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“It isn’t enough for a multinational corporation to be socially responsible; they must be a triple bottom line company to meet their ethical obligations”
Most people would think that a company’s core objective is to produce quality products, satisfy market’s tastes and preferences and eventually increase shareholder’s returns through profitable earnings. That was the notion for most companies in the past until various theorists such as Michael Porter dispelled the opinion of corporate social responsibility as a charitable course but rather an opening of business opportunities and market penetration (Porter & Kramer, 2006). In principle, managers perceive the action as a constraint to their profitability target and a social burden that reflected no tangible returns to the company.
Other companies’ conscious of corporate citizenship confined the role to workers welfare and environmental concern for the surrounding community. However, the term has been fronted as a core pillar to a company’s advancement towards realizing its corporate strategy. By definition, corporate social responsibility is a rational practice by business by developing commitment policies that address the social welfares of workers and employees as well as adhering to ethical obligations such as governance, purchasing policies, consumer ethics and internationally recognized business ethics (Thompson, 2001). Like every fronted notion, the practice of social responsibility has encountered several critics such as Milton Friedman argue that firms should concentrate on maximizing returns for shareholders in disregard of social responsibility since it distracts the companies from advancing their core values. Their argument is overwhelmed by the rise of the balanced scorecard as a strategic tool to measure a company’s commitment to satisfying the workers welfare, consumer demands, shareholders value and adhering to ethical standards for sustainable development.
This paper will strive at demonstrating the limits and benefits of corporate social responsibility for multinational corporations as a complement to globalization strategy. Socially responsible companies ought to adopt the three legged triple bottom line framework that advocates an integrated planet, people and profit corporate strategy. Corporate social responsibility is an ethical obligation that serves as a driving force for a firm’s market penetration and accumulation of external economies of scale.
The thin line between corporate social responsibility and triple-bottom-line
Conventional corporate social responsibility emphasized much on society’s welfare by participating in activities that would boost their well-being and create a link to a firm to blend their products with society’s taste. The rise of triple-bottom-line was coined by Elkington who believed that social responsibility is an ethical obligation that should rationally uphold the people's well –being, environmental conservation and maximizing returns for stakeholders (Savitz, 2012). The conjoining word between the two approaches is maximizing sustainable competitive advantage. Evolution of a balanced scorecard as a performance indicator measurement rhymes with the principles of triple-bottom-line context in recognizing a fair, ethical compliance of society welfare. Hence, corporate social responsibility supersedes the notion as an incentive to the society but rather an ethical demand by the market to undertake an impartial distribution of economic gains among the people, the environment, and the shareholders.
The influence of ethical consumerism is the key to effective social responsibility
According to economic theorists, consumers are termed as rational pertaining to their behavior of choosing the best at an affordable price. They believe that a producer has an ethical obligation to deliver quality products and services and adhere to their tastes and preference. This notion raises the concept of ethical consumerism where consumers have the grasp of the market information about product and services as well as a company’s responsibilities to the society. A rational customer would ponder: what value would it add to the society for a business to produce quality products at affordable cost and at the same time lose environmental conscience by directing spillage to the rivers or land? That question invites the linkage of social welfare benefits and Costs. Savings incurred by consumers in purchasing low-priced finished products would be channeled towards mitigating environmental hazards. Therefore, companies are not only required to provide social goods and services to the society but should also accentuate the need for distributive justice in social obligations.
Ethical consumerism offers a platform for cost-benefit analysis among the firms and the stakeholders where consumers enlighten companies that corporate citizenship should maximize both the welfare of the society and the company’s productivity. For instance, food consumer industries should be conscious of the rising trend of heath deformities I the society and participate in educating the citizens to healthy eating habits as well as producing products that maximize the wellness of the citizens. Despite incurring social cost, the company will expand its customer base and increase profitability. Michael Porter noted that the proximity of a social issue to the company and its response is likely to leverage on the firm's benefits and market growth. Therefore, companies must expand their social responsibility perception beyond the costly charity to a people bottom-line which could boost its globalization strategy and increase sustainable market advantage.
Triple bottom-line strategy builds a sustainable competitive advantage and embeds a firm’s corporate strategies to the ethical code of conduct
An integrated value chain supply system is the basis for a firm to build a sustainable competitive advantage over market rivals. The system upholds the influence of suppliers, middlemen, society and the consumers on their overall productivity. Triple bottom line emphasize on distributive justice of income and resources among the consumers and the company’s shareholders. There should be a balance of cost and benefits on any undertaking by a firm intended to benefit consumers as well as strengthen a firm’s market growth (Savitz, 2012).
For example, firms could invest part of their income towards educating suppliers on cost-effective methods of farming to produce quality raw materials. The approach not only benefits farmers but also indirectly increases firm’s market growth through quality products. The ultimate gain reflects in the company’s profitability segment. Based on this assessment, it would be logic to deduce that triple bottom line approach addresses the all the key performance indicators that define a firms marker sustainability. The social gains overwhelm the social cost incurred through corporate social roles. Unlike the traditional corporate citizenship that focuses entirely on giving to the community, the triple bottom line framework underscores that social responsibility is a drive to a firm positive externalities and competitive advantage.
In another instance, most multinational corporations have adopted technological innovations to address environmental challenges such as industrial effluents, plastic menace and carbon emissions that have escalated their operation costs and subsequently reduced their profitability.
In the automobile industry and consumer industry, firms invested vast amounts in research and development towards producing low-carbon emission cars and bio-degradable packaging bag respectively. The innovative approach has not only reduced environmental pollution but also decreased company operation cost thus maximizing profitability. The approach overrules the community-oriented social obligations and incorporates the essence of integrated value-chain based strategy. All in all, the firm’s social initiatives perform along the business ethical code of conduct that safeguards the welfare of consumers, workers, and the shareholders.
In summary, triple bottom line is the best performance assessment framework that ensures that a company benefits directly and indirectly from corporate social responsibilities. Firms should invest in human resource and technological improvement as a strategy to foster quality production, customer satisfaction, and sustainable competitive advantage. It would be necessary for companies to formulate a prioritized chart of social issues necessary to address to promote a shared value path that would maximize economic and social gains for all stakeholders. Conclusively, an integration of people, environment, and economic profits is the best approach towards attaining the externalities of corporate citizenship.
Savitz, A. (2012). The triple bottom line: How today's best-run companies are achieving economic, social and environmental success--and how you can too. John Wiley & Sons.
Thompson, J. L. (2001). Strategic management. Thompson Learning.
Porter, M. E., & Kramer, M. R. (2006). The link between competitive advantage and corporate social responsibility. Harvard business review, 84(12), 78-92.
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