What are the disadvantages of corporate social responsibility?

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Corporate social responsibility (CSR) is a prominent 21st century business ideology that heightens expectations of companies regarding social and environmental standards. The results of CSR compliance are generally viewed as a good thing by most companies.

Challenges lie in allocating time and resources necessary to develop a CSR approach that meets governmental and social standards and achieves compliance with informal CSR guidelines related to social and environmental responsibility.

Role of Profit

One of the biggest features addressed by CSR is its intent to cause companies to recognise responsibilities to stakeholders outside of shareholders. This includes customers, communities, employees and suppliers. While proponents of CSR point out the long-term benefits of taking care of these core relationships, shareholders are often deterred at the notion that companies will invest in anything that does not create immediately obvious financial gain. With CSR, detecting measurable bottom line benefits is a challenge as social and environmental programs are hard to account for with regard to financial gain.

Competitive Disadvantage

One of the most common arguments companies make when indicating reluctance to CSR policies is the disadvantage it causes against companies that do not. In other words, if company A does its part to invest resources to take care of its communities and the environment and company B does not, company B retains its resources, including money, for other business pursuits. Thus, without strict adherence industry wide, some companies argue that they cannot fall behind by putting money into CSR programs.

Loss of Focus

A main driver at the onset of CSR was increased interest in making the customer a primary focus of business operations. This coincides with continued realisation that customer retention and loyalty are keys to long-term business success. Detractors of CSR as a major component of corporate governance argue that guidelines have expanded beyond this basic initial emphasis. David Vogel points out in his "CSR Doesn't Pay" article for Forbes, that many companies that abide by CSR guidelines do so more from fear of public backlash than because they believe it is good for long-term business performance. He adds that most parties generally agree that taking care of customers is good in the long run, but expensive requirements in human rights, environmental sustainability and community development are too much to ask of many companies.

Lasting Impact

How long CSR will remain a prominent business concern is a common question asked by those who argue against CSR as a major concern with corporate governance. According to the My Efficient Planet website, CSR has existed for more than 50 years. However, its prominence as a major business consideration has certainly increased in the 21st century due to heightened awareness of ethical issues in business and environmental preservation standards. Detractors argue that CSR emphasis is a short-term fad in response to prominent scandals like Enron, and current interest in green-friendly practices.