Profits and Corporate Social Responsibility

Running head: PROFITS AND CORPORATE SOCIAL RESPONSIBILITY 1
Profits and Corporate social responsibility
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PROFITS AND CORPORATE SOCIAL RESPONSIBILITY 2
Various scholars have come up to give the meaning of profit. All definitions are however
centered towards a common point. Profit can, therefore, be defined as the financial benefits that
are only realizable when the expenses of running a business are exceeded by the revenue gained
by the same business (Michalowicz, 2017). When calculating profit, taxes, and dividends are
other important factors to be considered. For a business to claim having earned a profit, liabilities
must reduce while at the same time the business realizes an increase in assets. It does not matter
the size or type of the business for profit to be realized. Every company’s chief aim is to gain
profit from their day to day undertakings.
Profit is categorized into three major types; gross profit, net profit, and operating profit. Gross
profit is the value of total sales from which the cost of all goods sold is deducted. Secondly, the
operating profit is then obtained by deducting the total costs of operations from the gross profit.
Such costs include administrative and miscellaneous expenses. Net profit, on the other hand, is
the amount of money left for the company after all deductions have been made (Domash, 2009).
Major deductions here include interests and taxes. Profit is the most important aspect of all
businesses. This is due to the fact that it is the measure of performance for every business.
Additionally, profits are the major reason that businesses are in existence (Partridge, 2015).
Various financers of a business also look at the profit levels of a business before deciding on the
finances to be availed to that business. The profit earned from previous business activities is also
an important source of finances for the business. Retained profits play a significant role in
expanding the size and overall operations of a business through reinvestments.
Corporate social responsibility (CSR) is a business model that is self-regulating with a chief aim
of maintaining an organization’s social accountability to the public, to its stakeholders and to
itself. Also commonly referred to as corporate citizenship, CSR enables organizations to be

PROFITS AND CORPORATE SOCIAL RESPONSIBILITY 3
aware of their impact on all societal aspects such as environmental, social and economic
(Schwartz, 2011). By engaging in CSR therefore, it means that organizations are operating in
ways that are enhancing the general society and the environment rather than having negative
contributions to it. There also exists a strong interconnection between CSR and profits in a
business. Organizations that embrace and embark on CSR have higher profit earnings in
comparison to those who don't embrace CSR. The levels of customers' loyalty are boosted by
CSR are that directly contributing to the overall sales of a business, which in turn determines the
profit levels (HuangFu, 2017). Profits are also determined by the amount of finances invested in
a business. By engaging in various CSR activities, a business is able to attract investors whose
input is significant in profit making.
There are various reasons why organizations engage in CSR and of course with tangible benefits
to such organizations and to the society. There exists a long-term argument that organizations
engage in CSR to feel better, perform better and exist longer in the business market. Further on,
it is a fact that by engaging in CSR, companies are viewed positively by potential business
associates, the media, potential investors, and more importantly, by customers (Gössling, 2011).
Sustainability is another aspect that makes organizations shift their concern to CSR. It is a belief
for most organizations that it will be for their own long-run benefit by focusing on community
and environmental stewardship. Other organizations also focus on CSR to build a reputation for
themselves as well as due to the legal requirement for them to be given a license to operate.
There are various activities that encompass engagement of an organization into CSR. First,
respect for human rights is a crucial aspect of CSR. All human resources in an organization
should be given optimal working conditions. Organizations should also ensure that their
activities are considerate of the environment to avoid pollution (Idowu & Filho, 2008).