The Impact of Government Regulations on Corporate Social Responsibility - How Government Policies Shape CSR

Do Governmental CSR Policies Assist Consumers or Organizations?  In What Ways?

            “When companies comply with CSR regulations, the job of regulating agencies becomes much easier and that in turn helps protect consumers and the environment from abuse.” (White  2008)  Governmental policies are designed to assist both consumers and organizations.  There are several government regulations enacted to protect the environment from degradation.  For instance, the Federal Government has passed legislations such as the National Environmental Protection Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Toxic Substances Control Act and a host of others just to protect the environment, consumers as well as the organizations in those industries.  Governmental CSR policies do not only assist consumers or organizations, they assist both the consumer and the organization.  How do the CSR policies assist consumers and organizations?

            First, when the Federal Government enacts laws and regulations, the government assists specific organizations with financial resources to implement those laws and regulations.  The policy or regulation will give specific instructions to certain governmental agencies or non-profit organizations to help implement those policies and regulations.  For instance, section 103h paragraphs 2, 3, and 4 of the Clean Air Act of February 2004 states:

(2) The Director of the National Institute of Environmental Health Sciences shall conduct a program for the education and training of physicians in environmental health. (3) The Director shall assure that such programs shall not conflict with research undertaken by the Administrator. (4) There are authorized to be appropriated to the National Institute of Environmental Health Sciences such sums as may be necessary to carry out the purposes of this subsection. 

The Act has appropriated funds to the Director of National Institute of Environmental Health Sciences to train physicians in environmental health.  The funds appropriated will assist the physicians as well as the organization in creating public awareness regarding environmental health.  The public will benefit from this public awareness as well as the organization.

            Another governmental policy that assists consumers and the organization is the Public Company Accounting Reform and Investor Protection Act of 2002 also known as the Sarbanes-Oxley Act of 2002.  All small, medium and large organizations must comply with this regulation; however, it does not apply to privately held companies.  This Act was enacted in response to corporate accounting scandals that has caused millions of investors, consumers, and most organizations to lose their life savings and investment portfolio.  This Act was also enacted to “protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.” (Sarbanes-Oxley Act of 2002, section I).  The Act protects consumers and organizations in several ways. “The most far reaching reforms of American business practices since the time of Franklin D. Roosevelt.” (President G.W. Bush). 

            Sarbanes-Oxley mandates a set of internal procedures designed to ensure accurate financial disclosures. Organizational management must certify that they are responsible for establishing and maintaining internal controls and have designed such internal controls to ensure that material information relating to the company and its consolidated subsidiaries is made known to such officers by others within those entities, particularly during the period in which the periodic reports are being prepared.  This may protect management from making unreliable financial disclosures and also assists the public from making sound financial decision in terms of investments and acquisitions.

In What Ways Do Politics Shape the Regulation of Business?

            Domestic and international politics have tremendously shaped the regulation of businesses in several ways.  It is evident that most businesses prefer dealing with the national government in shaping business regulations rather than dealing with the international government where policies are not clearly defined.  They prefer dealing with the national governments because of the trust and relationship that they have built with the domestic government in shaping the business environment.  Business policies shaped by the national government are more familiar and clearly defined as opposed to regulations from the international governments.  “Firms often prefer to engage with national governments where they are based with whom good relations may have been nurtured, trust built up and where channels of access and representation are familiar and clearly defined.” (Newell & Glover 2003, p. 1)

            The advantages and other benefits that businesses derive from business policies made by national or domestic governments are more often not enjoyed by business policies made by foreign governments.  “Many of these advantages do not apply at the international level, where decision-making processes are slow and complex, very legalistic and traditionally not open to extensive inputs from non-state actors.”  (Newell & Glover 2003, p. 1).  Generally, politics shape the regulation of businesses in the following ways.

            First, government business policies mandate that organizations operations shall not hurt or harm society and the environment.  Businesses shall be friendly to the society and vice versa. To ensure that businesses abide by these policies, the government enacts laws and regulations to monitor the conduct and operation of businesses.  In addition, provisions are made in these regulations to punish violators of the policy. 

            The second way by which politics shape the regulation of businesses is by giving incentives and grants to businesses that comply with those government regulations.  Studies show that 63% of businesses report that compliance to regulations has brought them more benefits than expected.

            Finally, government regulates businesses to protect the interests of stakeholders and shareholders.  The absence of business regulation is not good for organizations as well as the society; society will be misled, manipulated and exploited.  It is therefore the responsibility of the government to regulate business and more importantly provide a level playing field for all businesses to operate and grow.  Governmental policies are designed to assist both consumers and organizations by protecting consumers from unfair business practices as well as protecting the organizations from public interference and misconduct.  There are no differences in international environmental laws and policies.  Studies show that environmental laws and polices in the European Union are pretty much the same as those in the United States.

References

Bourgoin, F. (2006).  Soil protection in French environmental law

            Journal for European Environmental and Planning Law, 3, 204-212

Newell, P., and Glover, D. (2003).  Business and biotechnology: Regulation and the politics of

            influence.  British Institute of Development Studies.  Retrieved November 6, 2008

            from  http://www.ids.ac.uk/ids/bookshop/wp/wp192.pdf

Sarbanes-Oxley Act of 2002, Public Law 107-204.  Retrieved November 6, 2008 from:

            http://fl1.findlaw.com/news.findlaw.com/hdocs/docs/gwbush/sarbanesoxley072302.pdf

United States Senate: The Clean Air Act, Public Law 108-201, February 24, 2004.  Retrieved

            November 03, 2008 from: http://epw.senate.gov/envlaws/cleanair.pdf

White, M. Fall 2008.