What are the advantages and disadvantages of corporate social responsibility?

2 Answers

kipling2448's profile pic

kipling2448 | (Level 3) Educator Emeritus

Posted on

Corporate Social Responsibility, or CSR, has both advantages and disadvantages, but the former do appear to outweigh the latter in most cases. The main advantages of CSR for businesses are the reputational benefits that accrue to companies perceived as environmentally and socially conscientious. With the rise of the environmental movement as a political force with which to reckon, more and more companies have found it advantageous to adopt corporate policies and practices--and the two do not automatically go together, as some companies market themselves as being more socially and/or environmentally conscious than they actually are, a phenomenon called "greenwashing." Most people are appreciative of businesses that adopt practices consistent with their, the public's, values. 

Another major advantage of adopting a socially and environmentally friendly business model is that it does, in fact, benefit the society as a whole. The more socially conscious a business, the more attention and resources are devoted to worthy causes. Admittedly, the definition of "worthy" is subject to individual perspectives, but most causes supported by socially responsible companies are objectively meritorious. And few would deny that environmentally conscious companies are beneficial to society as a whole; the less waste and pollution associated with given commercial activities, the better for everybody.

Still another advantage of CSR is the operating environment in which corporations and small businesses alike function. When employees are treated as "stakeholders" in the business for which they work, their morale and productivity tend to improve, which helps the corporate "bottom line," profitability. 

A disadvantage to CSR is that long-established companies may incur considerable expense in coming into compliance with CSR-related expectations. A newly established business can easily incorporate CSR principles into its physical design and operations. For older businesses, a major investment may be required in recapitalizing with more energy-efficient equipment. A counterargument to this, however, is that newer, more energy-efficient equipment reduces operating costs over the long run, helping the business owner(s) to recoup those investment costs while also enhancing the business's reputation for being environmentally friendly.

Similarly, a disadvantage of CSR could be less money going to shareholders and/or to employees, as some percentage of profit is diverted to charitable activities. Again, however, the businesses in question are exchanging a relatively minor level of financial penalty for a more positive image among consumers. When consumers are made aware of the charitable contributions that result from their purchase of a given product, they are more likely to purchase that product (unless, of course, the individual consumer objects to the cause for which the money is contributed).

Arguments have been made that CSR is too costly for small businesses. That would certainly constitute a major disadvantage, but, to reiterate, environmentally and socially friendly practices can prove very profitable. After all, environmentally friendly practices usually involve more efficient means of production with less waste and less reliance on non-renewable sources of energy. Additionally, as procurement and installation costs associated with solar power are reduced over time, more and more businesses will find it advantageous to make that investment. Solar power is not a panacea, but it is considered a more environmentally friendly source of energy.

gsenviro's profile pic

gsenviro | College Teacher | (Level 1) Educator Emeritus

Posted on

Corporate social responsibility or CSR is the idea or philosophy that corporations should behave responsibly toward the environment and society. This means that none of the actions of corporations should adversely affect the community or the environment and that they try to benefit the community and environment. CSR has its pros and cons. Such activities reflect a commitment of the business to the community where it operates and give it a better reputation in the eyes of the community. It also presents a better image to the stockholders and analysts. However, such activities have their cost. Environmentally friendly operations require capital and changes in work practices. Such investment has no direct benefit or return to the stockholders. Investors invest money to earn profits and not to see part of that investment being spent on non-productive activities. Also such costs may be an issue for small and medium businesses. This often results in businesses failing to fulfill their community and environmental commitments. 

Hope this helps.