CORPORATE SOCIAL RESPONSIBILITY: A NEW BUSINESS TREND AS AN INSURANCE
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Corporate
social responsibility (CSR) exemplifies a growing tactical concern for
organizations around the world. Many organizations are adopting CSR as a core
management or board-level function. In general, CSR is only about the corporate
functions toward the community, society and the environment.
Nowadays, the insurance perspective of CSR is the emerging concept in the field
of management, There are the enormous questions about CSR in the field of
corporate governance; Whether CSR could be taken as insurance or not? Whether
CSR activities could increase the financial performance of the organisation or
not? Within the periphery of CSR with insurance perspective, the research paper
by Peloza, John (2006) in the topic of “Using corporate social responsibility as an insurance for
financial Performance” provides in depth knowledge about CSR, Insurance
and financial performance.
There
are tremendous advantages of incorporating CSR into the organisation. The
corporate strategy for social investment helps management to build the social
image, good reputation, increase sales and obtain customer goodwill. In the
process of strengthening the goodwill by social involvements, the insurance prospective of CSR
will be developed and protect organisations from future social uncertainty and
improve the financial performance. However, this is the topic of social
involvement which required to consider the social, legal and ethical framework
of the society. Therefore, the micro level study is required for rationality
and proper application of insurance prospective of CSR.
The CSR as an insurance is important for two reasons. Firstly, even
though there is not a visible return which is associated with the CSR cost,
many organizations are using CSR like as insurance that
protect against a possible eventuality. Secondly, there is the positive
financial impact of the CSR act as an insurance of the society by reducing
negative publicity.
Negative publicity can lead to disastrous consequences for an
organisation. The reputation of the organisation is badly tarnished. It is like
the tiny spark that results in a disastrous fire. Negative publicity can quickly
destroy a business. Positive CSR can safeguard the organisational reputation
and social image of the organisation from negative publicity. It also helps to
increase revenue by developing customer loyalty and fulfilling stakeholder
expectations. CSR, with strategic social investment, is a tool that can enhance
organisational reputation and reduce financial impact as a consequence of
negative publicity.
The finding of this research paper indicate that, in the absence of
negative publicity, the value of a socially responsible organisation can be increased
through this insurance. Even when the relationship between CSR and financial
performance is neutral, CSR investment can still be justified by its insurance
value. A corporation having strong CSR is affected half in the stock decline as
much as a corporation with weak CSR after the riots in 1999, surrounding the meeting
of WTO in Seattle, This results reflects that positive CSR acts as insurance to
protect the corporation from the social consequences .On the other hand, the consumer
purchase intentions in the strong CSR companies appears double than the weak CSR reputation
following a product recall.
Insurance is a tool to protect
the organisation from some possible eventuality. There are three factors which
is identified by this research paper that allow CSR to be leveraged for
insurance:
1. Strong effort and commitment: an
organisation should develop its long-term relationship with social causes in
order to build its reputation. Positive relations with society can be developed
by, for instance, employee volunteer programs, product donations, advocacy
support and legal support programs. A positive and highly committed
relationship with a social cause and social involvement activities will boost
the organisation’s social image, and can be leveraged for insurance.
2. Modesty in promoting CSR: this
is the second factor for organisations to gain customer goodwill and third
party promotion. Leading corporate brands, such as Citibank, 3M and GE value,
are all promoting activities in support of various social causes.
3. Supporting social causes as a
core business strategy: social responsibility has developed in importance, and
organisations are supporting social causes as a core business strategy. Programs
that are appropriate, relevant and reasonable not only develop good reputation
and goodwill but also boost the insurance benefits to the organisation
Finally, CSR as insurance can be a tool for enhancing
a company’s reputation in society. It should project a holistic image of the
company and generate goodwill. At the same time, the social initiatives selected
for CSR should fit with the business strategy and contribute to expertise,
rather than simply donating to generic causes. However, some critics maintain
that CSR is not suitable for all organisations because the nature of their
business is incongruent with CSR activities. Furthermore, the critics are fascinating
that CSR is only the way of green-washing the corporation’s image.
THANK YOU
Citation:
Peloza ,John (2006) :Using corporate social responsibility as a insurance for financial
Performance .
