LFS00AS2 Academic Communication 2 - Argumentative Essay

Today’s consumer is deemed to be more socially and environmentally conscious, and this awareness has been influencing their purchasing decision. With more and ever stress upon being socially and environmentally conscious, the question arises as to whether both socially responsible and making money go together or not? Well it seems much possible. 

First, it is important to understand the concept of corporate social responsibility (CSR) that involves the expenditure of the company’s resources being made at the discretion of the management on doing “good work” for the whole community while refraining from doing the “bad work” that might harm the community. Such a role of company might indicate that companies have to face escalated expenditures that might threaten their pursuit of profit, but it is not the case. In other words, it is well argued by the theorists that companies, by making lesser profits, might feel much more satisfied as the net social benefits offset the diminishing returns (McCabe, 1992).

According to Schreck (2011), profitability is perceived to be a critical component of CSR as it reminds the firms to indulge into the behavior of “the right thing to do”. It is generally held that the CSR activities lead to improved company profits by enhancing the public image of the company in the market. When the company’s have a better image in the market, the sales get boosted and the employees’ loyalty improves while attracting the better personnel pool to the firm. By focusing on sustainability, the firms tend to focus more on lowering the costs, utilizing the resources in better way and improving efficiencies of the whole system. 

The research conducted by Kolk and Lefnant (2010) indicated that CSR activities tend to offer potential benefits and drive the corporate profits through improvement in the efficiencies, reduction in waste and enhancement of the public image of a company. One of the major reasons of boosting sales through CSR is that consumers tend to choose the products that are made from sustainable sources rather than buying the products that negatively impact the environment. It is generally argued that firms can contribute ecologically without suffering economically.

The consideration about gaining profitability through CSR and sustainable activities support the concept of “triple bottom line” i.e. people, profit and planet. However, the concept of “separation of ownership and control” might make the achievement of both profitability and being environmentally responsible a tough call. By divorcing the ownership and control, the management feels it free to run the company in favor of community’s interest while the stakeholders’ interests of wealth maximization seem to be threatened. 

The agency cost that arise from the dissection of ownership and control largely constitute the declining value of the firm due to diversion of resources for the purpose of being socially responsible. With rising agency cost, shareholders might feel unhappy and the company might face declining levels of profits at start. One of the arguments presented against CSR activities is that it decreases profitability as extra financial resources have to be deployed for indulging into socially responsible activities. However, with increase in the public image and boost in sales, the company might find itself on the right track with more socially responsible and eco-friendly customers demanding more of their products. 

With abundance of debate being devoted towards investigation of CSR activities in achievement of profits by the firms, it is generally argued that by being socially responsible and having led environment friendly activities, the firms can achieve profits. It is possible for firms to be both profitable and respectful towards its stakeholder by employing CSR in pursuit of its commercial interest and considering the CSR and environmental concern to be its competitive advantage. Moreover, by integrating the CSR into all operations and other activities, the financial performance can be achieved in synergy. Moreover, by making CSR a “core business function” firms can achieve success through improvement in its bottom-line performance. 

In conclusion, the traditional goal of company is to earn profit for paying off its shareholders, but, nowadays, the businesses find it more attractive to be sustainable in long term by focusing on CSR activities needed to fulfil stakeholders’ demands. On one hand, the CSR is based on the concept of “doing good” while on the other hand the profitability aim of the firm is based on the concept of “doing well”. By mixing up both the aims, a “positive business” can be successfully built.