Social Responsibility in Stakeholder Theory

Table of Contents 1. Introduction2 2. Social responsibility in stakeholder theory3 2. 1 Why social responsibility? 3 3.

Limitations4 4. Case study examples: Starbucks & Nike4 5. Conclusion5 6. References6 7. Appendixes9 Appendix A9 Appendix B10 1.

Introduction This report focuses on social responsibility issue focusing on stakeholder theory. Social responsibility will be introduced and defined based on stakeholder theory.Next, analysis on the importance and limitations of social responsibility will be shown based on reputable published articles, followed by examples of two successful companies on how social responsibility affects their business. Lastly, conclusion will be concluded based on findings on the issue. 2.

Social responsibility in stakeholder theory According to Caroll and Buchholtz (2012), social responsibility is defined based on four components, which include economic, legal, ethical and philanthropic.Freeman’s stakeholder theory it is defined as a network of different stakeholder that companies have responsibility on, whereby it is a theory of organizational strategy and ethics, (Theyel and Hofmann, 2012). Stakeholder perspectives focus on the four components of social responsibility as a unified whole. 2.

1 Why social responsibility? Practicing of responsibilities towards stakeholder has become an issue that can no longer be ignored.This is due the growing impact on how these stakeholders can affect the profitability, competitiveness, as well as shaping favorable scenarios for both economic and social aspects while creating values, (Adriana, 2010). Adriana (2010) stressed by successfully integrating business strategy with societal and environmental interest, value creation that is beneficial to the society, organization and environment can be achieved. Therefore, it is important for company to manage their relationship with their network chain as these stakeholders can directly or indirectly influence companies from reaching their goals, (Ihlen, 2008).

Since stakeholders have the ability to influence the goals of an organsaiton, it is essential for originations to maintain good relationship with them. To do that, businesses should apply stakeholder theory into business strategies and decision-making. Furthermore, Ihlen (2008) reported that by engaging close relationship with these stakeholders, management would be able to intensively identify or respond to the changes than the other competitors that focus on self-interest.Mentes (2010) believed that through corporate social responsibility, firms could eventually close the gap with their network and build a trustworthy and stable relationship. These encourage a better communication process between two that competitors might not be able to interfere.

These sustainable relationships can also lead to an improvement on innovation and creativity as company can learn about the entire operation and improve on operation process, (Theyel and Hofmann, 2012).Other than that, company can often obtain a positive public image through creating values and practicing responsible activities with their stakeholders as strong images enhance competitiveness while gaining supports by the public. For example, Nike engaging in social responsibilities in their value-chain by implementing code of conducts to ensure better labor and environmental practices, (Nike, 2013). Mentes (2010) stated that firms could achieve differentiation through long-term positive corporate image gained by being socially responsible.

Some cases such as The Body Shop against animal testing (The Body Shop, 2013) and Starbucks practicing fair-trading with their suppliers, (Starbucks, 2013), showed how companies can eventually better image by implementing social responsibility. They had gain positive global corporate image and got rewarded with investment opportunities. (Appendix A) displayed the poll result of the advantages of social responsibility by 195 representatives of top management from 152 Polish companies, (Adriana, 2010). 3. LimitationsHowever, time and resources are needed to achieve qualitative social responsibility, while over emphasizing on this approach may cause company to lose their focus on whether firms believed in the long-term benefits gained or the fear of public backlash, (Vogel, 2008).

Moreover, there is no evidence that engagement in social responsibility guaranteed better performance than company that focus on profitability, (Vogel, 2008). 4. Case study examples: Starbucks & Nike According to Starbucks (2013), Starbucks had solidified net revenue of $13. billion, an approximately 14 percent growth, (Appendix B) shows the financial returns are consistently increasing over the years, Starbucks (2013). This net increase shows the good economic performance of Starbucks. Solely economic performance is not sustainable, Starbuck understood the importance of emphasize on corporate social responsibility.

Starbucks Global Responsibility business strategy are synthesize with their culture and overall strategy. They focus on ethical sourcing that they see these plants as an agricultural sustainability, whereby C.A. F. E (Coffee And Farmer Equity) are practiced for continuous improvement on productivity, social and environmental aspects, Starbucks (2013).

Other than positive corporate image, Starbucks is exposed to more business opportunity, for example one of the world largest populations, India. Recently, Starbucks and Tata Coffee invested in a new plant in India, whereby the company sees it as an opportunity for social responsibility and agricultural sustainability, (Chen, 2013).An example that shows that social responsibility should not be ignored based on Nike crisis. According to Nike (2013), the firm had been engaging in social responsibility practices, especially on their supply chain relationship. Recently, Nike was in trouble with their sub-contracted factory in Honduras that Nike refused to pay approximately $2.

2 million to the factory workers while spending $25 millions on corporate social responsibility annually, (Arias, 2010).The incident resulted two factories being closed down and caused the workers to lose their jobs and remain unpaid despite emphasizing on supply chain responsibility, which is against the ethical and philanthropic factors of social responsibility. This incident resulted University of Wisconsin-Madison to be the first to react on ending the sponsorship of contract causing Nike to lose $1 million annually, (Arias, 2010). Based on the two examples, we can see that corporate social responsibility can eventually sustain profitability and opportunities in long-term basis.Nike crisis showed that society do care about the ethical issues whereby companies are really doing well for society or is it for the sake of good-looking annual report. 5.

Conclusion In conclusion, social responsibility is about doing the right thing and giving back to the society based on stakeholder theory model whereby these actors are being affected or directly and indirectly affects the company. Based on the research done, evidence had shown that it is important for company to practice these responsibilities into their business if they were to achieve long-term competitiveness and sustainability.Starbucks strongly believes in the returns of social responsibilities practices and demonstrated the economic returns, as well as the global images and market position that they hold in the market by displaying strong values in social responsibility. However, Nike showed the lost opportunities and profitability by not being responsible towards the workers.

Despite some corporate social responsibility limitations, social responsibility had proven to guarantee long-term business plan for firms to promote sustainability. (1008 words) 6. ReferencesAdriana Paliwoda-Matiolanska. (2010).

Social responsibility management in polish companies. Paper presented at the 1320-1332,14. Retrieved from http://search. proquest. com/docview/734618085? accountid=10499 Archie B. Carroll and Ann K.

Buchholtz, Business and Society - Ethics and Stakeholder Management, 8th Edition 2012, South-Western Cengage Arias Ana. (2010, July 18). Nike Spends $25 Million on CSR Annually; Refuses to Pay $2. 2 Million in Severance to Honduran Garment Workers.

Retrieved from Justmeans website http://www. justmeans. om/Nike-Spends-25-Million-on-CSR-Annually-Refuses-Pay-2-2-Million-in-Severance-Honduran-Garment-Workers/22753. html Chen Kevin.

(2013, February 8). Starbucks and Tata Coffee Open Indian Coffee Plant. Retrieved from The Motley Fool website http://www. fool. com/investing/general/2013/02/08/starbucks-coffee-company-and-tata-coffee-limited-i.

aspx Kaplan Financial Limited (2008). Stakeholder theory. Retrieved from Kaplan Financial Limited website http://kfknowledgebank. kaplan.

co. uk/KFKB/Wiki%20Pages/Agency%20theory. aspx Mentes, A. (2010).

The global compact: Social responsibility at global scale. Journal of American Academy of Business, Cambridge, 15(2), 130-136. Retrieved from http://search. proquest. com/docview/222878500? accountid=10499 Nike Inc.

(2013). Responsibility. Retrieved from Nike Inc. website http://nikeinc. com/pages/responsibility Oyvind Ihlen.

(2008). Mapping the environment for corporate social responsibility. Corporate Communications, 13(2), 135-146. doi: http://dx. doi.

org/10. 1108/13563280810869578 Starbucks Corporation (2013). 2012 Annual Report.Retrieved from Starbucks Corporation website http://investor.

starbucks. com/phoenix. zhtml? c=99518&p=irol-reportsannual Theyel, G. , & Hofmann, K.

(2012). Stakeholder relations and sustainability practices of US small and medium-sized manufacturers. Management Research Review, 35(12), 1110-1133. doi: http://dx. doi. org/10.

1108/01409171211281255 The Body Shop International plc. (2012). Against Animal Testing. Retrieved from The Body Shop International plc.

website http://www. thebodyshop-usa. com/values/AgainstAnimalTesting. aspx? m_re=Tyra_HolidayPh12012-_-Navigation-_-Against%20Animal%20Testing Vogel David. (2008, October 16).

Corporate Social Responsibility: CSR Doesn't Pay. Forbes. com. Retrieved from http://www. forbes. com/2008/10/16/csr-doesnt-pay-lead-corprespons08-cx_dv_1016vogel.

html 7. Appendixes Appendix A Poll result of the advantage of social responsibility based on Polish companies. (http://search. proquest. com/docview/734618085? accountid=10499) Appendix B Starbucks Net Revenues (http://investor. starbucks.

com/phoenix. zhtml? c=99518;p=irol-reportsannual)