The Relationship between Environmental Issues and Organisational Performance

By Yahya, Wan Kalthom; Ha, Norbani Che | International Journal of Business and Society, January 1, 2013 | Go to article overview

The Relationship between Environmental Issues and Organisational Performance


Yahya, Wan Kalthom, Ha, Norbani Che, International Journal of Business and Society


ABSTRACT

This paper specifically investigates the elements that constitute environmental issues which lead to the successful organisational performance. The two elements namely; social concern and economic concern are integrated as tools for the organisations to exhibit their corporate responsiveness and responsibility towards societal concern and issues. The respondents were senior managers of organisations in Malaysia which practices CSR and are involved in the organisations' decision making process. As such, the sample of this study is limited to organisations in Malaysia which practice CSR and integrate CSR into the organisations' agenda. Overall, only 261 respondents from 1379 of the total population were usable and further used in analyzing the data.

Keywords: Corporate social responsibility, social concern, economic concern

1. INTRODUCTION

Corporate social responsibility (hereinafter CSR) is how organisations maintain their values, behaviour and accountability with the expectations and needs of the internal and external stakeholders. Ideally, CSR functions as an autonomous system whereby the organisations agree to obey, and keep their eyes on the law and ethical standards in their business operations. It describes the organisations' dedication to be responsible to their stakeholders in earning the highest level of trust. It is a business's concern for the society's welfare. Through this process, organisations contribute to the society's sustainable development and accomplish their corporate social responsibility. The key role and responsibility are translated in the facets of business, social and the environment. Essentially, CSR is a continuing commitment by organisations to behave ethically, contribute to economic development and include the public's interest into corporate decision-making.

CSR and theory of sustainability are closely related. They refer to the idea that socially responsible organisations will outperform their competitors by focusing on the nation's social problems and viewing them as opportunities in building profits and helping the community at the same time. Without sustainability, organisations cannot subsist in a business. In addition, CSR is important because the organisations' reputation is influenced directly by their customer and clients in social and environmental areas (Marrewijk, 2003).

Organisations gain better reputation and brand image in the CSR process (Waddock & Graves, 1997; Basu and Palazzo, 2008). A better reputation in business means better sales and more investors. Social performances progressively influence the investors' decisions to invest. In addition, social and environmental responsibilities reduce operating costs that leads to higher profit for the organisations.

Eventually, CSR enables the strategic management of internal and external risks in social and environmental areas. This allows the organisation to plan short term strategy and in addition to sustain growth. In the long run, organisations achieve the suppliers', business partners', and customers' confidence and loyalty. As such, the products and services of the organisations increase and escalate to maximize profit. Organisations that address concerns of more socially conscience consumers in their strategic and day-to-day decision making process, are able to place themselves at a competitive advantage against the competition. These CSR practices are synchronous with the community's philosophy and sustainability development in a market driven society.

This paper examines the elements of CSR since these elements are important to the CSR practices and determine the level of CSR. The constructs help in developing the theoretical understanding of the processes through which CSR is practiced. Hence, this study measures the CSR practices of the multidimensional constructs based on the stakeholder's theory. Consequently, the motives of the study propose that organisations which comply with environmental rules and regulations, and simultaneously build stakeholders' relationship would gain better economic wealth, achieve competitive advantage and maintain an ecological balance. …

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