Corporate social responsibility Case Study Example | Topics and Well Written Essays - 1250 words

Corporate social responsibility - Case Study Example Socially responsible behavior is directly related to financial performance and this is evident in many recent cases. Being socially responsible places certain demands on a company but this generally 'pays off' for a company as well as for the stakeholders and the society. At the same time, concern about CSR issues could also be a PR fashion in the market. Businesses face certain challenges when they are under pressure to adopt CSR. Through certain examples this paper would compare and contrast demands placed on a business that seeks to adopt practices reflecting Corporate Social Responsibility (CSR) with those placed on a business that does not adopt this standard. There is no legislation that imposes that CSR issues have to be addressed and if a company does not live up to the social standards, there is no law that prevents others from doing business with that company. Economist Milton Friedman states that, "The business of business is to maximise profits, to earn a good return on capital invested and to be a good corporate citizen obeying the law - no more and no less". Such neo-classical economic thinking leaves no place for CSR expenditures which in any case decreases profits, contends Robins (2008). The collective good lies in maximizing profits and leaving it at that. Managers too find the demands of CSR enthusiasts vague and difficult to accomplish. Public CSR claims do not reflect in the activities and functioning of the corporations like in the case of Wal-Mart and Coca-Cola. Wal-Mart ranks fourth in terms of social responsibility in terms of its dealings with its stakeholders but there were 4851 claims filed against it in the court (Papasolomou-Doukakis, Krambia-Kapardis & Katsioloudes, 2005). Wal-Mart claims to hold down inflation in the US (Fishman, 2003), create jobs, and has customer-centered strategy as their prices are unbeatable, but they ultimately squeeze the vendors and under-pay the staff (Heyer, 2005) with the ultimate goal of maximizing shareholder wealth. They even have an efficient supply chain and source their products from developing countries and claim to be a part of their growth. Nevertheless, employee wages at Wal-Mart are as much as 31% lower than competitors (Nester, 2006). It pays practically no benefits and very often employees have to work overtime without any additional compensation. Coca-Cola too makes tall claims that by being more efficient and more profitable, it makes businesses better for the community (Ash, 2004) but findings reveal otherwise. The lists of accusations against Coke are lengthy. They have committed as many as 179 major Human Rights violations (Cairns, 2005). Since stakeholder perception is critical to the survival of the firm, some firms try to just enhance their image by attempting to be minimizing the impact on environment. This is known as greenwashing and Coca-Cola undertook this venture only as a PR venture. To discern between the actual performance and greenwashing ratings firms like Kinder, Lydenberg, Domini Research & Analytics (KLD) grade the firms on various categories of CSR (Chatterji, Levine & Toffel, 2007). Such ratings have gained importance because investors make their decision based on such ratings. The damage to Coca-Cola's brand and image was to such an extent that KLD dropped the company from its Broad Market Social Index in July 2006. Because of this,