Disadvantages of CSR - BMCR031 BMN1 CORPORATE SOCIAL...

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BMCR031 - BMN1 CORPORATE SOCIAL RESPONSIBILITY ALABA , Marco S. BAÑARIA , Roland R. CIVICO , Vince Russel E. CLOSA , Angelo B. VILLAREAL , Benedict J. Disadvantages Corporate Social Responsibility 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. Shift from the Profit-Making Objective Milton Friedman, an economist, is the biggest critic of CSR. He says that CSR shifts the focus of the company from the objective that made it a financial entity in the first place – profit- making. The company forgets about its obligations towards its shareholders that they have to make profits for them. Instead of focusing on making profits, they engage in CSR programs and use up funds for community welfare. So basically, instead of an income, the company is effecting an outflow of cash and not fulfilling its profit-making obligations. Company Reputation takes a hit 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. According to CSR policies, companies have to disclose shortcomings of even their own products if they are found to violate the CSR program. For example, car manufacturing companies calling back their vehicles in large numbers when they find glitches in the model after having sold them wallops their reputation. This creates inconvenience to the customers, and they lose trust in the manufacturer. Customer Conviction
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Initially, customers like to see the companies that they trust are engaged in social welfare programs. They like the fact that these programs are for a good cause. Later, they grow wary of it. If they don’t see instant results from these programs, they think that these are nothing but PR stunts. So it becomes difficult to convince customers that the results will take
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