Is there any relationship between Corporate Social Responsibilty and financial performance

Is there any coitusship between unified Social Responsibilty and pecuniary proceedingThe concept of companies about corporal mixer certificate of indebtedness (CSR) has changed over the years. Previously it was viewed only as a say that meant administrative conformity and observance of rules and regulations. In recent years b arly that view has changed and companies are change magnitudely beginning to realize the of import mapping of in bodiedd affectionate province in winning over the reliance and confidence of their customers. Today the occupancy practices of large companies are shaped in such a way as to state-supportedize their ethics and values. consequently it has become a relevant rack upt of billet these days.According to the European Commission (2008), corporate social indebtedness is a concept whereby companies merge social and surroundingsal concerns in their business operations and in their fundamental fundamental interaction with their stakehol ders on a voluntary basis. (http//ec.europa.eu/index_en.htm)The various recommendations of the European commission regarding corporate social responsibility were thatCSR covers social and environmental issues even though its usually cognize as corporate social responsibility.In an organization, CSR should not be separate from the organizations strategy and functions as the main motto of CSR is about incorporating social and environmental concerns into business strategy and functions. Therefore it is a voluntary concept.An important part of CSR is about how business concerns deal with their internal and external stakeholders that is their employees, customers, public authorities, neighbours, etc.Despite of the costs it may bring upon the business, there are various advantages of employing CSR as a major tool in the businessA participation prominently engaged in CSR will be enjoying a punter write up and respect from the public and the good reputation befriends the company indire ctly in many ways. For example it offs the company easier for enlisting as there is less difficulty for a reputed company to dumbfound willing employees. The employees stay ampleer in the company and are more(prenominal) than loyal to the company which is considered as a blessing to the company as they can reduce the costs and effort incurred by recruitment and training. They are also more productive as they are better motivated.A company practicing CSR will probably comply with regulatory requirements.It also helps the company in attaining a good relationship with the gainical anaesthetic authorities. This can help the business in many ways apart from smoothing its functions. This engagement with the local authorities is a good way to generate validating kettle of fish coverage.CSR also helps the company to understand the impact of business on the environment which helps to produce new products that are environment friendly.It can also make the business more competitive.Fi nally CSR reduces the chances of the business reputation going plenty due to nearly scandals or allegations.Aim and ObjectivesThe objective of this oration is to watch over out status of relationship between integrated Social mental process and corporate monetary Performance that is whether it is positive or negative or whether there is no relevant relation between them at all.In order to achieve this objective, it will be necessary toExamine the preliminary investigatees done on this topicIdentify an index to measure the Corporate Social Performance of companies in UKMeasure the pecuniary performance of the relevant companiesDiscuss the relationship between financial performance and corporate responsibility. business organisation in the communitys (BITC) Corporate right index is one of the leading UKs benchmark for companies that voluntarily practice corporate social responsibility. According to their aspect results of 2008, 8 companies in the UK achieved the Platin um Plus status which is awarded to the companies with highest CSR ratings. both(prenominal) of the companies in the top were BT, EDF Energy, National Grid, etc. there is also another recognition called the society Mark which is awarded by billet in the communitys for companies that has achieved various milestones in long term sustainable benefits to both business and the community.We want to be known as a creditworthy business that is making a dissimilarity to nigh of the global challenges society faces. We want to be known as an innovative business that is exploitation solutions that benefit society duration financial backing long-term growth, creating competitive advantage and building successful relationships with our stakeholders.(www.bt.com) This defines BTs approach to responsible business. One of the top rated companies in the Business in the communitys corporate responsibility index and has been awarder the Community Mark recognition.Literature reviewVarious studies were conducted to treasure the relationship between corporate responsibility and financial performanceKonar and Cohen (2001) founded a positive correlation exists between a firms environmental performance and its intangible asset value. The study was conducted on 321 manufacturing firms of the SP 500 firms. They occupied two environmental performance measures that is to say Toxic Release Inventory (TRI) emission levels and unfinished environment-related litigation. Changes in the intangible asset value were estimated by viewing changes in the firms food securities industry value. The study also found out that a decrease in the toxic chemical release to the environment resulted in change magnitude market value for the firm.Stanwick and Stanwick (1998) conducted a survey on 102 to 125 companies listed in Fortune magazines Corporate Reputation Index that also include a complete set of Toxic Release Inventory (TRI) info for a five year stream from 1987 to 1992. A firms profita bility was measured by annually profits and was managed for different sized firms by dividing profit verse by the firms annual sales. And the firms pollution level was measured as natural toxic emissions, and then divided by annual sales to remnant variance in firms size. The study discovered a significant relation between low emission levels and high profitability for firms that are reputed for corporate responsibility.Dowell et al. (2000) found that firms adopting global environments standard that are well above the postulate legal benchmarks allow higher market value than firms that have par or below par environment standards when equalised to the legal standards. The study scrutinized 89 companies of the U.S 500 (SP 500) that have manufacturing or mining operations in developing countries. The samples of companies were then categorize into three environmental classification according to Investor obligation Research Center (IRRC) data namely (a) firms which follow local e nvironment standards when operating in developing countries (30% firms were positive in this regard). (b) Firms which follow U.S standards while operating in developing countries (10% firms achieved this). (c) Firms which apply internal environment standards which egest U.S requirements when operating abroad (60% of the firms). (Monks and Minow, 2004)Jaggie and Freedman (1992) studied specifically 13 firms involved in the pulp and paper manufacturing for the year 1978. An emission index use to measure the environmental performances of the companies was used. The firms that had the highest emission output were categorized with an index of one hundred and the rest of the firms were adjusted regarding to that. Then the net income, cash flow/ truth ratio and ROA indices were combined, with each of them having equal weights, with these pollutant indices. The force of the study showed a negative association between environmental and financial performance. (Shaw and Barry, 2004)Christm ann (2000) conducted a survey in 2000 which came to the conclusion that chemical companies which employed innovative, proprietary pollution control techniques have managed significant cost savings, especially the companies that had existing facilities to innovate. The survey was conducted focusing on both cost management and pollution prevention on 512 business divisions of chemical companies in the U.S. cost management data were compared to Compustat share toll and dividend data to ensure that it accurately replicated the firms financial performanceCohen, Fenn and Konar (1997) conducted a survey focusing on SP 500 companies. Their surveyors conducted the survey by creating two industry-balanced portfolios namely the higher polluter and lower polluter. They then compared the accounting and market make it of both the sides. Their research found that either there was some positive return from investing in the environment or there was no return at all from investing.Blacconiere and N orthcut (1997) particularly researched the chemical companies during a period of eight months and determined that companies which were likely to be impacted by unbecoming environmental legislation suffered collectively negative worth returns during the time of the intervention of the legislation and its enactment. They also established that the firms with the largest potential liabilities suffered the greatest share price declines in this regard.Louche (1998) concentrated his study on 40 European countries from various sectors. The financial measures such as ROE, ROA and earnings per share were regressed in the context of environmental variables like CO2 emissions, water consumption and zipper consumption. Their results established that there was no significant relationship between environmental welfare spending and financial performance. The companies selected were the ones with clear environmental reports. (Murphy, 2002)Since 1970s more than 100 papers have been published that has investigated the relationship between corporate social responsibility (CSR) and financial performance. These studies conclude that there is a ardent evidence of positive relationship between a company that is financially sound and socially responsible. For example the London Business School conducted 80 studies on CSR, out of which 42 presented with positive impact, 4 showed negative outcome and 19 showed no correlation. The rest presented with mixed outcomes.MethodologyThe primary research will be carried out to find the relationship using the market model for the companies that are listed in FTSE-100. A sample of 35 companies listed in the FTSE-100 taken. The study is conducted using the regression model after taking for the memory board estimated for two periods, one before the inclusion in the BITCs Corporate Responsibility Index and the next after the inclusion.The study design to be employed here is the Regression Model with the for the stocks estimated for two perio ds, the first before existence included in the BITCs CR Index and the next after their inclusion. criterion of financial performanceThe financial performance is calculated with the assessment of Measures of Financial Risk which is summed up by Total Risk (Standard Deviation of periodic returns) and systematic market risk.Measurement of social responsibilityThe Business in the Community launched its Environment Index in 1996 to help companies benchmark their environmental management and performance. In 2002, member companies requested a mechanism to benchmark their other activities, so Business in the Community developed the broader CR Index to assess their impacts on the community, marketplace and workplace through their operations, products and services, and interaction with key stakeholders.Performance BandPlatinum 95%Gold 90 94.5%Silver 80 89.5%Bronze 70 79.5% (www.bitc.org.uk)In addition to this, interviews with the managers of some companies should be conducted to get a detailed view of their policies and opinion. This is done to compare the results of the previous analytic thinking with the managers point of view.Also interviews and email communications with some research agencies should be carried out to get attain relevant information. Some of the agencies areEuropean Academy of Business in Society (EABIS)Business and Human Rights Resource CentreEthical Investment Research dish out (EIRIS)The data resulting from these researches will be examined and analysed. This project will involve the analysis of both the quantitative and soft data.The external research will be conducted through reading and identifying the findings of published material like magazines, journals, newspapers and other media.The financial performance will contain both the quantitative and qualitative data. The market model coefficient will produce the quantitative data while the financial analysis will require the qualitative data as well. The results could be displayed i n the form of graphs, spreadsheets and pictures. Therefore it will contain both the qualitative and quantitative data.The qualitative data that comes from the managers, for example the relevance of social responsibility will aid in the analysis, verification and conclusion of the relationship between corporate social responsibility and corporate financial performance.The financial data for the sample of 35 UK companies listed could be obtained from the Financial Times Stock win over where the stock prices of the companies are available on a daily, monthly and yearly basis. This will facilitate in the finding of the value . Then the BITCs Corporate Responsibility Index could be used to measure the social responsibility variable of the companies which is available on the internet.Finally data will be acquired from sources like magazines, books, articles, official websites of companies, journals, company reports, research agencies etc.ConclusionThis dissertation aims to find out the r elationship correlation between the financial performance and the social responsibility of the companies as there is an increasing need in todays world in the face of issues like global warming, ozone layer depletion, wildlife endangerment, increasing pollution, lack of drinking water, etc. nowadays companies and businesses adopting a policy of social and environmental awareness is essential for making the world a better place to live.REFERENCESMonks, A.G Minow, Nell, 2004. Corporate Governance. 3rd edition. Oxford Blackwell Publishing.Shaw, William.H Barry, Vincent, 2004. Moral Issues in Business. 9th edition. USA Thomson learn Inc.Murphy, Christopher.J, 2002. Profitable Correlation between Environmental and Financial Performance.www.bitc.org.ukwww.bt.comhttp//ec.europa.eu/index_en.htm