Is There a Tradeoff Between Profit and Corporate Social Responsibility?

Corporate Social Responsibility (CSR) is a comprehensive approach to operating a social conscious business. CSR operates with the understanding that the firm affects many stakeholders and must function in a way that creates a positive impact. This includes providing good wages and working conditions, promoting sustainability, and other community focused endeavors. CSR differs from corporate citizenship in that corporate citizenship only looks at community involvement in terms of donations or other limited efforts, or what author Richard Levick calls “passive check writing” (2012). Instead, CSR ensures that every aspect of the business is run in a socially conscious manner.

According to authors Gamble, Peteraf, & Thompson, CSR programs manifest in a few ways. The first is the commitment to operating an ethical business that is inclusive, principled, and fair. This includes programs that promote quality of life for employees and fair treatment of suppliers. The second are large-scale philanthropic initiatives that target disadvantaged groups, such as diversity programs, job programs, charity campaigns, and other endeavors. The third are sustainability or “green” programs that promote stewardship of the environment. In essence, Corporate Social Responsibility is concerned with the triple bottom line: people, the planet, and profit (2013, pg. 197-199).

The Perceived Trade Off Between Profit and Corporate Social Responsibility

Many argue that managing the triple bottom line requires trade-offs between social equity, ecological preservation, and profitability. Businesses need to consider the overall cost versus return of initiatives and the trade-offs associated with each. The investments in green and social practices need to produce enough of a return either in reduced costs, improved revenue, or reduced liabilities to meet the standards of business both in terms of sustainability and profitability (Halpern et al, 2013, pg. 6229-6234).

However, much of the research has shown that operating with a focus on a triple bottom line does not require trade-offs between profit and social responsibility. Because triple bottom line companies operate with concern and interest in the social and ecological environments they operate in, they are able to shape those environments in order to develop new markets and new capabilities. Also, by valuing the resources used to produce goods and services and operating with a focus on preserving those resources, triple bottom line firms have been able to identify sustainable sources that are both cheaper and ecologically sound. This reduces costs and insulates the business to fluctuations in the supply of raw materials. By better managing supply chains while developing new capabilities, triple bottom line firms are able to establish and maintain a competitive advantage over their peers (Glavas & Mish, 2014, pg. 630-632).

One key example of this is Starbucks. Starbucks’ Corporate Social Responsibility programs address every aspect while preserving a focus on profit. Their products, especially their coffee beans, are ethically and sustainably sourced. They have numerous hiring programs that support key community members such as veterans and their spouses. They promote volunteerism among their team members, and other key programs. Their commitment to sustainable coffee sourcing and biodiversity are especially forward thinking practices. The coffee supply under traditional farming practices is in serious danger. Traditional farming practices have eliminated biodiversity in many crops, leaving them susceptible to pests and diseases that have become more prevalent over the years. The NY Times recently shared a report on climate change that claims coffee crops will continue to be devastated by pest and disease as temperatures continue to rise. By promoting biodiversity and crops that are more resistant to these pests and diseases, Starbucks has a head start on protecting and preserving their supply chain.

Despite the growing body of research, many companies are slow to tackle the Corporate Social Responsibility challenge. As the body of research develops and more examples of profitable, socially responsible firms emerge, the pressure to change will grow. The change to CSR practices won’t be easy for existing firms, and will require a complete overhaul in how they are structured and how they do business, but the long term pay offs for both the company and its stakeholders is worth it.

 

 

References

Bromwich, J.E. (2016, September 22). Climate change threatens world’s coffee supply, report says. NYTimes.com. Retrieved from https://www.nytimes.com/2016/09/23/science/climate-change-threatens-worlds-coffee-supply-report-says.html?_r=0.

Gamble, J.E., Peteraf, M.A., Thompson, Jr., AA. (2013). Essentials of strategic management: The quest for competitive advantage. (4th ed.). New York, New York: McGraw-Hill Education.

Glavas, A. & Mish, J. (2014, January 30). Resources and capabilities of triple bottom line firms: Going over old or breaking new ground? Journal of Business Ethics. 127, 623-642. Retrieved June 23, 2016 from the EBSCOhost database.

Halpern, B.S. et al (2013, April 9). Achieving the triple bottom line in the face of inherent trade-offs among social equity, economic return, and conservation. PNAS. 110(15), 6229-6234. Retrieved June 23, 2016 from the Highwire Press National Academy of Sciences database.

Levick, R. (2012, January 11). Corporate social responsibility for profit. Forbes.com Retrieved from https://www.forbes.com/sites/richardlevick/2012/01/11/corporate-social-responsibility-for-profit/#2f88c21646f1.

 

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