Organisational objectives 3 On completing this chapter you should be able to: Know and understand

Changes in corporate responsibility
Attitudes towards corporate responsibility have changed over time. The standards 
that companies are expected to reach are determined by societal norms, and in most 
countries these now focus on stakeholders rather than shareholders.
The main reasons for changing corporate approaches to social responsibility include:
• increasing publicity from international pressure groups that use the internet to 
communicate, blog, raise funds and organise boycotts
• the United Nations Millennium Development Goals, agreed by more than 
120
countries in 2000, which includes ‘environmentally sustainable growth’ – this 
Benefits
Drawbacks
• The image of the business and its products can be improved 
with a green or socially responsible approach. This could 
become a major competitive advantage, attracting new 
customers and loyalty from existing customers.
• Attracting the best-motivated and most efficient employees 
may become easier as many workers will prefer to work for 
and be associated with socially aware businesses.
• Bad publicity and pressure group activity resulting from 
socially irresponsible behaviour should not
arise.
• Short-run costs could increase, e.g. fitting anti-pollution 
equipment, paying workers above-poverty wage levels, 
paying suppliers promptly, not exploiting vulnerable groups in 
advertising.
• Shareholders may be reluctant to accept lower short-run 
profits (even though long-run profitability might increase).
• Loss of cost and price competitiveness if rival businesses 
do not accept social responsibilities and have lower costs 
as
a
result.
• The goodwill of other stakeholder groups, resulting from 
socially responsible behaviour, could lead to better relations 
with workers, suppliers, customers and the local community.
• Higher long-term profitability should result from all of the 
factors above.
• Consumers may be prepared to pay higher prices for 
products made in a socially responsible manner, but during 
an economic recession, they might just prefer low prices and 
worry less about how products were made.
• There could be a considerable social backlash against 
a business that 
claims
to be socially responsible but is 
discovered to operate in socially irresponsible ways, e.g. a 
furniture maker claims to use sustainable timber but buys 
from rainforest suppliers – this is sometimes referred to as 
‘greenwash’.
Table 1.3.3 
Benefits and drawbacks of corporate social responsibility

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Organisational objectives
47
has forced many developing nations to insist that new company investment in their 
economy takes environmental concerns into consideration
• global concern over climate change and the impact this could have on social 
and economic development – this is forcing companies to confront the climatic 
consequences of their actions and investments, e.g. the rapid increase in wind-power 
farms in Germany
• legal changes at local, national and European Union level – these have forced 
businesses to refrain from certain practices. In most countries, businesses can no longer 
pay sta
ff
very low wages or avoid legal responsibility for their products.