Lately, changes have occurred in the relationship between the state, civil society institutions and private companies that resulted in the emergence of new forms of social interaction. One of these forms is based on a purely voluntary system of relationships, namely corporate social responsibility. It has a great meaning for the company as its social activities and reputation are interconnected. If the firm invests in social programs, thereby providing social guarantees to its employees and ensuring quality and safety of products and services sold, then in the long term, it may expect favorable social conditions, and, therefore, sustainable economic and financial situation (Mallin, 2009). Considering that the mentioned factors have a significant influence on performance of the company, the paper will be focused on the definition of social responsibility, its role in the context of the organization as well as its ties with such components of success of modern companies as leadership and sustainability.
Social responsibility of business or corporate social responsibility (CSR) is an approach that reflects the voluntary decision of the enterprise to contribute to the improvement of both society and environment. CSR is based on the interaction with stakeholders, namely employees, shareholders, investors, customers, authorities and non-governmental organizations. Thus, one of the most paramount tasks of CSR is communication, eliciting the views and interests of all stakeholders in order to take them into account in its follow-up activities (Coombs & Holladay, 2012). Implementing a policy of corporate responsibility has a considerable impact on the business as it provides the following advantages for its development: increased profits, access to socially responsible investments, reduction of operating costs, improved brand and reputation, and increased sales and customer loyalty. There are also more opportunities to attract and retain employees (Mallin, 2009).
Leadership is the most significant asset that ensures the accomplishment of the main task of any business, namely making a profit, which is one of the key indicators the company is evaluated both by stock markets and its co-owners. However, socially responsible leadership makes people think about what they can do differently in terms of effectiveness of the processes that occur within the corporation. It provides a different focus on how to develop staff so that each employee will prove to be most effective on the place he occupies, regardless of whether he works with machines, in the finance department, or is responsible for sales. Socially responsible leadership also focuses on stimulating innovations, making it an internal incentive to evolve or, more precisely, to revolutionize. Any innovation, regardless of the sphere it is implemented (production process, sales, environmental protection), is not so much quantitative as the qualitative leap that allows making something in a completely new way. Thus, the movement in this direction makes people think differently, resulting in non-standard approach to performing tasks and solving problems (Coombs & Holladay, 2012).
Sustainability, along with the leadership, also plays a critical role in CSR. This term is usually used to describe the social climate and environmental impacts of the business on the environment. For the leadership of the company, it is responsibility for the development of a competitive and profitable business while for the Board of Directors it includes responsibility for the formation of corporate strategy, ensuring alignment between short-term and long-term goals, the achievement of revenue comparable to the tasks of business development, and increase in the cost of equity. Leaders must ensure the development of profitable business, the ability to manage risk and realize growth opportunities. In turn, the Board of Directors is responsible for the main strategic direction of the business, determining the position that it should take in the future and the measures required to achieve it. According to the traditional view of how the company should develop, in most cases, the business will be stable if the Board of Directors subconsciously relates the problems of ecological, ethical and social issues to the extent of its competence along with questions about the future financial position of the firm and its operation in the market (Mallin, 2009).
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In order to understand how sustainable business development is associated with CSR, it should be borne in mind that, during its growth and successful development, the company undergoes changes. One of these changes is due to the expectations of the interested parties (stakeholders). Therefore, to comply with the interests of different stakeholder groups, the company can administer a variety of measures and political mechanisms. For example, a code of conduct contains rules and expectations for management and employees, and dividend policy provides shareholders with information about future payments. The company’s policy in the field of corporate social responsibility reflects its future behavior in accordance with the expectations of stakeholders. Essentially, the company develops and implements its own rules and takes expected actions to inform and explain its own initiatives in the field of corporate social responsibility to all stakeholders (Gossling, 2011).
Returning to the definition of sustainable business development, it is possible to say that both the company’s leadership and the Board of Directors are primarily intended to ensure the application of policies in the field of CSR in the daily operation of the enterprise. Such measures are a guarantee that the business is growing, not only by increasing its profits but also through the compliance with the stakeholders’ interests. The Board of Directors, determining the corporate strategy and ensuring the growth of the cost of equity, in turn, ensures that the rules implemented by the firm are consistent with the interests of stakeholders. It also ensures that the control is effective, i.e. allows minimizing or mitigating the effects of events that could prevent the increase of profitability in the long term and damage the development of socially responsible company (Gossling, 2011).
Obviously, corporate social responsibility of business is widely accepted in the modern world. Although it is not mandatory or fixed in legal documents, it is an important functional component of any successful business. Nowadays, it is highly unlikely to find a large company that does not possess its own outreach program.