Effect of Societal Obligations on Business


Social responsibility is integral in any organization’s general performance. Societal obligation improves the monetary performance, therefore, enhancing the growth of the company’s maximum income in the competing market (Lattanzio & Litov, 2019). Previous literature shows a consistent association between societal accountability and the general and economic outcome of an organization. However, some studies assessing the connection between societal obligation and organizational performance have given indecisive and vague results. With some producing a positive relationship, others have proven to have negative connection concerning businesses social responsibility and structural performance. This study pursues to address the concerns by evaluating the effect of societal obligation on general business performance.

Social responsibility can be categorized into external dimensions and internal dimensions. Internal social responsibility defines the practices related to the stakeholders’ physical and mental work environment. In contrast, external social responsibility refers to the procedures that are customer-related. External corporate social responsibility involves the government and its policies, consumers, and environmental and other pressure groups (Schmitz & Huchzermeier, 2018). Internal corporate social responsibility practices could include issues such as human resource management, conducive working environments for employees, and good relationships between stakeholders and the organization’s structure.

Brand reputation

Reputation refers to the customers’ view on what the organization is, its commitments to meeting the stakeholder’s expectations, and how it appropriately conforms to the social, political, and environmental performance. The primary objective of any organization is to generate returns, maximize its sales and ensure customer satisfaction. However, an organization has secondary purposes of contributing to societal and ecological goals and incorporating corporate social responsibility as a planned investment. An organization can improve its public status by performing social responsibility. For instance, using the media to publish and advertise content about a company can improve the status image of a company. The organizational reputation is an intangible resource that helps in achieving competitive advantages. This is because an organization with a good reputation will attract more customers and structure good stakeholders. That way, it enhances the financial performance of the organization.

Employee retention

Investing in the workforce of a company ensures that the organization has a highly professional and skilled workforce. To enhance the growth and development of a company’s strategies depends on its human resources. This can be done through enhancing employee satisfaction, whether through improving their material or immaterial needs to motivate them to work efficiently. Employers suggest that their personnel are valued assets, and the ability to retain the employees is vital in helping the organization achieve its organizational goals. This means that investing in people sows the same results as they will also invest in you in return. Studies conducted deduce that conducive work places that offer sufficient work contentment with minimal strain levels, are perceived to employ fair policies produce progressive results in the organization. Also, inferior work environments that do not just demotivate the employees lead to poor results in the organization.

Customer satisfaction

Customer satisfaction refers to the overall organizational evaluation depending on the customer’s overtime consumption and intake experience of goods or services over time. Customer contentment is beneficial to the organization in that it enhances client maintenance, expansion of future client spending, and informally publicizes the company positively. Customer satisfaction is recognized as an essential aspect of the corporate strategy and a potent enhancer of long-term productivity and market worth (Kumar, 2016). As the old saying goes, a customer will remember the service offered long enough more than its cost. According to a study on customer satisfaction, it was observed that a customer would be willing to spend 16% more on a service or product provided that they get quality and improved services.

When attending to customers, it is important to observe good values related to how the customer will perceive the service received. This is important as it will determine the potential of the customer coming back for more assistance, commonly known as customer return rate. Listening to vocal critics and immediately addressing their problems is key to maintaining customer satisfaction and earning the organization a 70% return rate for the customer most of the time. Enhancing customer satisfaction could be improved by personalizing the customers, creating mechanisms for feedback to be easy, and training employees who handle customer’s skills to do their job effectively (Bercu, 2017).

Financial performance

Financial performance refers to an organization’s capability to support its budgetary requirements by utilizing the resources available in the shares. Research conducted on stock market performance deduced that companies ranked in the fortunes magazine as the best companies to work for performed well financially. The study report showed that the companies with a positive image of social responsibility towards their employees gained higher precedes than companies with poor or low vision on social responsibility (Turoń, 2017). Consequently, a company deemed socially responsible by its customers will gain monetary value for their goods and services regardless of the pricing strategy. Studies have shown that consumers would be willing to pay more for goods and services offered by socially responsible companies. However, there comes an implication with increasing prices of products whereby customers could potentially decrease due to the increased prices. This is bound to happen if few customers are willing to adjust to the new added cost of goods and services despite improved value.

The decline in cost of operation

Reducing the cost of production is achieved through the expensive use of resources. While this is not the primary objective of a business, the focus is short-term. If correctly implemented, corporate social responsibility programs lower the cost of production of an organization in the long run. A scenario illustrating decline in cost of production in implementing a high-cost decreasing corporate is the social responsibility energy sustaining program from Herman Miller (Lee & Choi, 2018). This company constructed an energy-saving and pollution-reducing heating and cooling plant worth eleven million U.S. dollars. This was in regards to the environmental laws on corruption. The company ended up saving $750,000 annually in fuel and landfill costs; it eventually took 15 years for the company to recover the initial cost of building the plant entirely. This was in addition to enhanced corporate image through conservation of environmental conditions for constructing the plant.

Reduction of risks in business

Organizational reputation is a critical factor in any organization’s ability to be stable (Schultz et al., 2019). Changes in stock price and business strategies are inevitable, but when the reputation of the organization is tainted, bouncing back can prove very difficult. The bouncing back could also take longer to reach full recovery, and above all, it’s uncertain whether the reputation will be fully recovered. Organizational structure is developed from the top tier, which involves the executives, whereas reputation is built through the virtues of reliance, trustworthiness, trust, quality, and constancy (Toumi et al., 2016). If the managers allow unprincipled and careless behavior to occur in their organization, it will affect the institution’s overall performance due to a bad reputation. This way, flawed corporate is rooted in the organization’s structure, leaving it vulnerable to risk occurrences.


Bercu, A. (2017). Impact of employees’ training programs on job satisfaction. Current Science, 112(07), 1340. Web.

Kumar, S. (2016). Appreciating customer worth in the Indian Market. Boring International Journal of Industrial Engineering and Management Science, 6(2), 204-206. Web.

Lattanzio, G., & Litov, L. (2019). Does competing through corporate social responsibility engagements lead to superior financial performance? SSRN Electronic Journal. Web.

Lee, W., & Choi, S. (2018). Effects of corporate life cycle on corporate social responsibility: evidence from Korea. Sustainability, 10(10), 3794. Web.

Schmitz, D., & Huchzermeier, A. (2018). Benchmark study on Omni-Channel integration – capability scale development based on internal and external dimensions. SSRN Electronic Journal. Web.

Schultz, C., Einwiller, S., Seiffert-Brockmann, J., & Weitzl, W. (2019). When reputation influences trust in nonprofit organizations. The Role of value attachment as Moderator. Corporate Reputation Review, 22(4), 159-170. Web.

Toumi, K., Sfar, H., & Garcia Alfaro, J. (2016). Reputation trust mechanism under the organizational-based access control model. Security and Communication Networks, 9(18), 5295-5310. Web.

Turoń, K. (2017). Corporate social responsibility to employees: The best labor practices in transport and logistics companies. Journal of Corporate Responsibility and Leadership, 3(1), 37. Web.

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