In today’s global environment companies have an important role in influencing economic, environmental and social change in both negative and positive ways. To ensure the positive development, the majority of companies employs corporate social responsibility. It is a concept, which encourages companies to consider the interests of society by taking responsibility for the possible impact of their activities on customers, employees, shareholders, communities and the environment (Zadek, 2007). This responsibility falls beyond legal liability; it represents the company voluntarily employing additional measures to improve the quality of life of stakeholders.
Since there is no universal formula for socially responsible business practices, companies adjust their CSR practices according to their views, beliefs and resources. Forbes article by Paul Klein (2011) outlines five interrelated criteria of how corporations can maximize their investments in CSR. First, the organization’s CSR should have the business-based social purpose. CSR programs should directly reflect what the business is and what it does. Since CSR is becoming ubiquitous, CSR programs should drive measurable social change through the clear theory of change. Providing quality and depth of information is more important than identifying social priorities for community investment. To be effective, Paul Klein (2012) suggests focusing on concentrated effort on one objective at a time. Finally, to establish a high degree of credibility, the company has to partner with experts.
An Italian manufacturer of branded chocolate, Ferrero, can serve as an example of the organization with successful CSR that responded to all of these criteria. As part of its corporate social responsibility program, Ferrero established AgriGeorgia initiative (Ferrero, 2013). Georgia, which used to be one of the most agriculturally successful countries in the region during the Soviet period, has lost most of its potential in the last 20 years (Sharashidze, 2014). Ferrero invested six million euros in Georgia in 2007, purchasing land in western Georgia to launch the cultivation of hazelnut plantations and to build processing plants. The initiative is based on business needs. At the same tome, this investment made a significant contribution to nut production as one of the few sectors in which Georgia has been listed among the world’s top producers over the past ten years (Ferrero, 2013). The Ferrero’s project of afforestation with hazelnut plantations offers a replicable model for rehabilitating soil, land and water resources and local employment for the long term in Samegrelo, the chosen region for the project. To achieve long-term goals, AgriGeorgia offers training on sustainable hazelnut plantation for local farmers. In collaboration with GET-Carbon and Climate and Education Partnership, the project takes advantage of additional income from carbon credits to provide significant change for environmental amelioration and better economic opportunities in the Samegrelo region of Georgia. The company’s initiative stops degradation, replenishing soil, and vegetative stocks. Ferrero ensured a constant flow of information about the company by word of mouth by employing a high number of people and accessing all target audiences (Gigauri, 2012). The company was able to build trustful relationship with the Georgian government and Georgian population.
Corporate social responsibility is not always associated with positive impact. CSR concerns include its relationship to the purpose of business and the motives for engaging in it. The recent scandal about Volkswagen happened because its CSR program failed to meet criterion described by Klein (2011) of achieving clear change. Volkswagen has invested in production and sale of diesel cars in the United States with an initiative for more ecological friendly cars, supported by a huge marketing campaign about cars’ low emissions. In September, the Environmental Protection Agency found that many Volkswagen diesel cars had software in their engines that could detect when they were being tested, changing the performance of emission rates to improve results (Dans, 2015). The engines emitted nitrogen oxide up to 40 times above what is allowed in the U.S. The company has admitted cheating emissions tests in the U.S. (Dans, 2015).
Even the production of diesel cars directly corresponds to Volkswagen’s business; the CSR was focused on reputation rather than actual change and positive impact. The motivation of the company moved away from the corporate social responsibility to aggressive marketing. The indirect costs of the scandal could exceed the fines of U.S. regulations. The loss of consumer confidence and trust may cause more significant damage. Their clients are more likely to sue the company they do not trust. The scandal surrounding Volkswagen group had a negative impact on the image of the whole of Germany, according to Deutsche Welle (Dumalaon, 2015). Almost half of German motorists believe that the illegal manipulation of VW permanently undermined the prestige of the quality label “Made in Germany.” The company loses possible support by its German partners.
The issue with Volkswagen’s CSR is that it was based on goals and aspirations rather than clear and tangible results. CSR is not a storytelling strategy, but a strategy to achieve real positive change. If the company CSR was motivated by a real desire to have a positive impact, in the case of similar scandal, the company could rely on public and client support. Honesty, transparency and real impact could keep the public’s trust and customers (Freeman, 2006). Since the company failed to implement successful CSR program, its reputation and stock prices experience a huge backlash.
References:
Dans, E. (2015). Volkswagen And The Failure Of Corporate Social Responsibility. Forbes. http://www.forbes.com/sites/enriquedans/2015/09/27/volkswagen-and-the-failure-of-corporate-social-responsibility/
Dumalaon, J. (2015). VW scandal drags down Germany’s brand. Deutsche Welle. http://www.dw.com/en/vw-scandal-drags-down-germanys-brand/a-18773984
Ferrero (2013) Sharing Values to Create Value. CORPORATE SOCIAL RESPONSIBILITY REPORT. https://www.ferrero.com/csr/eng/pdf/CORPORATE_SOCIAL_RESPONSIBILITY.pdf
Freeman, B. (2006). Substance sells: Aligning corporate reputation and corporate responsibility. Public Relations Quarterly, 51(1), 12.
Gigauri, I. (2012). Attitudes of Georgian Consumers towards Corporate Social Responsibility. European Scientific Journal, 8(9).
Klein, P. (2011) The Five Elements of the Best CSR Programs. Forbes. http://www.forbes.com/sites/csr/2011/04/26/the-five-elements-of-the-best-csr-programs/
Sharashidze, N (2014). Ferrero Group Presents its Corporate Social Responsibility Report. Georgia Today. 717.
Zadek, S. (2007). The path to corporate responsibility. In Corporate ethics and corporate governance (pp. 159-172). Springer Berlin Heidelberg.
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