What Are the Disadvantages of Corporate Social Responsibility?

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Corporate Social Responsibility calls for organizations to consider the company’s impact on society and the environment as they conduct business. Though noble in principle and profitable in some industries, CSR has a number of detractors who point out the disadvantages of implementing socially responsible practices.

Shareholder Interests

Corporate social responsibility often requires changes to a number of processes, as well as increased reporting. In many cases, businesses hire additional personnel to manage CSR initiatives. These actions come at a cost, and opponents point out that the money spent on CSR comes directly from shareholders’ pockets. Former investment banker and current Tulane University professor Elaine Sternberg, one of the most vocal opponents of the effects of CSR on shareholder profits, points out that CSR initiatives incur great cost with little measurable return.

Corporate Reputation

While many businesses undertake CSR initiatives with the intent of bolstering their public images, these initiatives can sometimes require a company to release information that has an opposite effect. In 2003, for example, Coca-Cola released a damaging report about chemicals found in its products as part of its CSR initiative. This report had an immediate short-term negative effects on the company's revenue, according to a peer-reviewed article published in the Utrecht Law Review, with sales dropping 40 percent in the two-week period following the report.

Customer Cynicism

Some businesses recognize that socially responsible behavior has a positive effect on their customers’ opinions of the organization. After years of hearing how their favorite businesses care about society and the environment, but seeing little obvious involvement from these organizations, many customers have grown cynical of CSR reports. According to business watchdog agency CorporateWatch.org, consumers often see CSR announcements as little more than PR initiatives. For this reason, businesses often face a considerable obstacle convincing their customers that their actions match their stated intentions.

Competitive Disadvantages

Corporate social responsibility projects and initiatives require a shift in thinking for many businesses, and some CSR processes can make the business more cumbersome to operate. Wal-Mart subjects its suppliers to strict regulations on product quality and employee working conditions, for example, which add production time and increase overhead for the suppliers. Their competitors, meanwhile, can operate at lower costs and turn out products more quickly.

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