Corporate social responsibility (CSR) is the way of honoring ethical values and showing respects to the people, the communities and the natural environment in the business activities. CSRs are influenced by laws and regulations for their minimum requirements, but definitely most of them are beyond these laws (Tsoutsoura, 2004). During the last decades, CSRs are performed by more and more companies and with increasingly high qualities, and these CSRs have not only improved people’s life quality, but also inspired the personalities and values all human beings are sharing and respecting. People are showing more and more respects to nature and animals, and companies are paying more attention to human rights. CSR is on the way to improve the world to a better place. Because of these benefits and spilling over effects, CSR is drawing more and more attention from theoretical and practical perspectives. On the theoretical perspective, researchers mainly pay attention into two fields: one is the relationship between corporate social responsibility and financial performance, and the other is the motivations of CSRs. On the practical perspective, executives endeavor to communicate positive signals to the public to broaden their influences and reputations. However, with improvements both in the minimum requirements of laws and regulations and the expectation from the public, CSR management is confronted with more challenges, especially for multinational corporations (MNCS). The essay would discuss the statement with detailed reasons and examples that MNCS face particularly demanding challenges in CSR management, and the essay is constructed as following:
There are four major parts in this essay, and the first part is introduction, which involves the basic definition of corporate social responsibility, its importance of CSR and its recent development. The second part would analysis the demanding challenges for MNCS in CSR management from the aspects of laws and regulations. The third part would discuss the statement from the aspect of the public’s expectations. The forth part is the conclusion.
The Aspects of Laws and Regulations
Corporate social responsibility actually is not required but affected by laws or policies. The requirements in laws and regulations are the minimum responsibilities that corporations should meet, and if the requirements are increased, the entrance requirements of CSR are raised, which means companies have to perform more social duties vulnerably so as to meet the previous supply of social responsibility. Therefore, it can be reasonably stated that requirements of laws and regulations is positively related with the challenges of CSR management. With business activities performing around the world, multinational corporations will meet more challenges in performing CSRs for they have to satisfy not only the international generally accepted laws and regulations like anti-corruption act, taxation, employees’ healthcare and so on, but also the local regulations and policies where the business is operating.
2.1 International Generally Accepted Laws and Regulations
That international laws and regulations having important influences on corporate social responsibility is because of their generalness and high requirements. For example, all the countries around the world care about the quality of safety of commodities, and have issued respectively the relevant quality laws and compensation acts. Companies have to ensure that the quality of their commodities have satisfied the quality laws before they are selling out. By taking the world as their market, commodities produced by multinational corporations have to satisfy all the quality requirements where these goods are sold, and the kind of generalness demands higher quality than that of the goods just sold in one country or area. Higher quality often accompanies more CSRs because some higher quality required in some countries would become CSRs in other countries which do not have such requirements.
Take the Toyota Vehicle Recalls for an example. During 2009 to 2011, there have been about three separate times of automobiles recalls by Toyota: the first is about pedal entrapment problem, the second is about sticking accelerator pedal problem and the third is about hybrid anti-lock brake software problem. Toyota has total recalled about 9 million cars from the worldwide. The final report made both by NHTSA and NASA states that Toyota’s problems are mechanical, not electrical, which means the accidents and damages are mainly caused by first two problems but the third problem. At the same time, the final investigation shows that some car models do not have such problem, neither some cars sold in some particular areas do. There are many conclusions included in the final report and one of them is that some cars are not necessary to be recalled. However, the fact is that all the cars with these potential problems had to be recalled, and once the kind of recalls happened in one country, the similar recalls were necessary in other countries, because Toyota has to perform the corporate social responsibilities that the same products with the same price should be with the same qualities around the world, and they cannot treat different people with discriminations. Another example is about Nestle double standards. There are years since Nestle has promised not to sell genetically engineered (GM) food in Russia, Brazil, Australia and some other countries, but it sets a double standard toward Thailand, China, and the Philippines by refusing to use genetically engineered ingredients into the food, and testing of food in these areas has shown contamination for many times. Many protests have happened during the last decade, and Nestle still do not want to admit their wrongdoings. The result is there has been credibly decrease in Nestle sales and reputation in China during the last several years. So it can be seen that if the CSRs are refused to be performed, the challenges would be met in the business activities and transactions.
2.2 Local Regulations and Policies
Sometimes there are local regulations and policies that the multinational corporations have to obey. In order to protect their political interests, to enhance the local market competition fairness or to improve domestic technology development, local governments would put some more requirements on the multinational corporations which perform business there. These requirements would be seen by the parties in power as the strategies to govern and control the countries, and each company need to adhere to the policies as its duties. These additional requirements would increase CSR requirements for multinational corporations.
Take Google quitting its search engineer service in China for example. Google launched in China in 2006 with a concession to Chinese government to filter some results for inappropriate information on its website, and this kind of filters is not required in other major countries. In January 2010, Google announced that it was no longer willing to accept the censorship agreements and would review the feasibility of its business activities and operation in China for it had witnessed many clampdowns on speech freedom rights on the web. In March 2010, with a failure to reach an agreement with Chinese government on the censorship policy, Google announced to quit its search engineer service in China. From Chinese government’s perspective, with the incentives to establish a favorable environment for its governance and domestic economic development strategy, it requires all the internet companies operating in China to agree on the censorship policy under which some information is required to be filtered for its inappropriate content. This kind of filter activities would probably reduce and damage the completeness and fairness of the information which is available to the local people, some maybe would even violate the human being’s rights. The question is does the company have the responsibility to assist the local government to perform its strategies, especially when the policies are not at the people’s advantages or interests. If it does follow, company may gain some economic benefits with sacrificing others’ interests, and it does not, it would loss the change to bring benefits to the people and to make the contribution to the society. Actually, it would become complex when the problem is connected with politics, and it is true not only in China but also in other countries. For example, would it be more effective if there is no tariff and import quota or would the world be more developed and beautiful when all companies come to share their core technologies? These questions are hard to answer for no matter what decisions are made, there are benefits and costs need to tradeoff and this kind of tradeoff make the companies hard to perform their CSRs effectively. So for Google, it is a dilemma. If it just complied with the censorship agreements, it would gain the economic benefits from Chinese market but to sacrifice the speech freedom rights and the rights to know of Chinese people which would violate to its belief of “don’t be evil”, and if it did not comply, it would quit China to make the people undertake the costs of government’s policies which is not fully adhere to responsibility requirements either.
Expectations from the Public
The public usually imposes higher expectations on multinational corporations than on normal companies, and the more famous the corporation, the higher the expectation. There are two basic reasons for the phenomenon, the first is the multinational corporations have duties to meet higher expectation from the public, and the second is the MNCS have capabilities to explore higher expectation for the public.
3.1 To meet higher expectation from the public
Products or services provided by multinational corporations are usually considered with higher qualities and safety insurance, because they have been consumed and tested by a large range of users. The results of these testing have been shown in the reputation and size of these companies, because if their products or services fail to satisfy the public’s appetites or expectations, they would not be so successful and confident as to extent their business around the world. Because of the trust and satisfaction from these guaranteed products or services, customers are usually willing to pay more prices to the multinational corporations than to other companies providing similar goods or services. On the other hand, multinational corporations usually could enjoy the benefits from lower costs and expenditures for such reasons like scale effect, lower raw material costs, longer time payable turnovers, lower financial expenditure and management expenditure and so on. So it usually happens that MNCS have a stronger profitability than others. With the profitability, multinational corporations are usually expected to guarantee lower probability of defective goods and to provide higher standards of after-sale service, at the same time, they are expected to spend more on the health care of their employees, the trainings, the retirement benefits or even social charities. If these expectations are failed to be met, these would become their scandals and influence their reputations and sales, so these expectations would be the demanding challenges in performing the SCRs.
Take BP Oil spill for example. In April 2010, there is an oil spill happening on the BP-operated Macondo Prosect and the spill had lasted for nearly three months. When the leap was stopped, it had released about 4.9 million barrels of crude oil and caused 11 persons dead and 17 persons injured. Moreover, the spill caused extensive damage to wildlife habitats, natural environment, local residents’ health and economic development. It is usually seen as the largest accident of oil spill in the history. BP, as an international famous oil producer, should undertake the responsibilities to ensure the safety of its operation to protect its employees’ life and the environment, but it failed. The influence of the failure is extensive for people had faith and belief in the company or even in this industry previously that the products they provided would bring benefits to the society and improve the living standards, and the failure makes people to doubt the faith. To keep people’s faith and protect their dreams is definitely a hard mission for companies, especially for multinational corporations for they have influences in a larger population. That is why MNCS need to perform CSRs better and will meet more challenges in the process.
3.2 To explore higher expectation for the public
As it can be seen from the history, each big progress that human being had achieved was related to the big development in industry, and these big developments were incredibly connected with the leader companies in the industries. Therefore, companies, nowadays considered as corporate citizens, are often imposed on the expectation to improve human being’s living environment. Multinational corporations, with both enhanced hardware equipment like money and technology and software equipment like attraction for excellent persons and genius, are often on the top of the list to be expected to realize the expectations. It is some kind of their social responsibilities. But because these expectations are for the future without being discovered at the current time, the possibility of on the right development direction would be increased, so as the difficulty of performing their requirements and responsibilities.
Take Nokia for example. Before 2007, Nokia was the most popular telephone in China for its higher quality and more advanced functions. However, during the last four years, Nokia has lost its leading position to HTC and Apple telephones, because the system of Nokia is not so friendly or advanced and the touch screen is not as sensitive as those of the two others even though Nokia has kept the higher quality in the traditional functions like telecommunication and texting. Before some new functions were created by Apple, people did not realize that they would need them, but once they have been invented, people would find how useful they are and how inconvenient would be if the telephone is without these functions. As it is generally believed that the demands and habits of consumptions could be cultivated and raised. Nokia confronted the failure in the last four years is not because they don’t work hard to explore the potential benefits they would make, but because they failed to precisely dig out the future benefits or dig out not enough. People will turn to the products which will bring them the most benefits and the society the most inspiration and development. They do not care about the inefficient work so much. From companies’ perspective, it may be not fair, but from economic perspective, it is totally fair, for if companies do not perform the responsibilities to benefit the society so well, it would be not worth being benefited so much. People would prefer to pay to the companies which have contributed to the society more. So for Nokia, to perform and manage these responsibilities is definitely not so easy.
As it said that with great power, conspired with great responsibility. Multinational corporations usually meet more challenges than others for their superior capabilities and broader influence. They would be required to comply with more regulations and laws both from international generally accepted rules and local specific policies, and at the same they have to endeavor to meet higher expectations from the public. It is difficult to meet all of these requirements, and even harder to accomplish them better. One of these requirements failed to meet would affect their reputation and draw them into an embarrassment. So, the requirement of to do them all and to do them better makes MNCS face dramatically demanding challenges when to perform and manage the CSRs.
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