Art Virgel O.

Densing MBA 103 REACTION PAPER

CSR or SE: Which is the better business approach or model?

FACTS:

Corporate Social Responsibility (CSR) is the practice by which a business views itself within a
broader context: as a member of society with certain implicit social obligations and environmental
considerations and issues. As previously stated, there is a distinct difference between legal compliance
and ethical responsibility, and the law does not fully address all ethical dilemmas that businesses face.
CSR ensures that a company is engaging in sound ethical practices and policies in accordance with the
company’s culture and mission, above and beyond any mandatory legal standards. A business that
practices CSR cannot have maximizing shareholder wealth as its sole purpose, because this goal would
necessarily infringe on the rights of other stakeholders in the broader society. For instance, a mining
company that disregards its CSR may infringe on the right of its local community to clean air and water if
it pursues only profit. In contrast, CSR places all stakeholders within a broader contextual framework.

An additional perspective of CSR is that ethical business leaders opt to do good at the same time
that they do well. This is a simplistic summation, but it speaks to how CSR plays out within any corporate
setting. The idea is that a corporation is entitled to make money, but it should not only make money. It
should also be a good civic neighbor and commit itself to the general prospering of society as a whole. It
ought to make the communities of which it is part better at the same time that it pursues legitimate
profit goals. These ends are not mutually exclusive, and it is possible—indeed, praiseworthy—to strive
for both. When a company approaches business in this fashion, it is engaging in a commitment to CSR.

CSR has been defined in a variety of ways by various international organizations. But in its
simplest terms, CSR is practiced by companies that are not only concerned with profit maximization (the
focus of the stockholders) but also with societal well-being (the interest of the stakeholders, which
include the owners of the firm plus the employees, customers, government, community, etc.). Also, CSR
companies operate in ways that do not harm the environment because, in doing so, they ensure their
own sustainability and that of our planet as well.

In recent years, there has been a noticeable upsurge in the popularity of Social Enterprise (SE) as
a business model. Proof of this is the mushrooming of conferences and awards held or conferred on SEs.

Social Enterprises (SEs), on the other hand, have been characterized by purists as business
organizations whose primary reason for being is to serve society. They do generate profit but it is
important to them only in so far as making the organization sustainable. They may be content with a
return on capital of 10 percent or even less if this is enough to sustain their operation in the long run.
This rate of return is more than adequate especially if the inflation rate is less than 5 percent as we have
today.

Profit maximization is anathema to SEs.

The simplest way to differentiate CSR company from a SE is to look at the profit motive. The
former’s main goal is to maximize profit though it seeks to balance this pursuit by addressing the
interests of the other Ps of people (society) and planet (environment), hence the development of the
triple bottom line concept. SE, on the other hand, is the exact opposite. Its main concern is to help
Art Virgel O. Densing MBA 103 REACTION PAPER

society. Profit is secondary and is useful only in the sense that it can provide sustainability to its
operation.

REACTION AND INSIGHTS:

How do we know for sure if a company is genuinely CSR-compliant? This is a tricky question for
two reasons. First, because CSR is a voluntary act on the part of the company and thus is not subject to
compliance regulations. And second, companies are not required by regulators to comply with a
standard CSR reporting system.

There are several CSR reporting tools available, such as the ISO 2600, that is useful in reporting a
firm’s CSR activities; but again, compliance is voluntary. Although many companies are now
incorporating their CSR accomplishments in their annual reports, they have a leeway on how to present
those. It is therefore quite difficult to compare the CSR program of one company with that of another,
and to conclude with certainty which of the two has a better CSR program with a greater impact on
society.

Moreover, CSR is practiced mostly by big companies or those in the list of the Top 1,000
corporations. Given that more than 95 percent of companies are classified as micro, small, and medium
enterprises (MSMEs), the majority may not even be aware of the term CSR.

How about the SEs? Is there a system or an accreditation formula that we can use to vet if a
company is a genuine SE? None. A company can falsely claim that it is an SE and get away with it without
any sanction or penalty. For as long as the company is not violating any law or regulation and dutifully
pays its taxes, it can proclaim itself as a SE.

To be fair about this issue, there is actually no government incentive available to SEs, be it
monetary or otherwise. It makes no difference at all for a company to be known as a SE unless it is after
recognition or what is called psychic income.

There is, however, a SE category that has a well-defined criteria or qualification requirement. As
a matter of fact, it is probably the oldest and best model of a SE. It is none other than the cooperative.

The original concept of putting up a cooperative is to serve its members. While it is not
prohibited or discouraged for a cooperative to generate income per se, the profit motive is only at the
outer fringes of its goals. The benefits from a cooperative can be in the form of the price discounts that
members enjoy when they buy their requirements in bulk as a result of the pooling of the members’
funds. The pooled funds can also be extended as credit to the members at affordable rates. In addition,
they receive patronage refund for the products and services they use. Many cooperatives also provide
for the providential needs of their members during times of emergency.

With the clear differentiation of the two business models or approaches, it is easy to conclude
that SE is better than CSR. A business organization with a profit motive can in no way outshine one that
is inherently generous to a fault by prioritizing society’s need as its raison d’etre.

While non-CSR compliant companies predominate the business landscape, more and more of
them are starting to gravitate toward CSR rather than evolve into a SE.
Art Virgel O. Densing MBA 103 REACTION PAPER

The most likely explanation is that the strength of a SE is also its weakness. SE’s noble objective
is difficult to put into practice. Only a few individuals would be willing to put the welfare of society
ahead of their own. Most of the budding and experienced businessmen and entrepreneurs are still
struggling to bring out the so-called better angels of their nature. For now, CSR is the more doable
proposition notwithstanding its imperfections.

CONCLUSION:

As an MBA student, I am compelled to evaluate things in the viewpoint of a business owner.

Therefore, it is my opinion that the CSR is the better business approach or model. Profit, though not
solely, is an indispensable motivation for business owners and should be the primary purpose of running
a business. With CSR, there is maximization of profits that will increase an organization’s ability to
address the concerns and interests of the society (people and planet) as compared to SEs which
prioritizes the society and their profit being the secondary concern which poses a threat to the
organization’s ability to sustain operations in the long run.

That being said, it should be noted that whether an organization employs CSR or SE approach, it
should be faithful and honest on its CSR or SE practices, otherwise, it would defeat its purpose and
might also result to the destruction of trust and loyalty of the public.

It is also my view that our government should support these business approaches through the
enactment of laws and implementation of programs that will define, regulate and incentivize
organizations practicing these approaches.