We often hear the old belief that when it comes to dealing with business, we must be strictly business-like and no other things should get in the way. This means that profitability is the governing language in business. Although true, this perspective is no longer entirely applicable to all businesses because corporations have come to embrace the very essence of corporate social responsibility (CSR).
Companies have learned to perform business in the interests of the larger community and in an ethical manner. Furthermore, observing corporate social responsibility also means being able to balance the interests of the shareholders and investors with that of the community.
Corporate social responsibility is not just a company’s obligation and accountability to one aspect or a single group but the scope is all-encompassing. It is not only held accountable to the shareholders but on all the stakeholders that either have a direct or indirect encounter with the organization.
When we speak of stakeholders, the term means every group of individuals that a company deals with in business. Basically, internal and external stakeholders are the two major types of stakeholders that will be discussed further in this article.
Internal Stakeholders
From the term itself, internal stakeholders are those groups of individuals who are coming from within the organization. So these are the shareholders or investors, employees, and the company management.
The shareholders are the investors in the business. They are the members of the company who put in money or capital for the business to run. A firm practices CSR towards shareholders by conducting business effectively to give back the share of investor, disclosing pertinent information to the shareholders and respecting their opinions, requests, and concerns. Also, the company is responsible for protecting and increasing the shareholder’s assets.
The employees help drive success in an organization. So the company must provide them with fair and proper compensation, good working conditions, open and honest communication, and equal treatment to every employee.
The management performs most of the decision-making in the company and just like the employees, the firm must also render high regard to these people. Reciprocally, the management is also responsible for protecting the welfare of the company.
External Stakeholders
The external stakeholders include the consumers or customers, suppliers, creditors, competitors, and local community.
Companies must cater to the needs of the customers for their satisfaction. They should purchase products of good quality to improve their standard of living. As with the suppliers, firms must create a good relationship with them especially that they can help in reducing the cost of company expenses.
Creditors must be responsible in making payments to suppliers on time based on the agreed terms and conditions. This is living up to the value of corporate social responsibility towards the people who are involved and are part of the process.
CSR extends its practice even among competitions in the business. If competitors are ethical in running the business, the organizations must know how to respect each other’s tangible and intellectual property rights. Also, competitors must avoid getting commercial information through unethical means.
The local community or the society at large is also involved in the business activities since they allow the corporations to conduct business and put up establishments in their vicinity. In return, companies must keep a responsible demeanor towards the people in the community such as respecting human rights and engaging in community programs or participating in corporate volunteering activities.
Major Stakeholder Expectations
What does each stakeholder expect from a company? There could be primary or secondary expectations for these major stakeholders. Starting with the shareholders, primarily they expect a return of investment through share. Secondary expectation would be added value to their asset. For the employees, their main concern is adequate compensation before work satisfaction. The customers are concerned more of the supply of goods and services more than product quality.
As for the creditors, credit worthiness is the primary thing and next to that is security. Prompt payment is what suppliers expect first and then long-term relationship. The government expects compliance to laws and policies and next in rank is improved competitiveness. Lastly, the community would need more of the safety and security in their areas. Then, they would expect contributions that would benefit them.