Describe and analyze CSR efforts of a company that you can freely choose. How do these CSR efforts link to the attached Economist article?

This paper examines the Corporate Social Responsibility efforts of HSBC to the environment, people and community.

HSBC is one company that believes long term success and good corporate behavior are linked. Thus CSR has been an important and essential ingredient in HSBC’s 140 years of success.

HSBC manages environmental issues as part of their business. It is helping to tackle climate changes by being the first major bank to go carbon neutral with its Carbon Management Plan. The plan consists of three parts: to manage and reduce their direct emissions, to reduce carbon intensity of electricity they use by buying ‘green electricity’ where feasible and to offset remaining emissions in order to achieve carbon neutrality. As at December 2005, HSBC has reduced its overall energy usage by 5%, thereby reducing its carbon dioxide emissions from energy use. This is due to improvements in carbon management practices, investigating use of renewable resources and use of energy-efficient and cost-saving equipment. (HSBC Environment targets section, para. 1) HSBC also showed a reduction of 1% in their water consumption at year-end 2005 through initiatives like installing switch-off devices, improving operations in water management and better control of cooling towers. (HSBC Environment targets section, para. 2)The environmental regulation and information disclosure by the company can benefit them to a large extent, as the company march their way to Product Stewardship, the second stage of development of green management process. Though these policies lower the economic efficiency of the business by increasing its cost, resulting in lower profits, it gives them a comparative advantage to other businesses in the same industry. By reducing pollution and operating with greater energy efficient, it can reap significant cost savings. The cultivation in the vision of sustainability can help HSBC adopt sophisticated strategic planning to allow their top managers assess the full range of the firm’s effect on the environment. These planning can thus help the company foresee new markets, materials and technology.

HSBC embraces diversity. It employs people from different cultures; different points of views on disciplines as they think that their diversity profile at all levels of the business should reflect that of their customers. It believes that having respect for all people inspires loyalty in both employees and customers. (HSBC Embracing diversity section, para. 1)Their commitment to diversity starts from its board of directors as it has three female directors, more than most of the world’s leading companies. In addition, one principle HSBC holds is fair pay to its employees, where the pay and promotion is based on individual performance and capabilities. It shares the benefits of its success through performance-related bonuses in most regions and the extension of share ownership. About half of all HSBC employees now participate in one or more of HSBC’s employee share plans. (HSBC Pay and reward section, para. 2)

By having diversity practices, HSBC has a strategic advantage because it is able to attract and retain talented workers from all backgrounds, serve a diverse customer base and avoid expensive lawsuits and public embarrassment. Having a fair pay policy helps persuade and encourage its employees that there is ‘distributive justice within the company’, as pay and promotion is due to meritocracy. Though these efforts create a fairer level of playing field, HSBC should continue to improve and maintain its policies as discrimination will always be on the list. Health and safety issues should also be taken seriously with the death of one worker in its workplace in 2005 (HSBC Health and safety section, para. 7) so as to be socially responsible to its stakeholders and weigh off the argument that that a firm places more responsibility on business rather than individuals.

HSBC takes importance in nurturing talent by providing the young talented people with scholarships. In United States of America, a US$1 million grant was given to the United Negro College Fund/HSBC Corporate Scholars Program to provide students with funding for college tuition as well as paid summer internships at HSBC offices in the US. (HSBC, 2005) HSBC’s employees also contribute back to the society through volunteering and fund raising. One example can be seen from HSBC Singapore's Senior Management Team climbing Southeast Asia's highest peak Mount Kinabalu to raise a total of over SGD 450,000 for needy schoolchildren in Singapore. (HSBC employees in the community section, para. 7) Lastly, HSBC engages its stakeholders like customers, investors and suppliers through forums, surveys and feedbacks to gain more insights for improvement and to understand the expectations people have on its business and CSR. (HSBC, 2005)

Community involvement, philanthropic contributions and engagement with stakeholders help to cement the loyalty of employees, customers and employees. They also help enhance its reputation and show its ability to respond quickly to changing stakeholders demand. The CSR efforts put in is very beneficial as needy people receive hope through this help, while firms got to build its social capital and show its strong stakeholder engagement in a proactive way. Dense social network increase productivity by reducing the costs in business, as company and people are more likely to trust one another. The development of social capital produces a win-win outcome as everyone becomes better off.

Overall the CSR efforts HSBC puts in may be due to the influence it possesses. Thus it may feel obliged to the iron law of responsibility, where it believes that responsibility must accompany with power. Otherwise, it may lose the power. By committing in social responsibility, social initiatives by business can promote long-term business profits. These can be seen in the donation it gives to the United Negro College Fund/HSBC Corporate Scholars Program above-mentioned. This ‘corporate gift’ though costly in the present, might in time provide a flow of talented graduates to work for the company. The CSR efforts also help to improve its business values and the firm’s reputation. The social reputation of the firm is an important factor in building trust with its stakeholders. It prompts consumers to come back to do business with them, attract and retain employees to spur productivity and enhance profitability. Thus the reputation with respect to the CSR efforts put in is positive. And this is why companies view CSR so importantly. This goes in accordance with the Economist article (2005) that states “businesses certainly need to take account of other interested parties if they are to succeed as businesses: they must satisfy their customers, get on with their suppliers, motivate their workers, and so forth.”

Yet, the CSR efforts HSBC invests in may not be fruitful. As it uses its resources for social purposes, it risks lowering efficiency. This is because those resources could have been put into better use in other important areas that could increase the efficiency of the company. By pursuing social goals, the firm deprives society of important goods and services, and the higher levels of economic production needed to maintain everyone’s standard of living. The low efficiency may thus induce higher cost, resulting in lower profits and returns in investment. This will make it more difficult for the firm to acquire additional capital for future growth. In the long run, the company’s CSR efforts may backfire.

The article also argues against CSR efforts. It feels that a proper business of business is business. Committing in CSR may give rise to confusion over business ethics and what the managers’ responsibilities are. Managers are employed by the company to maximize long-term value of the owners’ asset. The CSR efforts shown meant that assets of the owners are put into other uses. This means cheating the owners and is unethical. Thus managers should not concern themselves with the public good as they are not competent to do it and may lack the democratic credentials for it. (Anonymous, 2005) So if they are to manage those social responsibilities, which are not within their professional capacity, with office work, other than being unethical, it may result in lower efficiency of business. Hence it feels that it is the government that should be accountable to all citizens. It is their jobs to deal with economic and social problems. (Anonymous, 2005) So the CSR efforts should be left to other groups in society and business should stick strictly to making profits.

Though there are lots of criticisms against CSR by firms, HSBC has been a good corporate citizen, showing its responsibility to the environment, people and community. However, there are still rooms for improvement and these can be achieved together with the help of its stakeholders and its enlightened self-interest.