It is apparent that any action undertaken by an organization will have an effect not just upon itself but also on the external environment within which that organization resides. In considering the effect of the organization upon its external environment it must be recognized that this environment includes both the business environment in which the firm is operating, the local societal environment in which the organization is located and the wider global environment.
This effect of the organization can take many forms, such as:
- The utilisation of natural resources as a part of its production processes
- The effects of competition between itself and other organizations in the same market
- The enrichment of a local community through the creation of employment opportunities
- Transformation of the landscape due to raw material extraction or waste product storage
- The distribution of wealth created within the firm to the owners of that firm (via dividends) and the workers of that firm (through wages) and the effect of this upon the welfare of individuals
- And more recently the greatest concern has been with climate change and the way in which the emission of greenhouse gases are exacerbating this.
So an organization can have a very significant effect upon its external environment and can actually change that environment through its activities. Also it can be seen that these different effects can in some circumstances be viewed as beneficial and in other circumstances be viewed as detrimental to the environment. Indeed the same actions can be viewed as beneficial by some people and detrimental by others.
The benefits of an effective CSR approach to an organization can include:
- Stronger performance and profitability
- Improved relations with the investment community and access to capital
- Enhanced employee relations and company culture
- Risk management and access to social opportunities
- Stronger relationships with communities and legal regulators