Analysis of CSR Investment on
Financial Performance of Australian Telecommunication Companies
Introduction
In Australia, the importance of telecommunication services has increased
over past two decades because the utilisation and usability of this technology
have improved. Additionally, the cost of services of telecommunication has
decreased, driven down by Technological innovation and competition, improving
affordability (Lankoski, 2008). The utilisation of telecommunication services has
significantly affected business and life of people. Applications and content
services in a wide range have become available in the telecommunication
companies. The Australia market has reached the saturation point with more
range of mobile telephones than people in Australia (Lankoski, 2008).
According to Toffel and Horvath (2004), the increment in the usage of
telecommunication services including internet and data services have ensured
that telecommunication is a grown industry. On the other hand, Corporate Social
Responsibility is an approach of business which adds to improvement through
conveying social, ecological as well as financial advantages for business
partners. In the telecommunication business, the cost-sparing practices have
been improved by the activities of Corporate Social Responsibility. There are
lots of famous telecommunication organisations in Australia among them
Vodafone, Telstra and Optus are most popular telecommunication firms that have
changed the reusing and transfer of electronic wastage (Toffel and Horvath,
2004).
The organisation of media transmissions like Optus, Telstra and Vodafone
deliver the reports yearly that these three organisations link with social
responsibility, corporate social obligation or corporate issues. These social
responsibilities and corporate issues coordinate ecological contamination
venture, corporate citizenship and support the organisation of sports for
player’s improvement (Toffel and Horvath, 2004).
Need of
CSR investment in telecom industry
According to Garriga and Mele (2004), the CSR has become an important
component in techniques of business for developing various integral parts of
the service of telecommunication industry. The engagement if CSR in telecom
business provides interaction with stakeholders and focus on issues related to
the society that leads to new product and service development in the telecom
industry. The telecom industry needs to align corporate social responsibility
with important operations in a manner that allows this industry to operate in a
competitive and cost-efficient manner to improve their position in global
competition. The significant impact of corporate social responsibility seems to
be evident in the context of risk management, human resources, innovation and
reputation management (Garriga and Melem, 2004). At the time of analysis of
responsible competitiveness on any particular sector level, Corporate Social
Responsibility no longer behaves as a main driver for of various competitive
benefits of a particulate sector, but of the whole industry.
According to Lankoski (2008), the CSR increases the short as well as the
long-term financial performance of an industry through the satisfaction of
customers. The concept of CSR has been viewed mostly as an initiative of industry
to be environment-friendly. The definition of CSR defines various operations
among which the environmental corporate record is most frequently used
operation of the construct (Lankoski, 2008). Smith (2007), considered the
environment to be one of the multiple corporate responsibilities domains that
are: employees, suppliers, customers, society, stakeholders and local
community. The specifics of telecommunication industries are their products
that are the non-tangible services; therefore these aspects are excluded from
the evaluation of the various activities of CSR. The CSR affects the reputation
and financial benefits of a telecommunication industry and to gain these
benefits from CSR, awareness among the customers is needed, of CSR initiative
of the industry (Smith, 2007).
According to Schuler and Cording (2006), the satisfaction of the
customers can be increased with the investment of CSR in a telecommunication
industry. Moreover, the customers, who perceive an industry as socially
responsible, have more trust in the products provided by the industry. The
consumer groups of the telecom industry, which consider the activities of CSR
beneficial to their group, increase the value of this industry (Schuler and
Cording, 2006).
Current Status of CRS Investment by Australian Telecom Companies
In Australia, there are
three popular telecommunication companies namely Optus, Vodafone and Telstra.
As per the views of Branco and Rodrigues
(2006), Optus is utilising a strategic approach of CSR that focuses on respond
to the demands of society in the interest of long-term benefits of the
organisation. This company is being accountable and transparent to al the key
stakeholders about the employee, customer, environmental impacts and community
of it. In Optus, the report of corporate responsibility highlighted its
promises to the customers for improving the experience of the customers by
bringing its products to the market in a responsible manner. Optus reported
only two percent increment in the overall satisfaction along with the 87
percent representatives of customer care (Branco and Rodrigues, 2006).
According to Schuler and
Cording (2006), the Optus is contributing to the development of the community
for which Optus invested $8.24 million. Optus is in partnership with Livewire
Hospital program, Starlight Children’s Foundation, an online community of young
people with serious illness. Optus denoted approx 6000 parts of computer
equipment in IT organisations. Moreover, it is committed by Optus to contribute
to climate change by decreasing the environmental impact of it. The report of
CSR set out the commitment of Optus to the community in building up the
connections and links to the public (Schuler and Cording, 2006).
According to Garriga and
Mele (2004), In Telstra, the CSR is a value-based approach which is leading
beyond legal compliance for making a positive contribution to communities and
industries in which they participate. In this Australian telecommunication
company, the corporate social responsibility is managed by corporate relation
groups, part of the communications business unit and public policy (Garriga and
Mele, 2004). However, each part of the business has accountability for its own
activities of CSR. This company has participated Australian business whose
position is second in Index of Community Corporate Responsibility. Telstra
launched a program of innovative career and life transition in order to support
and help the employees on separate contract who leave the company due to
retrenchment. Telstra enhanced flexible options of leave for its employees on
the contracts include the capability of purchasing additional leave and allowed
paid leave for primary carers (Garriga and Mele, 2004).
The business principles of Telstra set out the work
practices of employee, standards and principles of behaviour and managers for
resolving issues by a new process of internal resolution.
According to Smith (2007),
the employees in Telstra demonstrated generosity in raising and donating funds
for the tsunami disaster of Indian Ocean. Telstra employees denoted approx $1,
561,280.27 to the funds of tsunami relief aid. Now in the fourth year of
Telstra, it continues to help and support the children of Australia and young
people for building more cohesive and stronger communities. In context of
Occupational Safety and Health, Telstra considers that the workplace injuries
and diseases are preventable, and they are committed to facilitating a safe
workplace which is free from diseases and injuries. Telstra provides a management
system for health and safety and aims at leadership in health and safety
through all management levels. Every year, Telstra undertake a schedule of
audits related to health and safety of employees along with the aim of
constantly improving the safety at a workplace (Smith, 2007).
Branco and Rodrigues
(2006), explained that the CSR practices of Vodafone Telecommunication Company
in Australia promotes the creation of opportunities, gender equality and
provide employment for women and disabled people of the society. In this
company, the CSR programmes of healthcare help in improving the health of
employees and preventing diseases. These programmes promote health education,
awareness about health safety and share information about health safety (Branco
and Rodrigues, 2006).
Impact of CSR Investment on Financial Performance of Australian Telecom
Companies
According to Husted (2003), CSR activities have a positive
influence on the financial performance of the companies and help them to grow
their business. The companies that follow the concept of corporate social
responsibility have reached to the conclusion that long-term financial
interests and financial performance of a company are based on the various
factors rather than stakeholders. According to Jenkins (2005), the Australia telecom
companies such as Telestra, Vodafone and Optus provide flexibility to the
decision-makers to incorporate environmental and social factors in the business
at the time of making commercial business decisions. In this regard, Telstra involves various
ongoing CSR practices to fulfil the environmental and social obligations that
ultimately results in attracting new customers.
In the views of Knox et al. (2005), the firms that perform CSR
activities such as the welfare of society, providing health services and
environmental concern gets more profit than the cost incurred for the welfare
of the community. Their CSR activities enhance the financial performance of the
companies. Thus, it has been explained that the telecom companies such as
Telstra, Vodafone and Optus includes the CSR practices in their decision-making
because it helps the companies to reduce their expenses, which may be incurred
due to oppositions, criticisms, and lawsuits against the environment and
society issues.
Kotler and Lee (2005), states that CSR practices increase the firm’s
profitability in long-term resulting in the satisfaction of stakeholders. For
improving the financial performance, the companies handle their business
functions carefully to give positive impact on the society. In this regard, the
telecom companies follow various codes and guidelines of CSR to enhance their
approach towards the environmental sustainability and the welfare of the
community to enhance their financial performance (Kotler and Lee, 2005).
According to Ghose (2012), the corporate bodies through CSR activities share their
profits and fulfil
their commitment towards the environment and society. In Australia, telecom
companies like Telstra, Vodafone and Optus are the leading companies that are
required to reinforce CSR practices in the business. Thus, the telecom
companies in Australia are mainly focused on their financial performance and
growth of the business along with the business ethics and social commitments
(Ghose, 2012).
According to Toffel and Horvath (2004), the CSR practices also help the
companies to survive in the competitive international market. Based on the
global commitments and business obligations, the telecom companies of Australia
such as Telstra, Vodafone and Optus are providing CSR activities in the
different areas of healthcare, poverty alleviation, charity activities, and
society and environmental concerns. It has also been explained that the CSR practices in telecom
companies assist in achieving a high position in the global market. In order to
increase the financial performance of the business, the telecom companies take
steps to solve the societal and environmental issues to take the advantages of
resources that are available in the environment and the society. It would also
facilitate the
companies to enhance their business at a competitive level in the international
market (Toffel and Horvath, 2004).
In the views of Branco and Rodrigues (2006),
the CSR activities involve some short-term costs and provide the long-term
benefits. It has been stated that CSR does not provide immediate financial
profit to every firm, and sometimes, the companies are not aware that the CSR
helps in leading to the competitive advantage. The CSR practices assist the
companies in increasing the financial performance including improved
reputation, shareholder value, customer trust and loyalty, enhanced market
share, and increased stock prices (Beckmann et al., 2006). In the context of
telecom companies such as Vodafone, Telstra, and Optus, CSR is perceived as a
means of innovation and competitive advantage that focuses on the various
societal issues and relationship with the stakeholders to develop new business
models, products, and services. The telecom sector can be seen as a technology-intensive
industry that changes frequently and provides advanced technology and
innovative products and services (Beckmann et al., 2006).
Conclusion
It has been concluded from the literature review, that Corporate Social
Responsibility plays a significant role in the financial performance of the
telecommunication industry of Australia.
In telecom business, the CSR helps in providing interaction with the key
stakeholders and deals with the issues and problems related to society. It has
also been concluded that CSR enhances the financial performance of a telecom
company by satisfying all the customers of the company. The activities of CSR
have a significant impact on the financial performances of Telecommunication
Company in order to grow their business.
The telecom companies, by following the concept of CSR, have reached a
conclusion that financial interest and performance of these companies are
incompatible in favour of key stakeholders. Telstra, Optus and Vodafone use the
CSR practices in the decision-making the process to reduce the expenses in
society welfare and other practices of business. The products of
telecommunication companies are the main aspects that are known as non-tangible
services. It has also been concluded that CSR investment in Telstra, Optus and
Vodafone leads to the success of their business in the market. The current
status of CSR investment in these three telecommunication companies has also
been described in the literature review.
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