Benefits of Corporate Social Responsibility

Corporate Social Responsibility (CSR) is defined as an organization ongoing

commitment to act ethically and contribute to economic development while improving the

quality of life of its employees and their families, as well as the local community and society

at large (Watts and Holme, 1999 as cited in Lindgreen, 2009). In the last few decades, CSR

has gained popularity and importance in the business sectors. CSR is mirrored by associate

degree increasing demand from consumers, employees, legislative systems, and society. For

example, KPMG, a global network of professional firms providing audit, tax, and advisory

services, announced that the number of corporations publishing CSR reports had risen

steadily since 1993 (KPMG, 2013 as cited in Vartiak, 2016). KPMG’s survey of CSR report

began with a low of 12% in 1993 and have increased to 71% after 20 years. The percentage

of companies that publish CSR reports is growing; it is an excellent sign. Hence, it is

reasonable to predict that CSR is becoming a corporate requirement. The rising number of

CSR reports implies that a growing number of companies is launching CSR strategies. This

phenomenon reflects that being socially responsible is crucial for a company as it bolsters

public image, improves employee engagement, and builds customer loyalty.

Corporate Social responsibility bolsters company’s public image

First and foremost, it is beneficial for a company to practice corporate social

responsibility as it bolsters the public image (Gürlek et al., 2017; Nicolau, 2008). CSR is a

channel for the company to communicate with the community (Eberle et al., 2013).

Nowadays, moral legitimacy and ethical standing are intensely scrutinized by the public. A

company has to take care of the welfares of stakeholders to thrive in the future. Good

performance in the annual reports, news, social and environmental reports help increase

public image as it reflects how the company acts and is responsible for society. When a
business involves stakeholders in decision-making, it improves public relations (Morsing &

Schultz, 2006). For instance, the news on 8 January 2021 revealed that CIMB Group

Holdings Bhd provided financial support and financial obligation payment relief to flood-

affected communities, customers, and employees in several states (Arjuna, 2021).

The Triple Bottom Line (TBL) concept developed by John Elkington (1998) focused

on 3Ps, consisting of three elements: people, planet, and profit, was associated with corporate

social responsibility. To John Elkington, it is a measurement of how well a company is doing

to achieve its long-term objectives and a way of considering capitalism's future. This concept

implies that meeting the community's needs at large in social and environmental performance

is essential for sustainability (Eberle et al., 2013). Likewise, in a research conducted by Wang

and Lin (2007) shows that TBL is a dedicated initiative to integrate economic, environmental,

and social issues into a company's evaluation and decision-making processes. This

understanding is crucial as a favourable business reputation reflecting in social media helps

the company gains praise and exposure. In addition, the ubiquity of the Internet allows

companies not to overlook the importance of information dissemination in social media as the

sound image is always considered good business. It is evident in the case of Google, which

matched 100 percent of global operations' electricity consumption with renewable energy in

2018 (Google 2019 Environmental Web Report | Google Sustainability, n.d.). The transition

to carbon-free energy brings advantages to 3Ps. A socially responsible profile enables the

public-limited company to draw the attention of investors. It shows that high corporate value

is the main factor to attract shareholders' engagement. Shareholders and investors similarly

consider the social and environmental performance of an organization (Mattila, 2009).

Carroll's CSR pyramid stated that moral management should encompass the

economic, legal, ethical and philanthropic expectations placed on organizations (Carroll,

1991). When a company can generate profits, create values for customers, and contribute to
society, investors will become interested in the company and involve in long-term

investment. Thus, the company can increase capital because the investors will increase

buying shares when they have confidence in the prospects. The company can seize the

opportunity to facilitate innovation in the manufacturing process. Simultaneously, the

company fulfils its accountability to ensure the shareholders obtain a reasonable return on

their investment. The company might enjoy economies of scale if they invest in better

production techniques, rising production and reducing costs. Cost savings help to drive long-

term organizational survival. Enriching the firm with ethical and social issues strengthens its

bonds, fosters strong beliefs, and establishes a competitive edge (Romantico & Muzellec,

2011).

Therefore, since the corporate profits are inter-related with the public image, CSR has

become a core company value in reaping benefits.

Corporate Social Responsibility improves employees’ engagement

Secondly, practising corporate social responsibility can improve employees’

engagement. Employee engagement refers to the strength of employees’ mental and

emotional commitment to their work, their teams, and their company (Ryba, 2020). In 2007,

Lockwood conducted a research which shows that today's challenge in obtaining

organizational success is not only attracting and retaining personnel, but also engaging

employees’ hearts and minds. Engagement reflects the positive psychology movement,

which is a relatively new area of organisational research. Based on the review of Gruman and

Saks, involvement has a significant impact on both individual and organizational

performance.

Implementing corporate social responsibility has massive effectiveness in improving

employees’ engagement. Many businesses are becoming more aware of the benefits of CSR
that go beyond their bottom line. Some examples of developing CSR strategy in action

include organizing charity activities, participating in volunteering work, and improving

labour policies. According to Piderit and Glavas (2009), one reason for the favourable

association between CSR and engagement is that employees identify higher meaning and

value congruence at work. Since Disney focuses on volunteerism, they offered away a

million complimentary Disney Theme Park tickets in California to a million people in

exchange for one day of volunteer labour in 2010 (Walt Disney Parks and Resorts, 2010).

Ordinary people such as employees with poor economic conditions and Disney employees'

families have opportunities to visit Disney Park. Consequently, personnel of Disney realize

the meaningful value of congruence at work due to this charitable activity. This allows

Disney staff have increased their engagement within this CSR action.

The benefits of employees’ engagement are customer loyalty, employee productivity

(Kahn, 1990), personal resource enhancement (Cartwright and Holmes, 2006), and

enhancement of operating income. Several investigations have shown that employees'

involvement promotes the company to generate increasing operating incomes. For example,

International Survey Research (ISR) gathered surveys from over 664,000 employees

worldwide and assessed three traditional financial performance criteria over 12 months in a

recent employee engagement research. ISR discovered that companies with high employee

participation increased their operating income by 19.2%, whereas organisations with poor

employee engagement decreased their operating income by 32.7%. Similarly, there is another

report shows that a 13.2% growth in net income over one year for companies with high

employee engagement and a 3.8% decline in net income over the same period for companies

with low employee involvement (Perrin-ISR, T, 2006 as cited in Gross, 2014).

In short, CSR is a vital policy for an organization to develop employees’ engagement

at work.
Corporate Social Responsibility builds customer loyalty

Lastly, exercising CSR enables the company to build customer loyalty. Customer

loyalty is essential for businesses as loyalty is illustrated as a customer's dispositional

attachment to a brand or service (Pan et al., 2012). It represents the customer's intention to

repurchase the brand or use the service again in the future, positive word-of-mouth, and

willingness to pay for a premium price (Anderson& Srinvasan, 2003). This understanding is

crucial as having a high customer loyalty base elicits profit and sales, thus inducing

sustainable business growth. This is exemplified in the work undertaken by Chung et al.

(2015), as firms that embed CSR prompt a merit impact on customer loyalty. The research

suggests that a corporation should develop more loyalty programmes to dominate customer

faithfulness. Thus, a business should play CSR role as it charms the customer's support and

raises brand loyalty. For instance, the news on 31 Mar 2021 reported by Jefferson (2021)

published that H&M's customer base is proliferating due to the venture in the CSR customer

loyalty programme. The rising client base partially offset the pandemic's losses. Although the

pandemic has suspended the economic activities, H&M group has experienced growth of

57% online sales in the first quarter of 2021 due to growth in loyal customer base. The

expansion in loyal customer base can be attributed to the dedication of H&M in executing

CSR activities since 1997. The annual sustainability report announced by H&M demonstrates

H&M's sustainable practices, goals, and progress in details (Sustainability Reporting - H&M

Group, n.d.)

In addition, Khojastehpour and Johns (2014) proved that consumers prefer to

purchase goods and services from socially responsible firms. Consumers are increasingly

expecting businesses to give back more to society. For example, TOMS shoe has organized a

program, One for One®. For every pair of shoes procured by customers, TOMS commits to

donating a pair of shoes to an individual in need around the world (The TOMS Story | TOMS,
n.d.). Purchase and charitable donation are linked together in providing more significant

incentives for customers to spend money, engage with the brand, build loyalty, and elevate

sales. By instilling the importance of customers' ability to influence others' lives, TOMS

empowers customers in purchasing items to alter someone's life positively. Positive emotions

are associated with each purchase, encouraging customers to make additional purchases in

the future. Based on the survey conducted by Nielsen (2015), most consumers polled across

60 countries indicated that they are willing to pay a premium for goods sold by socially

responsible businesses. The key implication from this survey is that consumers nowadays are

slanted towards businesses seeking profit and contributing to society's welfare

simultaneously. 

   Hence, implementing CSR is helpful to increase customer satisfaction and establish

loyalty in moving organization to long-term success.

Arguments against the benefits of Corporate Social Responsibility

Despite the advantages and positive impact of CSR, critics of entrepreneurship have

raised concerns about the high capital cost required to incur in CSR, which would be a

burden for the organization. The research of Ruggiero and Cupertino (2018) argues that

managers prefer to allocate resources to the more lucrative initiatives in the situation of

scarce financial resources. This circumstance provides financial advantages for the

organization rather than incurs costly expenditures in CSR investment. CSR investment

places the organization at a competitive disadvantage to other firms that are not socially

responsible. While investing in CSR program, the company might face costs factors of

establishing new strategies distinct from the usual mode of practice. It requires training or

employing qualified recruits, investing in specialized programs in order to uplift society and

the environment. For instance, Daimler AG, one of the world's leading vehicles producers,

invested $85 billion to retool its factories to support zero-emission production (Foreword -
Daimler Sustainability Report 2020, n.d.). This report shows that organizations must incur

special costs to comply with CSR standards, which entails a slew of additional plus

burdensome expenses.

Rebuttal

Although some researchers mention that CSR would be oppressive for the

organization due to the high capital cost, short-term studies do not necessarily show subtle

changes. Many scholars believe that investing in CSR activities benefits the organization by

achieving cost saving in the long run. Research conducted by Purnamasari et al. (2015) shows

that the business that strives for an outstanding corporate performance rating will be more

demanding on the company's efficiency in managing its business and will have a long-term

impact on reducing corporate expenses. Thus, it is recommended if business can ameliorate

the environmental management, company can implement new methods to achieve operational

efficiencies, such as streamlining, exercising sustainability practices, and energy

conservation. These eco-efficiencies lower the production cost in the long run as they benefit

both the environment and the economy by lowering energy consumption and executing new

cost-effective methods. Therefore, the company's performance becomes more efficient due to

the implementation of cost-saving measures. For example, Daimler AG, who has been

involved in practising the sustainability programme "SpurWechsel", has implemented various

resources-efficient plants to accomplish the objective of resources conversation

(SpurWechsel. | Daimler, n.d.). Daimler decreased the production cost by performing these

eco-effective methods as waste disposal in production per vehicle has minimized. In

summary, involving in CSR may suffer losses in the organization short run due to the lack of

financial resources. However, in the long run, as new methods are applied to enhance the
efficiency of the business, it could create a win scenario for the organization as the

production cost has reduced in the long run.

Conclusion

In conclusion, it is indubitable that the role of corporate social responsibility brings

countless advantages. Firstly, CSR enables an organization to enhance the public image as

good performance in annual reports, news, social and environmental accounts attract

investment from outsiders, allowing the company to enjoy cost savings. Moreover, CSR

programs facilitate employees' engagement in leading employees to recognize the importance

of unity at work, thus causing the acceleration of the organization's operating income.

Additionally, since customers' tendency has been moved to the organization's contribution,

executing CSR allows the organization to retain existing customers by building customer

loyalty and customer satisfaction. Finally, based on the argument presented, it is undeniable

that CSR is a critical component in today's business operation. Socially responsible initiatives

encourage the enterprise to look at the big picture, which is focused on sustainable

development. Those organizations that aim at a short-term profit but fail to realize the

importance of forming long-term collaborative relationships are unlikely to thrive in the

future.

(2125 words)
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