Social Corporate Responsibility

Recent years, the concept of Corporate Social Responsibility (CSR) has been changed influenced by economic conditions and corporate culture. Rapidly changing conditions require new approaches and ways to meet needs and wants of customers and business partners. Many critics admit that the concept of CSR in business is underdeveloped. They state that there is an urgent need to apply and employ strategic management theories to CSR which will help to develop integrated approach to CSR and related issues. Today, ethical responsibilities of a business are how its decisions and actions show con­cern for what its stakeholders (employees, customers, stockholders, and the com­munity) consider fair and just.

            The concept of SCR cannot be seen in isolation, but as an integral part of strategic management and HRM.  Today, organizations and companies do not analyzed in isolation from the society and other businesses, but considered as a part of global business process.  An organization provides goods and services for the community and uses raw material and labour and also makes use of other facilities of civilization, e.g. laws, which protect it.

No management can ignore the environment, but in changing economic conditions, the notion of enlivenment becomes complex and multi-dimensional. It involves political and legal factors, environmental concerns and public health policies, global business and interrogational operations. Following Dentchev it is possible to say that “The outside environment of organizations is reflected not only by the legal requirements but also by the stakeholders’ expectations with respect to corporate contributions to society and the natural environment” (Dentchev, 2005).

The attitude of HRM to SCR is also transformed. Today, workers have become better protected, e.g. collective bar­gaining has given more security to workers. Management gives a lead in these matters and the government periodically ‘exhorts’ industry to do things which would aid the country socially, for example the location of new companies in development areas (Heath, Norman, 2004). At the beginning of 21^st century, SCR is a shaper of corporate climate and culture which determine rules and behaviour patterns of employees. If several decades ago, SCR was seen as a per­son’s fundamental orientation toward life, what a person sees as right and wrong, today it becomes a core of corporate culture and governance.

In 21^st century, SCR is reinforced through the system of rites and rituals, patterns of com­munication, expected patterns of behaviour and perceptions of the psychological contract. The positive feature of SCR is that it helps to provide satisfaction of members’ social needs, and a sense of personal identity and belonging (Sacconi, 2004). SCR adapts some concepts of business ethics stating that SCR mean more than simply passing moral judgment about what should and should not be done in a particular situa­tion. It is part of the conscious decisions a firm makes about the directions it wants a business to take. It is a link between morality, responsibility, and decision making within the organization (Jones, Maurrasse, 2003).

SCR critics suppose that consumers have a right not to be exploited by an organization which depends upon the community in many ways. The question then arises should an organization share its property with its customers, e.g. by lower­ing prices, because of reduced costs through mass production and increases in sales? Legislation, on resale price maintenance and monopolies, has shown that the government adopts the attitude that companies must act in the public interest. Management therefore cannot avoid the fact that its responsibility for industrial and commercial direction is mainly its respon­sibility to society.

As it was mentioned above, SCR include such important areas of performance as marketing policies (should they avoid manufacturing products detrimen­tal to health, e.g. cigarettes, weapons); policies that imply social costs (pollution of rivers – the organization reduces its costs by pumping waste into rivers and this involves social costs in clearing the rivers); the relations which an organization should have with political parties; whether or not to export to particular countries.

In terms of Corporate Strategy, SCR can be seen as a core of strategic decisions and plans which affect all participates. Within corporate planning, SCR influences style of man­agement, an attitude of mind, which uses a systematic and integrated approach to all aspects of a firm’s activities. The idea is to treat the company as an ethical one, and on a long-term basis, rather than a short-term one. SCR influences company’s environment, past, present and future, and with a precise definition of objec­tives. The most interesting and important feature of the SCR approach is the emphasis on the joint establishment of objectives between the company and ethical issues (Johnson, Millon, 2005).

Today, researchers see SCR a continuous process of making ethical decisions systematically and with the best possible knowledge of their consequences. It can be said that today SCR is really more of a style of management working in an atmosphere of change. In most of the evidence to date, better results are obtained by companies adopting SCR as a core of strategic planning and strategic management. Management systems and practices in all types of enterprise, e.g. banks, local government and industry, need to be revised to give more weight to ethical considerations. Competition may not be so much in products or mar­kets, but through conflict with government and pressure groups in society, e.g. on matters such as pollution, safety and welfare (Sacconi, 2004).

New views on SCR is necessary because they help advertising and promotion honestly represent the product or service avoiding misleading or confusing claims. The international marketer should be aware of what approaches and subjects are considered as acceptable to target market, and conform to local requirements. Duties and obligations help to control activities of salespersons and staff. All efforts should be made to prevent false claims and pressure tactics.

The case of IKEA shows that it follows recent changes in SCR and applies them to corporate culture.  As an international organization, IKEA reflects the nature of the environment in which it is operating. Factors such as uncertain economic conditions, fierce world competition, the level of government intervention, scarcity of natural resources and rapid developments in new technology create an increasingly volatile environment. “IKEA believes that good working conditions and the protection of the outside environment at our suppliers is a prerequisite for doing good business” (IKEA, 2006).

The important approach on the staffing and development is built around the concept of corporate culture and the notion that ‘excellent’ companies serve as models for others to follow. In IKEA, managers work closely with employees and workers in order to meet high standards of products and deliver high quality. In all its departments, IKEA attempts to change management-worker relations from low to high trust and seek productivity gains through workforce cooperation and commitment.

Another impressing fact about IKEA policies is that “it has set up bridge schools in carpet belt areas in east Uttar Pradesh as it sources a lot of material from there. IKEA is committed to keeping units it has business relations with free of child labour. By establishing such schools it tries to create incentives for parents to keep their children away from the job market” (Gupta, n.d.).

Also, some critics suppose that IKEA lacks SCR policies.  IKEA cuts prices at a level that is reasonable and fair, but this policy is a result of successful marketing strategy and high profits which has nothing to do with SCR. Also, IKEA proposes very high prices for Eastern Europe and Russia which prevents many potential customers to buy IKEA’s products.

Perhaps the most difficult ethical problem faced by IKEA’s managers is the question of to whom they are responsible when developing new strategies. The simplest answer is the shareholders. On the other hand, recent models of SCR suggest that MNEs are responsible for national governments and populations of the countries they penetrate, environmental organizations and world populace, etc. Perhaps the only useful guide to managers is to say that analysis of their lines of responsibility needs to go beyond the legalistic answer.

It is possible to say that IKEA applies “integrated” model of SCR which covers all areas of corporate governance and ethics. IKEA concerns with ethical issues related to products and services, promotion, and customer as well as public safety and public health. IKEA employs SCR practices that have the potential to maximise benefits from different strategic issues, practices and national economic conditions through a variety of means: locating businesses in markets where factor conditions are favourable leading to cost advantages and efficiency; operating in non-domestic markets where demand conditions are more favourable and profit potential apparent.

In any case, there are some problems and areas of improvement which prevent IKEA to be an ideal company. Taking into account recent models of SCR it is possible to say that an “extended” model of SCR can be used by IKEA to improve corporate governance and business ethics. “When CSR is viewed as ‘extended governance’, it completes the firm as an institution of transactions governance (Sacconi, 2004).

This model includes: “the residual control right (ownership) allocated to the stakeholder, the fiduciary duties of those who effectively run the firm; the fiduciary duties of those in a position of authority in the firm (the owner or the managers) towards the non-controlling stakeholders” (Sacconi, 2004). These policies and strategies are aimed to improve present day situation and meet new standards set by changing economic environment. One of the biggest hurdles ahead for IKEA will be changed thinking: a new view of what Europe has to offer and how this can be tapped for competitive success; a willingness to learn and develop within wide context.

Integrated CSR is supported and strictly enforced by IKEA and its management team. It helps the company to become a part of global business sustaining strong culture and ethical behavior. Also, adoption of new approaches is very important, because it will help to maintain high ethical standards in business worldwide.

References

1. Dentchev, N.A. 2005. Integrated Corporate Social Responsibility in Business Models. Retrieved from: ttp://www.feb.ugent.be/fac/research/WP/Papers/wp_05_284.pdf
2. Gupta, D. n.d. Corporate responsibility. Retrieved from: http://www.india-seminar.com/2005/545/545%20dipankar%20gupta1.htm
3. Heath, J. Norman, W. 2004. Stakeholder Theory, Corporate Governance and Public Management. Journal of Business Ethics 53, pp 247-265.
4. 2006. Retrieved from: http://www.ikea-group.ikea.com/corporate/
5. Johnson, L. P. Q., Millon, D. 2005. Recalling Why Corporate Officers Are Fiduciaries. William and Mary Law Review, Vol. 46, p. 1597.
6. Jones, C., Maurrasse, D. A Future for Everyone: Innovative Social Responsibility and Community Partnerships. Routledge, 2003.
7. Sacconi, L. 2004. Corporate Social Responsibility (CSR) as a Model of “Extended” Corporate Governance. Liuc Papers n. 142, Serie Etica, Diritto ed Economia 10, suppl. a febbraio, Retrieved from: http://www.biblio.liuc.it/liucpap/pdf/142.pdf