The Impact of Corporate Social Responsibility on Organizational Performance

Corporate Social Responsibility (CSR) initiatives can have both positive and negative impacts on an organization's production capability, cost of production, and overall financial performance. While CSR activities can increase a company's corporate image and reputation, they can also require significant expenditures that may compromise profit-making capabilities. Additionally, CSR programs may shift an organization's focus away from its core business objectives, potentially affecting its financial stability.

Running head: ETHICS AND CORPORATE SOCIAL RESPONSIBILITY
Ethics and Corporate Social Responsibility
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Introduction
Corporate Social Responsibility (CSR) defines the business approaches, which contribute
in the sustainable business development through delivering economic, social and environmental
benefits to all types of stakeholders (Korschun, Bhattacharya and Swain 2014). CSR programs
actually enhance the corporate image of organization to the stakeholders. However, CSR
programs can enhance the overall cost of production of the organizations. Moreover, CSR
programs have both advantage and disadvantage, which can have huge impact on the
organizations. This essay will present arguments for and against Corporate Social Responsibility,
using research
from the academic literature and highlighting real company examples.
Discussion
Corporate Social Responsibility (CSR) is defined as the form of corporate self-regulation
integrated into the business model. Moreover, in the concept of CSR, organizations integrate
social, economical and environmental concern in their business operation and positively interact
with the stakeholders. CSR practices encourage the organizations to be much more aware of the
impact of their business on the society, stakeholders and community. As per Saeidi et al. (2015),
CSR goes beyond charity and requires the organizations to act beyond legal obligations and
integrated social, economic and environmental concern. Moreover, CSR activities of
organizations care for the benefits of customers, employees, community and environment.
According to Walker and Dyck (2014), CSR enhances the responsible business
reputation and corporate image of an organization to their stakeholders. In CSR policies,
organizations are more likely to maintain warm relationship with the customers and other

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stakeholders by fulfilling their interests. Therefore, they can gain trust of the stakeholders and
make them well established in the market. While looking at the evidence of Coca Cola Amatil, it
has been found that the organization constantly maintains the standards in all their product
categories. Furthermore, the organization highly values their customers and other stakeholders
through meeting all their standards. In this way, Coca Cola Amatil has well established its
corporate image in the market (Ccamatil.com 2017).
On the other hand, Chernev and Blair (2015) opined that CRS activities can face the
issues of customer or community conviction. In such issue, customers and community like to
see the organizations that they trust are highly engaged in social welfare programs. They highly
believe that CSR programs are for good causes and like to see instant results from those
programs. It is very difficult for the organizations towards convincing the customers and
community about the good intension of CSR, if it does not show any instant result. While taking
the example of Tom Shoes, it has been found that the organization gives one pair of shoes to a
poor child for every one pair of shoes it sells to its customers. However, the customer and
community claimed that Tom Shoes should try to develop the life of poor children rather than
merely giving one pair of shoes. Moreover, the customers and community are less likely to
believe on the charity Tom Shoes, which is making customer and community conviction issues
(Anderson 2017).
Servaes and Tamayo (2013) pointed out that CSR activities facilitate in maximizing the
overall organizational profit of an organization. Organizations having CSR activities always
provide adequate return on investment to the shareholders and investors. In this way, such
organizations can gain high level of trust of the shareholders and attract more capital inflow from
various sources including shareholders and investors. Therefore, increased investment can

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strengthen the financial capability of an organization. Furthermore, effective CSR activities
facilitate in gaining high level of customer loyalty. Therefore, the customers are more likely to
repeat their purchase, which can actually enhance the sales and profit volume of an organization.
While looking at the CSR activities of Coles Group, it has been found that the organization
ethically deals with its shareholders and provides them adequate return on investment. Therefore,
the shareholders and investors are highly interested to invest in this organization by enhancing its
overall profit level (Theage.com.au 2017).
As per Kim, Li and Li (2014), CSR programs actually increase the overall expenditure
of an organization and its cost of production. Moreover, the organizations involved in CSR
programs need to provide charity for communal development. It need huge among of monetary
as well as non-monetary organizational resources, which add to the overall production of the
organizations. Furthermore, organizations often have to compromise with some direct profit
making activities for protecting the environment and stakeholders from the harmful effects of
those activities. Apart from that, the organization also has to allow employee volunteering time
to the employees, which can hamper the production capability of those employees and overall
organizational production. In this way, CSR activities actually increase the cost of production of
an organization. While looking at the example of Domino’s Australia, it has been found that the
charity programs of the organization towards treating the life of cancer affected young people
have actually increased its expenditure. Though the organization is gaining high level of
corporate image through their charity programs, still the organization has to compromise with its
profit making capability (Dhaliwal et al. 2014).
Most of the organizations utilize CSR initiatives for bolstering their public image.
However, CSR initiatives necessitate an organization towards releasing certain genuine

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information, which could have some opposite impact on the organization than the expected
outcome. Moreover, Hoi, Wu and Zhang (2013) opined that CSR programs require an
organization to disclose all organizational information. As per CSR programs, the organizations
need to be clear and transparent in communicating all their important information to their
important stakeholders. In such situation, any organizational information, which is breaching
the values of CSR programs, it can destroy the reputation of the organization to its stakeholders.
While taking the evidence from Coca Cola, the organization released a report including the
information regarding the chemical found in its products. This report has actually lowered the
reputation of the organization (Mail Online 2017). The organization has actually suffered huge
revenue loss from such information discloser.
According to Saeidi et al. (2015), CSR programs facilitate an organization towards
saving overall organizational cost. The principle of good business is that any publicity is good
publicity. Moreover, the product should be well known to the customers for increased sales
volume. Effective CSR programs enhance the corporate image of a particular brand in the
market. In this way, the CSR activities enhance the customer loyalty of an organization, which in
turn enhance the word of mouth of any particular product. In this way, such CSR initiatives
enhance advertisement effectiveness of the organization through increased word of mouth.
Therefore, it actually reduces the advertising cost of the organizations. While looking at the
evidence of community development programs of Cotton On Organizations, it has been found
that the organization has highly popular for its favor towards community development. It has
been found that high level of popularity of the organization has increased the word of mouth for
the brands of the organization. Moreover, the customers are more likely to refer the brands of
this organization to their relatives. In this way, CSR programs are actually enhancing the

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advertising effectiveness of the organization, which has minimized the advertising cost as well as
overall organizational cost of the organization (Acrath.org.au 2017).
Most of the critics of CSR have identified that CSR programs can shift the focus of an
organization from its core business objectives. Hoi, Wu and Zhang (2013) opined that the
organizations often forget their obligations towards the shareholder in which they have to make
adequate profit for provide accurate return on investment to the shareholders. Moreover, the
organizations can engage in CSR programs and use up their funds for community welfare. In this
way, instead of making an income, CSR programs often make outflow of cash and not fulfill the
actual business objectives of the organizations. While taking the example of Woolworth Group,
it has been found that the organization spend huge amount of money for charitable purpose and
community development. In this way, such huge amount of spending on CSR programs affects
the financial stability of the organization (Wecu 2017).
Conclusion
While concluding the study, it has been found that corporate social responsibility
enhances corporate image of organizations in the market. It actually helps in fulfilling the
interest level of all kinds of organizational stakeholders. On the other hand, CSR programs can
create customer and community conviction, where customers and community have less trust on
the CSR programs, if it does not have any instant positive effects. However, CSR program
maximizes the profit level of the organizations. Moreover, CSR initiatives encourage the
organization towards provide adequate return on investment to the shareholders. It actually gain
the trust level of the shareholders, which encourages the shareholders towards huge investment.
It actually enhances the financial stability of the organizations. On the other hand, CSR

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initiatives enhance the overall cost of production of the organizations through increased
charitable investment. Furthermore, CSR programs reduce the advertising cost of the
organizations through increased word of mouth.

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Reference List
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Dhaliwal, D., Li, O.Z., Tsang, A. and Yang, Y.G., 2014. Corporate social responsibility
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