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CORPORATE SOCIAL RESPONSIBILITY ANDFINANCIAL PERFORMANCE

MARIELLE DIBELLABU 201 B

DR. JACK WOODILLAMarch 15, 2006

EXECUTIVE SUMMARY

The theory of corporate social responsibility encourages corporations to take notice notonly of the economic and financial dealings in a company, but also the social andenvironmental consequences a business places on its shareholders and society. Businesseshave the duty to generate profit while remaining environmentally and socially conscientious.Corporations follow certain leading practices to balance financial performance with social

responsibility. The Neoclassical Model of corporate social responsibility advises companies toseek the maximum profits while obeying a moral minimum. Another common practice acompany may use is assimilating corporate social responsibility into its marketing strategies.Consumers may purchase certain products because they are led to believe they are supportingsocial causes. Lastly, the superior model of sustainable development states that businesseshave the moral responsibility to use resources at appropriate rates and compensate ecosystemsfor any losses incurred. A company has the duty to ensure its activities be ecologicallysustainable.

Corporations, such as Home Depot and Minnesota Mining & Manufacturing, areleading proactive advocates for recognizing the value of corporate social responsibility within abusiness. These two companies strive to maintain the balance between financial success andenvironmentally responsible practices. Both companies follow the model of sustainable

development in their corporate social practices. Minnesota Mining & Manufacturing works toreduce volatile air emissions through pollution prevention programs, pollution controlequipment, and the development of solventless technologies. Home Depot has introduced a lineof building materials produced from wheat straw to be used as a substitute for tropicalhardwoods that are diminishing in number. Both corporations seek to improve the environmentwhile generating profit for their business. In addition, both participate in community outreachprograms such as building and refurbishing playgrounds and providing educationalcontributions. The companies differed in the fact that 3M focused more on environmentalissues such as air quality and greenhouse emissions whereas Home Depot concentrates more onforest conservation. All of these issues encompass environmental matters, however, and areindeed equally important.

These corporate social practices have provided a strong background and basis forrecommendations our company will need to further our participation in corporate socialresponsibility. The company should focus on improving ways to enhance the manufacturingprocess of our goods so as to improve the environment and reduce pollution as much aspossible. It should play an active role in the community and sponsor projects for the bettermentof society and those less fortunate. Our company should make generous contributions tosociety through educational and environmental giving. By promoting and partaking inenvironmental conservation, the corporation will profit in the long run. Our company willcontinue to thrive financially and our presence as a leading advocate for social responsibilitywill be known worldwide.


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Introduction

In recent decades a great deal of time and attention has been devoted to the theory ofcorporate social responsibility. This premise has deemed it necessary to take notice not only ofthe economic and financial dealings in a company, but also the social and environmentalconsequences a business places on its shareholders and society. It used to be said that the onlysocial responsibility a company had was the promise of profit. Businesses have realized thiscorporate flaw and struggle to balance financial performance with social and environmentalresponsibility. Corporations such as Home Depot and Minnesota Mining & Manufacturing areleading proactive advocates for recognizing the value of corporate social responsibility within abusiness. These two companies strive to maintain the balance between financial success andenvironmentally responsible practices.Leading Practices

Leading practices for social responsibility encompass morally, ethically, andenvironmentally just aspects. The neo-classical approach emerged as an improved and furtherdeveloped model of the classical model. According to DesJardins, the classical model ofsocial responsibility denies that businesses have any direct environmental responsibility. Theclassical model did advise companies to increase profits only so long as there was no deceptionor fraud. However, this did not hold corporations environmentally responsible for a great deal.

According to DesJardins, the neoclassical model of corporate social responsibilityholds thatcorporations ought to seek profits while obeying a moral minimum. This practice seeks toovercome the obvious ethical deficiencies of the classical view (DesJardins, 1998). The moralminimum is hoped to become part of customary business practice and force restraints on high-powered managers. According to DesJardins, the environmental challenge is to develop anaccount of environmental responsibilities...to a wide enough rangeyet plausibly within amoral minimum to still motivate business compliance. This practice becomes a way toincrease profit by acting socially responsible.

Another common practice some companies use is assimilating corporate socialresponsibility into their marketing strategies (McWilliams & Siegel, 2000). Consumers maypurchase certain products because they are led to believe they are supporting social causes.This in turn leads to a heightened financial performance for the corporation through greaterconsumer profit. In addition, many companies will try to establish a socially responsiblecorporate image (McWilliams & Siegel, 2000). This technique will also cause consumers tobelieve they are directly or indirectly supporting a cause (McWilliams & Siegel, 2000).

According to DesJardins, an even superior model called sustainable development existsthat says business has a moral responsibility to insure that its activities be ecologicallysustainable. This theory states the moral minimum must also include an ecologicalsustainability. It seeks to unite natural ecological laws with moral limits placed on businessactivity. Businesses have the duty to use resources at appropriate rates and compensateecosystems for the loss of productive capacity caused by its activity (DesJardins, 1998). Thisknowledge of social environmental problems helps the corporation in the long run.Conclusion

Corporations have the task of performing a balancing act between social responsibilityand financial performance. A corporations main goal is usually to produce substantial profit topush the company to the top of competition. To achieve this position, however, moral andethical decisions must be made that follow certain practices, such as the ones described above.If a corporation obeys these social responsibilities, moral choices will yield significantfinancial profit in the long run.

Company 1: Minnesota Mining & Manufacturing

The successful worldwide company, Minnesota Mining & Manufacturing, hasmanaged to maintain leading global market positions for each of its seven businesses, whileupholding its commitment to the leading social practice of sustainable development. According


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to mmm.com, the company actively contributes to this model through environmentalprotection, social responsibility, and economic progress. Minnesota Mining & Manufacturingcreated an Environmental, Health, and Safety Management System responsible for settingtargets to provide continuous environmental improvement. According to mmm.com, thecompany has been successful in reducing volatile organic air emissions from using solvents inmanufacturing. These reductions are made possible through pollution prevention programs,pollution control equipment, and development of solventless technologies.

Minnesota Mining & Manufacturing has also taken voluntary, responsible action toreduce greenhouse gas emissions (mmm.com, 2006). The reduction goals are achievedthrough improvements in the manufacturing process and pollution control equipment. Inaddition, 3M continually seeks ways to decrease the production of waste, reuse it in otherareas, and look for other manufacturers who may be able to use the waste in their products.Minnesota Mining & Manufacturing also works to enhance and protect biodiversity out ofrespect for the environment. According to mmm.com, the 3M Foundation has donated over$5.5 million to The Nature Conservancy to preserve habitat in the United States and Brazil.This partnership, as well as on-site facility preservation, works to safeguard the worlds vitalnatural resources. Community outreach is a significant aspect of 3Ms sustainable strategy aswell. 3M donates to the community through educational contributions, environmental giving,and various grants and projects.

Company 2: Home Depot

The thriving and lucrative company, Home Depot, strives to remain profitable whileupholding a level of environmental and communal sustainability. Home Depot understands theimportance of conserving the environment and abides by a set series of principles to guide thecompanys actions. According to Homedepot.com, the corporation is committed to improvingthe environment by selling products that are manufactured, packaged and labeled in aresponsible manner. Home Depot obeys all environmental laws, as well as works to protectnatural resources by using energy and water efficiently. Home Depot is dedicated to recycle inall operations and uses recycled materials for shopping bags, signage, and office supplies(Homedepot.com, 2006).

Home Depot has also taken a stand to preserve endangered timber areas. According toHomedepot.com, the company has pledged to give preference to wood that has come fromforests managed in a responsible way and to eliminate wood purchases from endangeredregions of the world. In addition, Home Depot introduced a line of building materialsproduced from wheat straw to be used as a substitute for tropical hardwoods that arediminishing in number. Home Depot also contributes to the community through philanthropicgiving such as building and refurbishing playgrounds, ensuring the safety and accessibility ofcommunity gathering spaces and building and refurbishing affordable and transitional housing(Homdepot.com, 2006). Home Depot strives to build community and remain sociallyresponsible while seeking superior profits year to year.Comparison of 3M and Home Depot

Minnesota Mining & Manufacturing and Home Depot both continually work to ensure

the sustainability of the environment as well as give back to the community through variouscontributions and projects. Both companies recognize the importance of recycling products andwaste back to the environment to be used in other operations and areas. Neither company usesthe leading practice of assimilating corporate social responsibility into marketing strategies, asdescribed earlier. Both partake in the sustainable development model that states the moralminimum must include ecological sustainability. This is achieved by Home Depot through thepreservation of endangered timber areas, and by 3M through striving to reduce greenhouse gasemissions as a result of creating improvements in the manufacturing process. 3M and HomeDepot differ in their specific practices to conserve the environment; however, all the methodsused contribute to sustaining the environment and paving the way towards superior socialresponsibility in the corporate world.


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Conclusion

Corporations such Home Depot and 3M have the responsibility and duty to maintain asignificant level of social and environmental responsibility while enhancing the companysfinancial performance. By promoting and partaking in environmental conservation, thecompany profits in the long run. Corporations have realized conserving the environment is avital aspect of the well-being of a company in the long run. If all resources are used up anddestroyed, future success is not feasible. Home Depot and Minnesota Mining & Manufacturingare on the same level as far as leading the world in socially and environmentally responsiblepractices. Both partake in ways to better the environment, such as constant product recyclingand conservation of natural resources. 3M focuses more on reducing greenhouse gases andharmful air emissions, probably due to the fact it is responsible for a certain amount ofpollution in the environment. These corporate social practices have provided a strongbackground and basis for recommendations our company will need to further our participationin corporate social responsibility. The company should focus on improving ways to better themanufacturing process of our goods so as to reduce air pollution as much as possible. It shouldalso play an active role in the community and sponsor projects for the betterment of society andthose less fortunate. The company will continue to thrive financially and our presence as aleading advocate for social responsibility will be known worldwide.

Annotated BibliographyCorporate Responsibility. (2006). The Home Depot. Retrieved March 12, 2006.

http://corporate.homedepot.comFrom this website I was able to see how Home Depot remains profitable while stayingcommitted to environmental sustainability.

DesJardins, J. (1998). Corporate environmental responsibility.Journal of Business Ethics,17(8), 825. Retrieved February 4, 2006, from ProQuest database.

This article allowed me to see the neoclassical method of increasing corporate social

responsibility. This practice is used by some companies today and focuses on the moralminimum companies are held accountable for.

This article also allowed me to see the sustainable development model that a fewcorporations use. This practice focuses on not only moral responsibilities, but also, and more

importantly, ecological issues.

Environmental, Social and Economic Sustainability. (2006). Minnesota Mining &Manufacturing. Retrieved March 12, 2006. http://solutions.3m.com/wps

From this website, I was able to read about the leading practices Minnesota Mining &Manufacturing uses to maintain the balance between financial success and social and

environmental responsibility.

McWilliams, A. & Siegel, D. (2000). Corporate social responsibility and financialperformance: Correlation or misspecification? Strategic Management Journal, 21(5),

603. Retrieved February 4, 2006 from ProQuest database.This article focused on the business method of using marketing strategies to simulate social

responsibility to consumers. This technique causes consumers to believe they are indirectlyhelping a social cause.

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1378 Dibella Woodilla