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Corporate Social Responsibility : Key Challenges and Implementation

Corporate Social Responsibility is a concept that seeks to bring together the apparently exclusive worlds of the corporate and the society. Society here means all the stakeholders in the firm. CSR implies that it is the duty of the corporate to ensure the safety of all the stakeholders. It is closely linked with the concept of sustainable development whereby not only financial concerns should drive the decisions of a firm but also concerns of the society, environment, etc…

The advantages of implementing CSR in a firm from a government’s perspective are:

• Ensuring that labor and environment standards are met
• Enhancement of poverty-reduction strategies
• Leveraging the competitiveness of the country by making it attractive to investors

A government can help the firms in participating in an active manner by:

• Developing the CSR code based on the laws and regulations of the country
• Leveraging capacity building so that the standards are implemented by the local businessmen
• Ensuring that the reporting systems are accountable and transparent

Corporate Social Responsibility has manifested itself in various forms. Some of the survey reports indicate that:

• 200 institutional investors who controlled $3 trillion assets of McKinsey were interviewed. The results showed that 80% of them would rather invest in a company that was well governed even if the financials did show big money, that in a company with poor governance and higher stock price.
• In a survey done by CLSA they found that average return for corporate with good governance was 267% while for the others it was only 127%.
• A Harvard – Wharton study of 1,500 US firms showed that a firm with better CSR had a stock price that was consistent and stable.

In a World Bank study, it was found that the three key challenges to the implementation of CSR were:

1. Generation of inefficiency and confusion in the buyer CSR codes
2. Traditional implementation of CSR strategies not achieving the desired results
3. Insufficient information about the business benefits of CSR implementation

The World Bank then proposed some solutions to go forward. Effective implementation of CSR involves active engagement of the public sector, capacity building, empowerment of the workers, development of standards and harmonizing them with the firm’s objectives and goals, ongoing research, removal of economic barriers to CSR, etc… Public sector engagement involves host government actions as well as home country government. They must build a sustainable relationship so as to promote CSR. In order to harmonize standards, care must be taken to address implementation guidelines, training and education, sharing of information, and monitoring of procedures. In Morocco, employers have consolidated a code of conduct that is in sync with their CSR implementation plans.

Some of the community issues in which CRS plays a major role is education and training, community health, regional environment, poverty eradication, human and civil rights, indigenous peoples’ rights, regional development, etc…

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Posted: 17/02/2011 05:23:15


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