Exam 4: Environment, Innovation, and Sustainability

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Corporate social responsibility looks at ethical behaviour from the organizational level. Corporate social responsibility is an obligation of the organization to act in ways that serve both its own interests and the interests of its many external stakeholders-those persons, groups, and other organizations directly affected by the behaviour of the organization and who hold a stake in its performance.
In the 21st century economy, it is hard to argue against corporate social responsibility. One way to approach this is by exploring the linkage between organizations' corporate social responsibility and their financial performance. In the short term, financial success might be achieved by ignoring social responsibility. In the long term, however, proper attention must be given to social responsibility in order for the company to survive and prosper. Indeed, in today's world, the public at large expects businesses and other organizations to act with genuine social responsibility. Additionally, increasing empirical evidence indicates that high performance in social responsibility can be associated with strong financial performance and, at worst, has no adverse financial impact. Moreover, recent evidence suggests the existence of a virtuous circle in which corporate social responsibility leads to improved financial performance and this, in turn, leads to additional socially responsible actions.
Another approach for supporting the contention that businesses should be socially responsible draws upon the four criteria for evaluating corporate social performance. These criteria, which can be arranged in a hierarchy of impact, are the following:
- the organization's economic responsibility, which is met when it earns a profit through the provision of goods and services desired by customers.
- the organization's legal responsibility, which is fulfilled when it operates within the law and according to the requirements of various external regulations.
- the organization's ethical responsibility, which is met when its actions voluntarily conform to both legal expectations and the broader values and moral expectations of society.
- the organization's discretionary responsibility, which involves the organization's voluntary movement beyond basic economic, legal, and ethical expectations to provide leadership in advancing the well-being of individuals, communities, and society as a whole.
The argument can be made that businesses are more likely to survive and succeed over the long term when they fulfill a responsibility that has greater impact. Thus, a higher probability of survival and success would occur by fulfilling the legal responsibility than by just fulfilling the economic responsibility. Likewise, fulfilling the ethical responsibility likely produces still further increases in the probability of business success and survival. Fulfilling the discretionary responsibility should provide a business with the greatest chance of survival and success.