Home / This Week / Cover Stories / Importance of Corporate Social Responsibility

Importance of Corporate Social Responsibility

Corporate Social Responsibility (CSR) carried out by the organizations involve handling the relationship between their business operations and the communities and surrounding environment within which they operate. These activities similarly assist to fulfill employees and shareholders’ demand by reporting social related activities which help companies to achieve better economic impacts. In addition, CSR also give good perception and image to public which may result in better public recognition and acceptance, thus avoiding negative projection of a company. CSR-related activities are used to tackle consumers’ social anxieties, build a favorable corporate image as well as develop better relationship with consumers plus other stakeholder. It is claimed that bad reputed companies or environmentally unfriendly companies likely to utilize CSR-related activities to attract and increase the confidence of the stakeholders and change their negative image.

It is claimed that this strategy frequently used by organizations in sensitive industry, such as organizations in manufacturing sector and oil & gas sector. The manufacturing processes may produce waste and pollute the environment which may affect the community. Sometimes the manufacturing processes produce hazardous chemical which may affect the health and safety of the locals surrounding the factories. CSR usually involves voluntary act by organizations to interact with their stakeholders. This is a way for organizations to discharge their responsibilities to the community and help to solve the economics and social problems. Reducing harmful effects of company operations as well as creating social value is similar to promoting human right such as respecting human rights which will prevent companies from causing harm to the communities in which it operates. It is claimed that companies will get benefit by engaging in CSR because the activities can better enhance financial performance, improve the image of the organizations and enable to attract as well as retain best workplace, which would lead to increase the value of the companies in the market.

Challenges in CSR implementation are also many. High cost involved in conducting CSR activities is claimed to be the main challenge to organizations. As a consequence, organizations tend to pay more attention to short term programs rather than those programs which would have long term advantages and would be able to provide profits in the long run. Organizations tend to be more concerned and focus on the cost involved and competitive advantage that they would gain rather than health, security and ecology development of the society. It is noted that organizations’ lack of strategic vision and unwillingness to spend on CSR activities are among the significant barriers in CSR implementation. Another barrier for the industry to implement CSR is cultural diversity. This factor has affected the success of CSR operations and there is a need for a change in organizational culture to also include their concern about ecology and society in their business plans and practices. The barrier rise when people with different beliefs and values in different culture have to work together in an organization. Their different way of thinking and style of communication may cause misunderstanding in the implementation processes. This barrier can affect the productivity as well as the effectiveness of the team to work together.

Likewise, benefits of implementing CSR are more than its limitations. It is a considered opinion that CSR activities benefit the organizations in multiple ways. Among others, it is claimed that when manufacturing companies implement CSR activities, there are several benefits that they earned and provide value added to them.

 

It is believed that CSR activities is one of the ways the companies can demonstrate their responsibility towards the community and reflect the human side of the companies and their commitment to contribute to the community.

It is believed that CSR activities assist in developing consistent long term goals and improve the understanding of complex and competitive environment especially for strategic management processes. CSR has become a successful concept for companies in order to ensure their capacity for long term value and gain competitive advantages. It is an effective mean in order to mitigate the new type of risk that has emerged.

In 2012, the Securities and Exchange Commission of Pakistan (SECP) granted approval for introducing CSR guidelines for public companies in Pakistan. The guidelines are considered to be a significant step towards streamlining reporting requirements and corporate accountability of the CSR activities by the public companies. In 2009, the SECP issued the Companies (Corporate Social Responsibility) General Order, applicable to all public companies. According to the said order, every company is required to provide descriptive as well as monetary disclosures of the CSR activities undertaken during each financial year in the directors’ report to the shareholders annexed to the annual audited accounts.

Overall, CSR is almost non-existent in Pakistan as it is in most of the other developing countries. Supreme Court’s notice on non-compliance of CSR practices by some oil and gas firms few years back was viewed as a step in the right direction. CSR benefits both the business corporations and the society. On the one hand, it results in sustainable socio-economic development, poverty alleviation and better environmental conditions for workers and the local communities. On the other, it creates brand value, customer satisfaction and employee retention for the firms to compete with their rivals in the market. Unfortunately, in Pakistan no pertinent laws, regulations, and policies are in place to check CSR compliance and implementation.

Corporate Social Responsibility is considered as an important instrument that pushes the competitive advantages, the creativity and innovation, improves the business reputation to the society with the employees, furniture, state institutions and nongovernmental organizations. It is expected that a majority of Pakistani companies will be encouraged by the leading companies to introduce a viable CSR culture in Pakistan. As a first step, it is important to publish the CSR policies and practices and also upload reports on their web sites and make them a part of the Code of Corporate Governance for all the companies having issued capital of more than a certain level. This will help establish CSR standards and promote competitive culture amongst companies in the field of corporate social responsibility.

Check Also

Ports and shipping: a historical perspective

Ports and shipping: a historical perspective

The history of use of waterborne vessels is as old as humans. Research has found …

Leave a Reply