Advantages and Disadvantages of using CSR Standards as A way of Establishing A Responsible Business Group

Advantages and Disadvantages of using CSR Standards as A way of Establishing A Responsible
Business Group
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i. Introduction
Engaging in CSR standards ought to be a careful decision and organizations
should consider its advantages as well as disadvantages
ii. Advantages of using CSR standards
Enhanced image
Increased attraction as well as retention of workers
Reduced regulatory oversight
Capital inflow
Clean and Renewable Energy
Positive Publicity
Enhanced financial performance
Improved reputation and brand image
Increased sales and customer loyalty
Easy access to funds
Approval of local communities
Attraction of investors and less explosive stock value
Competitive advantage
Better quality of services and products
Increased profits
iii. Disadvantages of using CSR standards
Conviction of customers
Shifting attention to profit-making initiative
Reputation of a company takes a hitch
Conviction of customers
Increased cost of production
Provision and legislation related to CSR
iv. Conclusion
Critically discuss the advantages and disadvantages of using CSR standards as a way to
establish a responsible business organization.
Using CSR standards as a way of establishing a responsible business organization incurs
a series of advantages as well as disadvantages. Environmental and social actions that a firm
engages in bring advantages as well as disadvantages. Therefore, engaging in CSR standards
ought to be a careful decision and organizations should consider its advantages as well as
disadvantages (Tilakasiri, 2015). The paper aims at discussing advantages and disadvantages of
using Corporate Social Responsibility standards as a way of establishing a responsible business
group. Therefore, the paper comprehensively handles advantages and disadvantages of using
CSR standards as a way of establishing a responsible business group from the viewpoint of the
organization. It comprises of arguments that are economic based such as increase of profits as
well as improving the image of the company. As noted by some scholars, the idea of corporate
social responsibility is connected not only to positivism but also a certain level of criticism (Tai
& Chuang, 2014).
Advantages of using CSR standards as a way of establishing a responsible business group
Enhanced image
Using CSR standards enable a firm to gain an increased value of goodwill that serves a
double purpose that is; in the first place, people will be eager to buy products of the company
due to its clean and good image (Tilakasiri, 2015). On the other hand, other firms will be
yearning to be associated and carry out business with the corporation. Therefore, this increases
the company's prestige to a level that its name might become synonymous with goodness and
reliability. Furthermore, people like to be associated with most popular and best companies.
Therefore in this respect, the organization rises in stature and turns out to be a vital player in the
Increased attraction as well as retention of workers
A company that uses corporate social responsibility standards as a way of establishing a
responsible business group finds it easy to recruit as well as retain workers (Tai & Chuang,
2014). Many people desire to work in companies that have good conditions of working and are
concerned with the well-being of their workers. Compassionate attitude towards workers is
extremely desired by recruits as well as old workers. For instance, financial help, attention, and
appraisals that are given to individual successes and special days such as birthdays make the
workers remain in an organization. Therefore, this is a vast advantage in case there is a
constricted global labor market condition. Moreover, this will enable the firm to reduce the
expense of training new workers and on the other hand increase incentives for the existing
workers. Nevertheless incentives prompt efficient work from the workers (Saeidi et al., 2015). In
short, in case the workers of a firm are happy, the firm gets more profits due to the improved
efficiency of production.
Reduced regulatory oversight
A company that uses corporate social responsibility standards as a way of establishing a
responsible business group does not get inspected by regulatory bodies like companies that do
not have CSR programs. Usually, the authorities will tend to be lenient in their directive because
they will usually feel that the firm must be adhering to all directives because it is supported by
people as well as firms for its welfare task. Furthermore, companies using CSR standards usually
work within directives to gain benefits from the CSR programs. Also, authorities will offer
organizations that use CSR standards in setting up a responsible business group a fast-track
preference. On the other hand, organizations that use CSR standards in setting up a responsible
business group might forego cumbersome paperwork that is required in setting up projects in
case the authorities feel the project is aimed at improving the community (Tai & Chuang, 2014).
Capital inflow from many sources
The image of a corporation plays a major role in the attraction of investors. In case a firm
engages in corporate social responsibility standards, its image gets boosted, and so many persons
invest heavily in its operations (Saeidi et al., 2015). Therefore, in this way, the organization will
attract capital globally thereby helping the mother country to gain valuable foreign exchange. On
the other hand, the company will also attract investment from other industries as well as forms,
and it will, in the long run, become a name that can easily gain trust. Additionally, even the
mother country of the organization will be willing to invest in the firm, and this will lead to red-
tapism and lesser regulation (Tai & Chuang, 2014).
Clean and Renewable Energy
In case an organization engages in an environmental Corporate Social Responsibility
program, it makes sure that its actions and operations do not affect the environment in whatever
way. Therefore, it works hard to invent techniques and machines that can reduce harmful effects
of its operational activities (Slack, Corlett & Morris, 2015). In doing this, the company gives the
society a clean environment. Consequently, the company that uses environmental CSR standards
gets a chance of exploring the use of renewable energy for its operational activities. Therefore,
this reduces the company's cost of obtaining fossil fuels. On the other hand, this may reduce the
company's cost of production by just investing in production using renewable energy (Tai &
Chuang, 2014).
Positive Publicity
A company that uses corporate social responsibility standards as a way of establishing a
responsible business group gains good publicity. Additionally, a good CSR standard acts as an
advertisement for the organization. Publicity gained enables the company to be known and by
being known, it will sell its products to a large market (Saeidi et al., 2015). Additionally,
publicity enables a company to be set apart from its rivals. Rival companies might be selling a
similar commodity at slightly low rates but a firm that engages in CSR standards can keep the
interests of its community and environment intact, and people do not get bothered by an extra
charge because of this thoughtfulness (Slack, Corlett & Morris, 2015).
Enhanced financial performance
A company that uses corporate social responsibility standards as a way of establishing a
responsible business group is usually ‘stakeholder balanced,' and usually, stakeholder balanced
companies have a growth rate as well as eight times growth rate in employment as opposed to
those companies that focus on profit maximization and shareholders (Tai & Chuang, 2014).
Improved reputation and brand image
A company that uses corporate social responsibility standards as a way of establishing a
responsible business group can benefit from its reputation from the business community as well
as its improved reputation with the community by attracting more trading partners as well as
capital (Slack, Corlett & Morris, 2015). Furthermore, perfect employee, community and
customer associations are important compared to strong shareholder returns.
Increased sales as well customer loyalty
A company that uses corporate social responsibility standards as a way of establishing a
responsible business group gains a large market for its services and commodities (Tai & Chuang,
2014). While organizations must satisfy the key buying criteria of the consumers such as quality,
price, taste, appearance, availability, convenience, and safety, there is also a growing desire of
purchasing related to other value-oriented criteria such as ‘child labor-free' and ‘sweatshop-free'
clothing, commodities that have small impacts on the environment as well as absenteeism of
genetically modified ingredients as well as materials.
Easy access to funds
A company that uses corporate social responsibility standards as a way of establishing a
responsible business group has a fast increasing access to capital that might not have been
available (Reverte, Gómez-Melero, & Cegarra-Navarro 2016). This is prompted by the fact that
the company addresses social, environmental and ethical issues that attract many firms including
the government and other international bodies as well as companies to invest in the organization.
Approval of local communities
A company that uses corporate responsibility standards as a way of establishing a
responsible business group gains the approval of the local communities. Therefore, the socially
responsible behavior of the company helps it to operate unperturbed (Slack, Corlett & Morris,
2015). On the other hand, a company that engages in CSR standards is easily distinguished from
others. Additionally, by a company representing itself as a forerunner of a responsible attitude, it
easily stands out of the crowd hence induces consumers into purchasing its commodities as well
as supporting it in various ways.
Attraction of investors and less explosive stock value
Investors look for responsible firms to invest in. Therefore, the ethical values of an
organization that uses CSR standards attract wealthy investors that are willing to contribute to
the organization's gain of profit as well as success. On the other hand, companies that engage in
CSR standards have low chances of being criticized publicly and are less risky thus lowering the
price of the stock (Reverte, Gómez-Melero, & Cegarra-Navarro 2016).
Competitive advantage
A company that uses social corporate responsibility standards as a way of establishing a
responsible business group creates a competitive advantage for itself. This is because it creates a
positive image and can, therefore, attract members of the community and customers because it
maintains an accountable representation. Additionally, a company that uses CSR standards
shapes good relations with its stakeholder and shows that the needs of its stakeholders are
paramount to it (Slack, Corlett & Morris, 2015). On the other hand, the workers of a company
that uses CSR standards are usually motivated and inspired. Therefore, the high motivation and
morale of the workers, the company's work efficiency, and performance increases rapidly.
Moreover, the current potential customers are usually careful in their shopping. Therefore, many
buyers choose those brands that have a reputation for their CSR even when they have to be
overcharged for socially and ecologically friendly commodities.
Better quality of services and products
An organization that engages in CSR standards as a way of establishing a responsible
business group retains good workforce and attracts new talents because people usually want to
work for firms that have a good reputation. On the other hand, reformation of labor practices as
well as protecting human rights increases the organizational commitment of employees.
Additionally, the rate of employee errors decreases due to the training programs (Reverte,
Gómez-Melero, & Cegarra-Navarro 2016). Moreover, the rate of employee turnover declines
thus leading to savings on relentless recruitment and training of new personnel. Additionally, by
a company reducing overtime, it causes less waste because when the workers work long hours
with no break, workers are tied and make more mistakes that could be avoided.
Increased profits
A company that uses CSR standards can easily come up to the position of a leader in the
sector. Moreover, a company engaging in CSR standards is adopting a perfect positioning
strategy because CSR increases the value of the organization’s brands (Slack, Corlett & Morris,
2015). Therefore, this might lead to improved influence of an organization in the industry. Some
corporate practices such as reducing wastes increase operational efficiency thereby making
production cost effective as well as improving profits.
Disadvantages of Corporate Social Responsibility
The role given to a leader is to guide business organization towards achieving sustainable
responsibility of business is complex and vast growing organizations. To implement such form
of initiative, it requires the use of a unique array of enormous and intricate skills that essentially
needs one to borrow from other people (Dhaliwal et al., 2014). Use of different leadership
capabilities and styles has become most prevalent amongst leaders where organizations have
experienced changes in strategy and focus. The works have demonstrated the use of socially
achievable behaviors. Many disadvantages are encountered when a firm improvises the use of
CSR standards in various organizations. Some of the common disadvantages include;
Shifting attention to profit-making initiative
Many economic specialists have become critical to the use of CSR in firms. In many
occasions, CSR shifts the focus of the organization from being a financial entity. In this case, the
company forgets all the obligations given by stakeholders that they are supposed to make profits
for them. Instead of focusing their mind towards profit making initiatives, they are interested in
engaging themselves in the implementation of CSR programs that use funds and consumes most
of community welfare. The company does not concentrate on profit making initiatives but
instead focuses on the outflow of cash without fulfilling the obligations given to them of profit
making. Many stakeholders invest in various organizations with the aim of making profits that
will be essential in improving their livelihood and helping get some other cash to invest in other
places (Mahoney and Roberts, 2014). Implementation of CSR in organizations has taken a hitch
because many view the minimal use in firms without taking into consideration any positive
outcome that will be realized when corporate social responsibility is implemented in an
Reputation of a company takes a hitch
The requirement of CSR where companies are supposed to disclose the shortcomings that
they face will affect the running and performance of the companies to a greater height. Most
firms work hard in not disclosing any problem that they face because of the fear that would later
turn to haunt them in their relation to customers whom they serve. It is not easy for companies to
disclose some of the common strains that they face making them violate the provisions of CSR
program. For example, when a car manufacturing company manages to call back their vehicles,
there is a possibility of losing many customers who had expressed interest in using their services
in the future. The recalling process will in most cases gallop their reputation because there are
needs where various individuals are required to adhere to the rules and regulations of the
program. This has become one of the most frustrating things to many companies because of the
image that they create to consumers when implementation of CSR is solely observed by the
organization. The recalling initiative in the case of car manufacturing firms will cause
inconvenience to consumers thus losing their trust in the manufacturer.
Conviction of customers
Previously, customers were pleased when they saw companies that they were interested
in get engaged in programs of social welfare. Many people are convinced that the use of such
programs will be of good use and will finally take them to a good cause. The customers will later
grow wary of the initiative if they do not see the required form of results. The use of social
welfare programs will later be seen as mere PR stunts when they do not notice the outcome as
helpful as initially thought. These activities will become hard in convincing customers to
continue waiting pending the outcome of the results and showing that the company had good
intentions to the society (Yin and Jamali, 2016). The actions of trying to convince people about
the intended outcome will become fruitless each day because a lot of impatience will be
observed from customers and there should be an initiative of constantly appeasing their wait for
the positive outcome. In this case, CSR will make customers of the organization lose patience to
the outcomes thus making conviction to customers hard.
Increased cost of production
CSR standards increase the cost of production of a company. The implementation process
takes time and influences the way in which a company runs and the extra cost that will be
experienced. CSR and increased cost of production is reflected in the cost of products. This is
because prices hike and customers are supposed to pay more to get the required services. In some
cases, large corporations can absorb the high cost of using CSR and will work hard in
implementing the program because of the outcomes that are experienced in large firms. CSR
standards may not bring financial benefits to the organization, but small organizations have to
increase the prices of their product so that they can be able to match the financial muscles that
are exhibited in the competitive market (Mahoney and Roberts, 2014). The increased prices will
help one to meet the expenses that have increased so that the use of CSR can be effective to the
whole organization.
Provision and legislation related to CSR
Provisions and legislation imposed on an organization regarding the use of CSR are
meant to vary from one organization to another (Joutsenvirta and Vaara, 2015). The use of CSR
differs in various contexts depending on their usage and the geographical location of the intended
firm. Some of the common features that affect the use of CSR standards include culture,
environmental conditions and the legal framework that are put forward by various countries.
Therefore, legal factors are critical in showing the strength and ability of an organization to adapt
the requirements and provisions of using CSR that does not have the economic advantage to
various organizations. CSR is concerned with emphasizing the use of official behaviour of
individual firms. The program later expanded it to include the use of supplier needs where the
produced products are disposed as they are also used (Cooper, 2017). Despite the many
disadvantages experienced by various organizations, CSR has become one of the most common
forms of business practices in the current time.
Corporate social responsibility is concerned with fulfilling the responsibility of treating
all stakeholders of various firms well and in a responsible manner. By use of responsible or
ethical means then stakeholders are treated in an acceptable and civilized manner. Social
responsibility includes the work of ensuring there is economic stability. Stakeholders exist both
within and outside the firm such as the natural environment. The main aim of using CSR
standards is to create acceptable social standards that are acceptable to various people,
corporations and stakeholders found outside and within the organization. Successful initiatives of
CSR have managed to take teams beyond the legislation and compliances that enable them to get
respect and ethical honour from various people, natural environment, and surrounding
communities. CSR enables firms to start activities that can take place without affecting the
normal running of the organization and achievement of business goals. The use of CSR has
become vital than environmental responsibility which employs the use of recycling policy.
Furthermore, corporate social responsibility involves the consideration of the whole business
picture, internal processes of clients and ability to take various steps in improving day-to-day
operations. For many years, the use of CSR has proved to be using the policy of self-regulatory
mechanism where business organizations monitor compliance to the law, national norms and
ethical standards that help the organization goals to be successful. Furthermore, CSR is a broad
concept that manages to address different topics such as corporate governance, human rights,
safety, and health. CSR standards ensure that there is adherence to human rights and good
working conditions thus improved economic performance and transparency. Many companies
have become successful by using unique initiatives of CSR that are difficult to be on the
forefront of aspects of CSR.
Cooper, S., 2017. Corporate social performance: A stakeholder approach. Taylor & Francis.
Dhaliwal, D., Li, O.Z., Tsang, A. and Yang, Y.G., 2014. Corporate social responsibility
disclosure and the cost of equity capital: The roles of stakeholder orientation and
financial transparency. Journal of Accounting and Public Policy, 33(4), pp.328-355.
Joutsenvirta, M. and Vaara, E., 2015. Legitimacy struggles and political corporate social
responsibility in international settings: A comparative discursive analysis of a contested
investment in Latin America. Organization Studies, 36(6), pp.741-777.
Mahoney, L.S. and Roberts, R.W., 2014. Corporate social performance. In Research on
Professional Responsibility and Ethics in Accounting (pp. 73-99). Emerald Group
Publishing Limited.
Reverte, C., Gómez-Melero, E. and Cegarra-Navarro, J.G., 2016. The influence of corporate
social responsibility practices on organizational performance: evidence from Eco-
Responsible Spanish firms. Journal of Cleaner Production, 112, pp.2870-2884.
Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P. and Saaeidi, S.A., 2015. How does corporate
social responsibility contribute to firm financial performance? The mediating role of
competitive advantage, reputation, and customer satisfaction. Journal of Business
Research, 68(2), pp.341-350.
Slack, R.E., Corlett, S. and Morris, R., 2015. Exploring employee engagement with (corporate)
social responsibility: A social exchange perspective on organisational participation.
Journal of Business Ethics, 127(3), pp.537-548.
Tai, F.M. and Chuang, S.H., 2014. Corporate social responsibility. Ibusiness, 6(03), p.117.
Tilakasiri, K.K., 2015. Advantages of corporate social responsibility concept: evidences from Sri
Yin, J. and Jamali, D., 2016. Strategic corporate social responsibility of multinational companies
subsidiaries in emerging markets: Evidence from China. Long Range Planning, 49(5),

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