Corporate social responsibility (CSR) is the idea that companies should behave in a socially responsible manner, considering their moral responsibility to society. The concept dates back to the 18th century, with Adam Smith supporting market interactions that serve society’s needs. Milton Friedman, however, believed that a business’s only responsibility was to increase profits for shareholders. Today, companies cannot ignore environmental and social issues, as it can be bad for business. Ethical activities that promote the well-being of workers and the community are beneficial for both the company and the public.
The story of corporate social responsibility (CSR), also referred to as corporate citizenship, stems from the idea that companies, like individuals, should behave in a socially responsible manner. This concept encompasses all of their activities and engagements, particularly in their dealings with other companies. Their moral responsibility to society should always be considered in all levels of planning and during the implementation of those plans and their normal operations.
Although it is difficult to pinpoint an exact date, the history of corporate social responsibility probably begins in the eighteenth century. Adam Smith, a noted Scottish philosopher and economist, wrote in The Wealth of Nations of his support for market interactions in which individuals and organizations freely participate, stating that they could serve the needs of society. He further argued that people engage in trade or business for selfish reasons or for their own benefit. This implied that the consumer should be solely concerned with the welfare of society and that he should support actions that promote the interest of society.
Another famous personality in the development of corporate social responsibility is Milton Friedman. He was not in favor of the idea of CSR. His belief was that the business simply had one responsibility, and that was to increase profits for its shareholders. Friedman was a prominent American economist and Nobel Prize winner who was at one time an advisor to President Reagan.
Clearly, companies exist primarily to make a profit. However, CSR advocates argue that it won’t hurt businesses and corporations to develop a corporate conscience. They may have some short-term costs to engage in socially responsible activities, but it will ultimately benefit the company. People in general will patronize products that are good for the environment or that support charity or a noble cause, rather than other products that promote no social benefit.
However, the fact remains that any business must make profits, or at least break even, to survive. It will go out of business if all it does is pursue socially responsible businesses. Eventually, investors will withdraw support for even the most socially responsible companies or the most ethical companies, if it continues to suffer losses. This reality has always been evident throughout the history of corporate social responsibility.
The story of corporate social responsibility continues to evolve to the present day. The current thinking is that companies cannot persist in ignoring environmental and social issues. Doing so can be bad for business. Past experience has taught everyone that it is for the benefit of the company and the public to engage in ethical activities that do not pollute the environment and promote the well-being of workers and the community.
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