CORPORATE SOCIAL RESPONSIBILITY – FACTORS OF PERFORMANCE AND

COMPETITIVENESS SVOČ – FST 2008

Marcela Srchová,

West Bohemia University, Univerzitni 8, 306 14 Pilsen

Czech Republic ABSTRACT Corporate Social Responsibility (CSR) represents not just successful enterprise but also thinking on social and environmental aspects. Corporations must include the social and environmental aspects to the activities which lead towards making profit. Corporate Social Responsibility answers the requirements of both the customers and persons who are co-operating with them in business activities. Corporate Social Responsibility positively affects the whole of society and regulates its impact on the environment. Corporate social responsibility is a concept. It is a way of managing a company and making relationships with partners which contributes to improving the reputation and credibility of a company. This paper presents the issue of Corporate Social Responsibility with its characteristics, assets, advantages and disadvantages. KEYWORDS Corporate Social Responsibility, performance, competitiveness, environment INTRODUCTION The concept of CSR was established in the 1950s. It is a way of managing a company and making relationships with partners which contributes to improving the reputation and credibility of a company. The European Union supports CSR activities in the Europe. This issue has been worked on since the 1990s. The European Union uses CSR as a tool for achieving tenable and acceptable growth. CSR DEVELOPMENT The development of CSR is discussed from the second half of the 20th century. The year 1953 was a breakthrough because the book Social Responsibilities of the Businessman [1] was published. Bowman first defined social responsibility in this book. His definition is more about the responsibility of the businessman than the responsibility of the company. But his definition is still valid: “… to realise such procedures, take such decisions or follow such ways of behaviour which are required for the goals and values of our society.” The problem is that his definition and others insufficiently identify the requested behaviour of the businessman and company. The following idea became very popular in the 1960s: a company has not only economic and legal obligations but also obligations to society. If a company does not follow these obligations to society, society can close down or limit the enterprise. The problem here is that the idea does not define who or what is a part of the company. The answer is the stakeholders’ concept. Developing the stakeholders concept started at the beginning of the 1970s. CORPORATE SOCIAL RESPONSIBILITY Developing CSR takes a long time. There is no simple definition because CSR has no definite limits and it is voluntarily established. It is a trend which is focused on the change from short-term tasks to long-term tasks. CSR companies´ behaviour is such that inside needs and outside needs are covered. They contribute to tenable and acceptable growth and generally help to improve the overall situation of society. CSR integrates the attitudes, practices and procedures into the company strategy at the highest level of management. It requests a change from the “profit only” level to the wider level “three Ps – people, planet, profit.” The triple-bottom-line means that the company is focused on economic growth and environmental and social aspects of its activities. The company is a part of society and society influences it.

There are a lot of definitions of CSR but here are the most well-known:

• “CSR is a voluntary integration of the social and environmental aspects in the everyday company activities and relations with the stakeholders,” [2].

• “CSR is a way of an enterprise which follows ethical, legal, commercial and social expectations,” [3]. • “CSR is a continual obligation of companies to be ethical and contribute to economic growth and at the same

time improve the quality of employees´ lives and their families and local and global society,” [3]. The definitions show that they are not fixed. The reason is to provide flexibility to companies for their use. THREE FUNDAMENTAL PRINCIPLES OF CSR CSR is based on three fundamental principles. They are economic, social and environmental. Each part of CSR contains a lot of different activities depending on the type of enterprise and the requirements of stakeholders. Economic area Transparent enterprise is expected from the company. A positive relationship with investors, customers, suppliers and others business partners is also expected. The impacts of the company on the economy at local, national and global levels are monitored.

Economic area - Market • Owners and investors • Customers / consumers • Suppliers and other business partners • Governmental institutions

Stakeholders

• Media Table 1: Economic area - stakeholders

Economic area

• Ethical codex creation • Transparency • Best practice management • Corruption rejection • Relation with stockholders • Relation to customers / consumers • Relation to suppliers • Relation to investors

CSR activities

• Protection of intellectual property Table 2: Economic area – CSR activities

Social area In the social area, behaviour is focused on the attitude to employees and on supporting the local community. The company influences the standard of living, health, safety, education and cultural development of citizens.

Social area Area Working environment Local community

• Employees • Non-profit organizations Stakeholders • Unions • Public

Table 3: Social area - stakeholders

Social area Area Working environment Local community

• employee health and safety • Corporate donorship • Developing human resources • Corporate volunteerism • Follow working standards,

abolition of child labour • Support for social integration

CSR activities

• Equal possibilities • Education of the public

Social area

• Work – life balance • Support of employees´ life quality

• Workplace diversity • Support for laid-off employees • Job assurance

• Developing employment and local infrastructure

Table 4: Social area – CSR activities Environmental area The company is aware of its impact on the living and inanimate nature in the environment. This includes the ecosystem, land, air and water. There is an assumption that the company will protect nature and natural resources.

Environmental area – Environment • Environmental groups Stakeholders • Other environmental groups

Table 5: Environmental area - stakeholders

Environmental area • Environmentally friendly manufacturing, products

and services • Compliance with regulations and standards (ISO,

EMAS, etc.) • Environmentally friendly company policy (recycling,

using of environmentally friendly products) • Reduction of impacts on environment

CSR activities

• Protection of natural sources Table 6: Environmental area – CSR activities

MAIN FEATURES OF CSR Main features of CSR are:

• Triple-bottom-line – economic, social and environmental. • Voluntary – all activities are done voluntarily. • Stakeholders dialogue – integration of all participants. • Long-term period – all activities are done over a long-term period. • Credibility – increasing company credibility.

THE SITUATION IN THE CZECH REPUBLIC A survey on the topic of Corporate Social Responsibility was carried out by Business Leader Forum in 2003, [8]. 265 companies from the Czech Republic were approached in this survey. The task was to get answers to several main questions. The results of the survey indicated that activities in CSR were established but they were very often called by different names. The conclusions of the survey are summarized here. The CSR issue is understood more intuitively in the sense “social responsibility = good product or respect for laws.” Almost all companies considered being a part of society to be an important role for the company. This role does not have to be the main mission of a company. The internal dimension of CSR is the most used now and will also be in the future. This means; care about the employees, their education, their hiring and keeping. The external dimension of CSR is focused on transparency, relation with schools and ecology. The relationships with other subjects (non-profit organizations, state, and donations to charity) are minor. In the future, companies will want to extend their activities, especially inside the company. On the basis of the survey, it is clear that it is important to explain the concept of CSR. It is important to give it a definite content. CSR must be understood more actively than intuitively, must have a more local attitude than global, its contributions to socially responsible behaviour must be communicated and must be listed good and bad examples of companies and discussed.

ADVANTAGES OF CSR Responsible behaviour is advantageous, brings a lot of benefits, especially non-financial, which are also very important for successful enterprise.

CSR advantages • Higher reputation of company, better company image • Higher attraction for investors • Good reputation and strong position in market • Distinguish from rivals • Increasing employees´ productivity and loyalty • Attraction for quality and talented potential employees • Decreasing expenses on risk management • Direct financial saving – ecological behaviour • Better relationships with local society and public institutions

Table 7: Advantages of CSR CSR does not bring advantages only to big companies, small and medium sized companies can also gain some advantages. They are: easier recruitment of employees and business partners, good public relations, possibility of getting contacts and information from society and from main business partners. MEASUREMENT OF CSR BENEFITS CSR is an investment in the assets of the company. It is possible to measure them by indicators over the long-term period. It brings financial profit to the company.

Assets Evaluation by indicators Long-term measurement aspects

Good corporate reputation

• Questionnaires • Brainstorming • Reaction in media

• Strengthening market position

• Possibility of new business opportunities

• Possibility to gain environmentally friendly and sensitive customers

Customers satisfaction and faithfulness

• Interviewing customers • Number of repeated orders • Number of complaints

• Strengthening market position

• Turnover increasing

Company flexibility

• Number of product or services modifications

• Added value of products or services

• Expanding products • Increasing of market

portion

Employee qualifications and satisfaction

• Interviewing employees • Number of absences • Number of qualified employees

• Higher employee motivation, content and performance

• Lower employee fluctuation

• Higher possibilities for recruitment

Environmentally friendly company culture

• Energy consumption • Proportion of recycling waste • quantity of exhaust • quantity dangerous materials used

• Possibility to gain huge contracts

• Possibility to gain environmentally friendly customers

• Increasing eco-efficiency Table 8: Measurement of CSR benefits

CONCLUSION AND RECOMMENDATIONS At the beginning I posed a simple question: “Why follow the requirements of CSR?” A lot of businessmen know very well that they must do good things. It means not only behaving well towards customers and business partners, but also

taking care of their employees and good relationships with their neighbours and protecting the environment, etc. Why? Being a CSR company opens new business challenges and brings competitive advantages. REFERENCES A Paragraph in the expert Journal: [1] CARROLL, A. B. Corporate Social Responsibility – Evolution of a Definitional Construct. In Business and Society, Vol. 38. No. 3, 1999, p. 268-295, Available ProQuest 5000. A Book Publication: [2] European Union, Green Book, 2001. A web page: [3] http:// http://www.blf.cz. [4] http://www.csr-online.cz. [5] http://en.wikipedia.org/wiki/Corporate_social_responsibility.