is because it portrays the company as being conscious of the social and environmental sustainability in the community, thus promoting good corporate citizenship (Filho & Odowu 2009, p.176). There are numerous laws and regulations that prohibit anti-corporate social responsibility policies in America. Such include laws against discriminative employment and environmental pollution by organization.
In addition, conflict between members of local communities and organizations have been a real drive to tarnishing the reputation of the organizations. This is due to the negative publicity such brings to the company. Therefore, corporate social responsibility is crucial in safeguarding the reputation of the organization by making it more responsive to the social and environmental good of the society (Filho & Odowu 2009, p.176).
The concept of CSR and its contribution to the corporate strategy of Coca Cola Company
The Coca Cola Company has its customers, employees, and stakeholders as the most instrumental factors to its success. Due to this, the company has a strong corporate social responsibility mission statement, ‘Live Positively is our commitments to make a positive difference in the world by redesigning the way we work and live so sustainability is part of everything we do’ (Coca-Cola 2010). Based on this mission statement, the company has put in place numerous corporate strategies for promoting the social and economic wellbeing of its employees, stakeholders, and customer ass well as other member in the general public sphere. On employee engagement, the company is involved in two types of incentive plans; all of which are aimed at promoting company profits.
The Coca Cola Company management employs economic value added and economic profit viewpoint as a strategic measure for its growth. This is achieved through its three strategic approaches, which define its incentive plan policies. These are; 1) promoting its industrial growth so as to enhance its products demand across the globe; 2) engaging in innovative business practices such as marketing and human resource and customer management; and 3) long-term investment operations for improving its future competitive stand in the market (Coca-Cola 2010). The first incentive plans is annual incentive plan, which involves evaluation of preset objectives for sales of company products and economic profit in each division to determine the level of incentive to be given.
The other incentive plan is the Stock Options award program for its executives and employees. Here, stock option awards are granted to divisions based on their performance to the objectives; sale of company products and gained economic profits (Coca-Cola 2010). These two incentive plans in the company have played an instrumental role in promoting the commitment of employees and division management in meeting their annual objectives as a requirement for enhancing their shareowner value in the company. This corporate strategy in Coca Cola Company has also served the important purpose of improving customer relations as divisions strive to meet their sales of company products objectives.
As an emphasis to the important competitive economic advantage brought by this corporate social responsibility policy on employees of Coca Cola Company, the company has managed to gain constant growth both in economic added value and in market stock value since the 1986. Available statistical information indicates that the stock-based market value of the company grew from $15 billion in 1986 to an estimated over $200 in 2006 (Coca-Cola 2010). This gives an increase in value of about 20% per year over the same period, an achievement that is closely associated with the increased employee commitment to the mission and objectives of the organization.
Another important contribution of Coca Cola Company corporate social responsibility to its corporate strategy is evident from it current energy and environmental policies. Over the past few years, the company management has invested numerous resources in implementing green energy policies for its production. This is in line with the current calls for engaging in safe production practices to mitigate the problem of global warming in the globe (Coca-Cola 2010). In addition, the company is identified as among the most efficient organizations in promoting recycling of waste products for the common good of the community. This has been had important move in safeguarding the company against liabilities as it cultivate a strong positive good corporate citizenship.
In addition, the company remains one of the few in the world which have invested in numerous community projects. In its simplest definition, corporate social responsibility encompasses actions which are tailored at giving back to the community as an appreciation of the harm the company processes have caused on them. This is quite reflective to the Coca Cola Company production given the burden of ensuring safe disposing of cans among other byproducts from the company (Coca-Cola 2010).
According to available statistical information, the each company branch across the globe invests substantial amount of resources in funding community projects such as sports. This has served not only as a publicity technique but also as a social of promoting the social good of the larger society.
Still, the CSR of Coca Cola Company has played a vital role in the companies struggle to maintain its position as the largest beverage company in the world. The company engages in promoting innovative practices in its major commercial fields namely; marketing, product development, and packaging to meeting the competitive satisfaction of its customer needs (Coca-Cola 2010).
Moreover, the company has invested much in formulating and implementing an effective customer feedback mechanism to identify product appreciation and/or complains as well as unique demands from customers (Coca-Cola 2010). Therefore, the corporate social responsibility of Coca Cola Company has no doubt brought much influence in its corporate strategy on promoting competitive satisfaction of customers.
The Coca Cola Company has implemented a policy on social accounting, auditing, and reporting its social performance and the economic impact it has to the overall company performance since 2001 (Coca-Cola 2010). According to available information, the company engages in giving quantified reports on developments in its corporate social responsibility practices annually.
Despite the fact that the policy has been met with numerous challenges, the company management claims of sufficient and potential long-term achievements on its effectiveness in promoting social and economic wellbeing of all in the society. This success has been closely attributed it constant review of their social accounting measures against other local and Global reporting initiatives.
It is evident that corporate social responsibility is an instrumental tool in promoting the competitive advantage of an organization in the marketplace. This is because it serves to strengthen the reputation of the company in the public. It also functions to improve employee, and stakeholder commitment to the goals and objectives of the organization. In addition, corporate social responsibility plays an important role in corporate strategies. This is because it defines ethical business practices to be engaged by all company employees (Lee, & Kotler, 2005).
Through its quest to ensure sustainability of its corporate social responsibility, the Coca Cola Company has significantly modified its corporate strategy to reflective the social, environmental, and economic needs of the society. Therefore, companies should strive to formulate and implement a corporate social responsibility policy as a crucial tool for gaining sustainable competitive advantage in the marketplace.
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Banerjee, S, 2007, Corporate social responsibility: the good, the bad and the ugly, Cheltenham, Edward Elgar Publishing Limited.
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Coca-Cola 2010, Corporate Responsibility: overview. viewed 18 August 2010, <http://www.cokecce.com/pages/allcontent.asp?page_id=72>
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