Why Should Organisations Be Socially Involved?

The importance of corporate social responsibility evolved in the 1960s when social activists questioned the singular economic objective of business. In fact today also many activists argue for and against businesses being socially responsible. Yet, arguments aside, times have changed.

Managers regularly confront decisions that have a dimension of social responsibility such as philanthropy, pricing, employee relations, product quality, resource conservation and doing business in countries with oppressive governments are just a few. To address these issues, managers may reassess packaging design, recyclability of products, environmental safety practices, outsourcing decisions, foreign supplier practices, employee policies, and the like.

Another way to look at this issue is whether social involvement affects a company’s economic performance, which numerous studies have done. Although most found a small positive relationship, no generalisable conclusions can be made because these studies have shown that relationship is affected by various contextual factors such as firm size, industry, economic conditions, and regulatory environment.

Other researchers have questioned causation. If social involvement and economic performance are positively related, then this doesn’t necessarily mean that social involvement caused higher economic performance. It could simply mean that high profits afforded companies the “luxury” of being socially involved.

Such concerns can’t be taken lightly. In fact, one study found that if the flawed empirical analyses in these studies were “corrected,” social responsibility had a neutral impact on a company’s financial performance. Another found that participating in social issues not related to the organisation’s primary stakeholders had a negative effect on shareholder value. Despite all these concerns, after re-analysing several studies, it has been concluded that managers can afford to be socially responsible. This corporate action affirms that sustainability has become a mainstream issue for managers.

What’s emerging in the twenty-first century is the concept of managing in a sustainable way, which has had the effect of widening corporate responsibility not only to managing in an efficient and effective way, but also to responding strategically to a wide range of environmental and societal challenges.

Although sustainability means different things to different people, it is concerned with meeting the needs of people today without compromising the ability of future generations to meet their own needs. From a business perspective, sustainability has been defined as a company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental, and social opportunities into its business strategies.