Explain the CSR Debate

The CSR debate :

Ans.    CSR, being a voluntary activity, has no rules, regulations or procedures to comply with. It is a means to demonstrate to the society at large that the firm believes in discharging its ethical responsibility. Such activities, as we have seen enhance the firms goodwill and brand image and eventually lead to improved financial performance and lower operating costs.

However CSR is a subject of a lot of debate with arguments against corporate social responsibility. Most arguments center around the fact that there could be a conflict of interests between direct stakeholders, government and the society.

The following are some of the arguments against CSR :

1.      Business is for profit : Business is an economic activity performed with the aim of earning profit. Any amounts spent on social activities would be a strain on its limited resources. Therefore business must concentrate on making profits, leaving social activities to government and other Non governmental organizations (NGO’s).

2.      Lack of requisite social skills : Businesses often lack skills required to perform social, environmental and developmental activities, which are part of any government agenda. Hence it is sufficient for businesses to earn profits, pay taxes and allow the government to fulfill the social requirements.

3.      Increased Costs : Every business needs to look at a return on investment (ROI). Moneys spent on welfare activities is considered an expenditure rather than an investment and there is to immediate return on such money spent. This may affect the financial strength of a business.

4.      Economic Argument : Investors put money into a business to undertake economic activity and provide them with a good return. Expecting the business to become involved in social welfare activities may reduced its economic efficiency and shift its focused from its primary activity. It can increased cost leading to increase in prices of goods and services offered, resulting in customers bearing the burden of increased prices. It can also lower a firm’s competitive advantages both locally and internationally.