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Corporate Social Responsibility and the Triple Bottom Line Approach - Coursework Example

7 pages
1787 words
University of California, Santa Barbara
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Course work
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Corporate social responsibility, usually abbreviated as CSR refers to an organizations measures to examine and take responsibility for the effects of its activities on environmental and social well-being. It creates the view that corporations are part of the moral community meaning that they cannot be separated from society (Suliman, Al-Khatib & Thomas 2016). As citizens of the world, organizations have responsibilities that are similar to those of other members of the community. The responsibilities can be categorized into four groups which are economic responsibility, legal responsibility, ethical responsibility and philanthropic responsibility.

The triple bottom line theory is similar to corporate social responsibility but focuses on sustainability instead. It requires companies to evaluate their actions on three independent dimensions of performance namely social, environmental and financial sustainability(Savitz, 2013). This structure was introduced by John Elkington in 1994 and is commonly referred to as the three Ps: people, planet, and profits which translate into social, environmental and financial sustainability respectively. From the case studies provided, the three dimensions and their impacts are discussed in detail. From the theory, the success of companies is measured using societal and environmental criteria in addition to economic standards. Businesses can show their concern for these requirements through their corporate social responsibility acts(Willard, 2012). Throughout the years, corporate social responsibility has undergone several evolutionary stages with the current stage being the age of responsibility which happens to be the most comprehensive as it ensures that companies can keep a close look on the criteria used to measure their success.

Social sustainability refers to the idea that a decision or project should be beneficial to the society and prioritizes the balance of economic power in the community. While competition in business in common and usually encouraged, maximizing the bottom line in social terms ensures that a company creates an environment where all can thrive. Based on this notion, it is better for a society to grow than for a single organization to succeed alone. The result is that the company is assured of continued existence and creates good relations with the community it exists in.

Environmental sustainability arises from the realization that resources are not infinite and hence the conclusion that too much degradation could harm our lives and those of future generations. In this context, organizations are required to refrain from activities that result in corporate exploitation and neglect. Initiatives such as renewable energy, reduction of fossil fuel consumption and emissions, recycling, and better waste management are highly encouraged to achieve environmental sustainability.

Economic Sustainability refers to the strategic use of existing resources optimally to achieve a responsible and profitable balance can be attained in the long term. In a business perspective, it involves the use of the organizations assets in an efficient way that allows for continued effective functioning in the long run. The best way to achieve economic sustainability is by formulating an economic model that promotes the fair distribution and efficient resource allocation while at the same time ensures a healthy balance between economic growth and the ecosystem.

Financial Sustainability

This pillar measures the financial performance of the corporation over a period using the traditional profit-loss equation. It also serves to caution against corporate greed the main component of defensive corporate social responsibility in the age of greed. There is also an emphasis on business being about public good and private greed. Several cases demonstrate the ills of corporate, i.e., Barings Bank, Enron Corporation and Lehman Brothers. Barings Bank was United Kingdoms oldest merchant bank before its collapse due to fraudulent activities by a broker named Nick Leeson. Leeson states that at the bank, employees were driven to make more and more profits and he was the one raking in the most profits(Bodur, 2012). It is estimated that he single-handedly made 10% of the banks total profits in 1993. Much later in 1995, the discovery of a secret error account showed that Leeson had lost vast amounts of money in Barings name as a result of making seismic bets in the Japanese markets(Rodrigues, 2015). His loses were further amplified following the devastating Kobe earthquake that significantly affected the Japanese economy. Loses of such magnitude led to the banks collapse as it did not have enough capital to cover its debts.

Another example of corporate greed is the bankruptcy of Enron Corporation, an American energy company based in Texas in what is now known as the Enron Scandal. The collapse of this corporation was as a result of the then CEO hiding financial losses and other operations in the company. To cope with the mounting losses a CFO was appointed who came up with schemes to disguise the companys losses by making it appear to be in great shape. Large amounts of debt and toxic assets were covered up this way(Covitz, Liang & Suarez 2013). In 2001 however, analysts began to question the transparency of Enrons earnings leading to the prosecution of those involved in the shady cover-ups. Towards the end of the year, the company had filed for bankruptcy.

Perhaps the most significant bankruptcy filing in history is the Lehman Brothers collapse. The organizations primary aim was to cash in on the vast profits that arose from slicing and dicing Americas mortgages into securities for sale to investors around the world. Lehman did not heed warnings that the US housing market had become dangerously overheated and that mortgage brokers were giving out loans to people who could never repay them(Strange, 2015). By the first quarter of 2007, defaults on sub-prime mortgages reached unprecedented levels leading to concerns that the defaults would affect the companies profitability. Lehmans stock fell sharply in August as the credit crisis erupted. In June 2008, the company announced a second-quarter loss of close to $3 billion(Gambacorta & Mistrulli 2014). Its stock plunged 77% in September leading to investors questioning the then CEOs plan to keep the firm independent. After a series of continuous stock plunges, the firm declared bankruptcy on September 15 causing its stock to further plunge from its previous close.

Social Sustainability

Social responsibility is the notion that businesses should balance profit-making activities with activities that benefit society. It mostly involves creating companies with a positive relationship with the community in which they operate. The International Organization for Standardization concurrs that the relationship between the society and the environment in which businesses operate is a vital factor in for their continued efficient operation. Social responsibility insists that both individuals and companies must put the prioritize the interests of their environments and society as a whole first(Weingaertner & Moberg 2014). Most organizations especially those with green policies have integrated social responsibility into their business models. Investors have also taken to using a companys social responsibility as an investment criterion. This is explained by the fact that a company with its own dedicated social responsibility program in place encourages investors to invest and consumers to purchase goods and services from the company thereby developing a good reputation.

From the case study, IKEA is a good example of organizations that have incorporated social responsibilities into their business practices. For instance, IKEA has repeatedly supported local communities in the regions where its stores are located. In the UK for example, the company has planted one million trees in communities across the country. The company has also gone ahead to practice social responsibility towards its workforce through education and empowerment. A good example of this is the introduction of a new hourly wage rate structure that focused on the needs of its employees rather than market standards. IKEA organizes global talent focus weeks that provide employees worldwide with a chance to have a dialogue on the many options for growth and development within the organization.

IKEA has also demonstrated social responsibility towards the environment through the manufacture of energy consuming products that are significantly more efficient such as energy efficient LED light bulbs. The organization has also continued to operate in energy efficient buildings that are environmentally friendly. Continued investment in renewable energy such as wind and solar energy shows the organizations efforts towards environmental conservation. IKEA also employs waste reduction and recycling in the manufacture of its products to manage waste emissions into the environment(Mani, Agrawal & Sharma 2015). For instance, the Skapro Chair sold by the company is purely made of recycled plastic. The organization employs sustainable sourcing for its raw materials. The cotton used by the company comes from more sustainable sources, and so does the wood used in furniture manufacture. The same practice is applied to the fish and seafood sold and served in restaurants.

Other corporate social responsibilities undertaken by the company include donations to Brighter Lives for Refugees campaign and investments to help farmers produce cotton using fewer chemicals and water. It also enforces the Supplier Code of Conduct which prohibits the use of child labor, use of forced labor and discrimination at the workplace. The Code of Conduct also mandates the freedom of association for employees and the creation of a safe and healthy environment.

Critical Review of Case Study

The case study uses Interface Inc as an example to demonstrate the effects of the manufacturing process on the environment. In essence, the case study shows the companys actions to achieve environmental sustainability. Interface Inc was one of the worlds largest manufactures of carpet tiles, but at the height of its success, green issues did not feature anywhere in the first two decades of the companys history until customers began to ask about its actions for the environment. Although not aware of it at first, Anderson, the man at the helm of Interface, came to realize that carpet making was a pretty abusive industry since they used lots of petroleum and petroleum derivatives both as raw materials of synthetic carpet and in the powering of the production process. The dyeing process is also water and energy intensive He also noted that when customers are done with the carpets, they dump them in landfills where they last for long periods of time before decomposing. Anderson concluded that none of the many industrial companies on earth was sustainable and vowed to make Interface Inc. the first company that was both sustainable and restorative. To achieve this Interface introduced various systems such as EcoMetrics which quantified the metabolism of Interface in the form of what Interface takes in, i.e., materials and energy and what comes out regarding waste and products and the SocioMetrics system which measured impacts on their people. Based on these methods, the company was able to innovate their products such as offering a carpet maintenance service rather than a carpet product thereby creating a whole new sustainable business model.

Product innovation also continued with the introduction of a carpet product made from recycled material. To achieve their sustainability goals, the company listed the steps the...

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