The Evaluation for CSR

Essay by LihengUniversity, Master'sB+, August 2014

download word file, 4 pages 0.0


30 years ago, no more than half of the Fortune 500 companies mentioned corporate responsibility (CSR) in the wording. By 1997, CSR was only used for developing an international standard SA8000. Until the early 21st century, nearly 90% of these well-known companies were seen regarding CSR as an important factor in the organization's objectives and promoting various CSR initiatives in their annual reports.

The Economics Value of CSR

There are five ways companies gain benefits from having a CSR code. Firstly, CSR can improve companies' marketing capabilities. CSR, as an incentive of business management, is likely to be recognised as new revolution that can improve the market expansion of enterprises as well. Secondly, CSR can help companies establish a preferred corporate image and enhance their competitiveness in business competition. Although companies may have increased operational cost for bearing certain CSR in the short term, this "suffering" will undoubtedly help these companies to establish a better reputation, to increase their intangible assets and to increase competitive advantage, thus to bring long-term potential benefit for the these companies.

Thirdly, CSR can lead companies to innovations on product design, production process, management maturation and other institutional aspects. These innovations will promote the transformation of companies' profit growth mode by improving their production efficiency, reducing their costs, improving the business environment. Furthermore, CSR help create a favorable external environment that facilitates the sustainability of enterprises. Adopting CSR initiatives can help companies create a wider space for their survival conditions. Lastly, CSR setting has positive effects on the promotion of the outstanding corporate culture. Re-shaping the values ​​and innovating corporate culture are efficient ways of building corporate cultures. Being a part of corporate value system, corporate culture will be brought to a higher level by CSR measures.

Green Tax and Corporate Environmental Responsibility

Environmental responsibility is a major part of CSR, and the green tax help force enterprises to take environmental responsibilities. From the governments' perspective, green tax is a mandatory compensation for the use of environmental resources following the polluter pays principle, and governments tax the operators for exploring, abusing, destructing and polluting of the environment. This tax forces companies to select more conducive operation modes with the protection of environmental resources, to modify the benefit of the direction of environmental adjustments on the industrial structure and the allocation of resources. The green tax is designed to levy the external cost generated by polluting companies, which will surely increase these companies' internal cost and thus affect their profitability. However, for those corporates that have met the environmental requirements, a tax reduction could be an efficient way to support their environmental initiatives.

As Porter (1995) assumed that if a company achieved its success by sacrificing the environment, then the success was nothing but mirage. To achieve the goal of balancing business development and environment conservation, companies must focus on technology innovations in order to fully utilise environmental resources.

Background of the Coca-Cola Conflict

In 2003, the Indian NGO Centre for Science and Environment (CSE) published a report that provided evidence of unqualified products of Coca-Cola and PepsiCo in India. With the evidence provided that the CSE complained to the Indian authority to practice legally mandatory water standards (Torres, Garcia, Hordijk & Nguyen, 2012) . The publication received a wide media and public attention, which directly affected Coca-Cola's sales revenue. In fact, the company had started to take actions to focus on sustainability two years before the incident took place. However, several CSR-related issues did occur to the company prior to the incident, but these issues did not bring major negative effects to the company's reputation.

The first reaction of the company was barely concentrating on the attempt to show evidence to prove part of the criticism was incorrect. Meanwhile, Coca-Cola's strategies were focusing on bringing back trust from consumers and on building a responsible corporate image. The company provided arguments in its Corporate Responsible Review. However, all the measures the company adopted were not effective enough to reconcile the serious consequences of the incident. Although some of Coca-Cola's operation activities were following the Indian laws, the loss of its reputation needed serious concern. It shows that the conflict in India could bring be educational for the company, and it provided implications to the company that it should pay attention to water management in its production world widely.

The case showed the changes of Coca-Cola's CSR policies after suffering from a conflict. Nowadays, Coca-Cola has a series of strategies designed to solve the water problems in India, which includes cooperating with the Indian local authorities, community projects and the international institutions (Torres et al., 2012). At the same time, efficiency of water management has become one of the key requirements of Coca-Cola's global CSR policy. Coca-Cola does not admit that it changed its unfavorable water management policies because of the conflict in India. However, with the shifted attitude after the grave damage on its public image and great revenue reduction, it is easier to say that the social pressure was the main reason that drove the company's decision making of the CSR policy implementation on the water management.


To sum up, there are a number of advantages of the corporate social responsibility for companies, which include marketing capacity improvement, enhancing on corporate image, innovations, sustainable development and promoting of the enterprise culture. In terms of environmental externalities, the "green tax" collection will increase the production cost and has a negative effect on the profit of the company. Corporates may pay more attention to the environmentally decision making in order to decrease the "green tax" to reduce their cost, and to achieve higher profit. Finally, the business code of the CSR is a noticeable conduct of the business management, however the code itself does not represent a responsible business. There are many cases that companies claiming a responsible code have suffered from various irresponsible business scandals. Therefore, the company's authentic commitment to the code is more crucial than the content of its code.


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