Importance of Corporate Social Responsibility in Healthcare

Introduction

The common belief that businesses exist solely to make a profit is becoming obsolete day by day. While that is still quite a top priority, many organizations have embraced corporate social responsibility (CSR) due to circumstances surrounding corporate corruption, and environmental and human rights abuse. In the early 2000s, only about a dozen Fortune 500 companies and health care organizations issued a CSR or sustainability report (Freeman, 2012). Recently, more than 8,000 organizations around the world have pledged to show good global citizenship in the areas of increased labor standards, environmental protection, human rights, and anti-corruption by signing the United Nation Global Compact Agreement (Freeman, 2012).

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This paper will examine and review the impact of CSR within a health care organization in the following order:

1. provide the definition of CSR;
2. explore reasons why companies and health organizations engage in CSR;
3. provide examples of companies / health care organizations that have successfully implemented CSR into their operation model.

CSR Defined

From a broad perspective, Baker, (2013) defines CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.” The term can also be referred to as efforts that go above and beyond the organization’s mission statement. Within the health care system, CSR is defined as “an ethical obligation that requires hospitals and other organizations to do something beneficial in issues such as delivering quality health care to everyone who is entitled to it (Brandao, Rego, Durate, Nunes 2013).”

In an effort to define CSR in a conception manner, a three-dimensional model (Exhibit 1) of corporate performance was created by Archie B. Caroll in 1991. According to this model, there are four (4) components of social responsibilities that organizations must maintain in order to constitute total CSR: Economic, Legal, Ethical and Philanthropic (Fadun, 2014). We explore each of the 4 components in detail below:

Economic Responsibilities:

1. Conduct business in a way to maximizing earnings per share (profit).
2. Maintain a high level of operating efficiency and a strong competitive position within the market.
3. Strong commitment to being profitable as possible.
4. Ensure firm is consistently profitable. (Carol, 1991).

Legal Responsibilities:

1. Follow all law / rules set by the federal, state, and local regulations; be a law-abiding corporate citizen.
2. Conduct all actions in a manner that is consistent with expectations of the government.
3. Donate goods and provide services that at least meet the minimal legal requirement.
4. Fulfill all legal obligations (Carol, 1991).

Ethical Responsibilities:

1. Review and recognize all ethical moral norms that are accepted by society; Do not allow current ethical norms from being abused to achieve the overall organization’s goal.
2. Conduct business in a manner that is consistent with societal and ethical norms.
3. Understand and realize that corporate integrity and ethical behavior are critical to an organization’s success in the long term.
4. Acceptable and good corporate citizenship is defined as doing what is expected morally or ethically (Carol, 1991).

Philanthropic Responsibilities:

1. Assisting in projects that supports the community and its’ quality of life.
2. Act in a manner that is consistent with philanthropic and charitable expectations of society.
3. Volunteer in charitable activates within the organization’s community.
4. Provide tangible / non-tangible assistance to private and public educational institutions (Carol, 1991).

Reasons to engage in CSR:

Based upon my review of several research literatures regarding CSR, I’ve come across a number of distinct, but related arguments regarding why companies engage in CSR. That is, it simply makes good business sense to behave in a fashion that is perceived as responsible by society (Burke, 1996; Freeman, 2012; Castelo, 2006; Aguilera, 2007). In addition, based on a public opinion survey conducted by Reeve, (2010) regarding CSR, it was noted that 88% of consumers believe that companies should do whatever it takes to please stakeholders in addition to improving society and the environment (Reeve, 2010). In conjunction, 83% of consumers believe companies should be obligated to support charities / nonprofits with financial donations when they are able to (Reeve, 2010). Therefore, it is imperative for organizations to embrace CSR into their current business model. In order to further support this statement, we explore other reasons why companies engage in CSR below:

First, from a human resources perspective, hospitals and healthcare organizations are obligated to recruit and retain the best talent within a workforce. According to the Volunteer Impact Study performed by Deloitte, (2011), 61% of Millennials would consider a company’s commitment to social responsibility when making the decision to take the job. In addition to recruiting the best talent, a CSR program can also increase the overall perception of a company among its employees. For example, companies that provide employees the opportunity to become involved in charity/community service events will not only boost employee morale, but it would also increase their overall public image (Dobers, 2009).

Second, risk management is an important part of many corporate strategies. A health organization’s reputation, that took years to develop, can be ruined in an instant through incidents such as Medicare fraud and medical malpractice. The arrest of 46 doctors and nurses across the United States for Medicare fraud is an example of such case. It was noted that in total, $712 million worth of patient care that was never given or unnecessary was billed to Medicare. In addition, owners of mental health care facilities in Miami were found guilty of billing millions of dollars for psychotherapy sessions which consisted of little to no treatment at all. The outcome speaks volumes; the fraudulent activity committed by a portion of the healthcare community has an everlasting effect on the entire community as a whole. Creating a genuine culture of ‘doing the right thing’ within an organization can offset these risks.

Third, by engaging in CSR, healthcare organizations will be able to create a strong rapport with their patients. Trust within the healthcare community is probably the most valuable currency and it does not come cheap. In order for patients to have complete trust in their health care organization, the business must go beyond healthcare services and create an everlasting emotional bond with the patient through ethical business practices. Once the patient realizes this attribute of the organization, patient loyalty is formed. In return, the organization will gain sustainable business growth.

Lastly, as healthcare cost is expected to rise in the near future, an increase number of individuals are opting out for care simply because they cannot afford it. According to a 2017 study by the Journal of American Medical Association (JAMA), health care cost rose nearly $1 trillion dollars from 1996 to 2015 (Probasco, 2018). A large portion of this increase is contributed to the rise in pharmaceutical drug cost. With this noted, pharmaceutical companies should be more aware of its social surrounding versus putting greater value on financial profit over human life. An example of such case is the high price of insulin, which ranges in price between $14 and $300 for a single vial of Novolog insulin. The high price of insulin is causing many individuals to either skip doses or stretch out their medication in an effort to save money even though this could mean life or death for certain individuals with diabetes. Based on this information, it is imperative for healthcare organizations to embrace CSR, and put human life first ahead of profit.

Successful CSR Initiatives by Organizations

For the 8,000 companies around the world that have pledged to show good global citizenship, making money and satisfying customers is just not enough (Freeman, 2012). These companies often take the extra step to give back to the community, employees, and the world at large. As such, they have developed solid reputations for doing some good, translating their success into an opportunity to support others. The following companies below are just a few examples of those who have executed CSR successfully:

Johnson & Johnson (JJ):

JJ is a New Jersey based company that specializes in producing medical devices, pharmaceutical and consumer packaged goods. From inception to date, JJ has been striving to conduct business ethically and focus on giving back to the community. Examples of such initiatives are as follows: 1) JJ initiated a partnership with the Huaxi Hospital Mental Health Center and the Ministry of Health of China (MOH) in an effort to support victims who were impacted by the 2008 earthquake in China, which killed approximately 80,000 people (Essays, 2018); 2) JJ offered a flexible work arrangement for its employees based on a survey of 4,400 employees in the United States. The outcome of the survey showed that 78% of respondents valued flexibility as a significant attribute to whether or not to stay with the company. Based on the results, JJ decided to implement a compressed week schedule, telework, summer hours, and a part-time work schedule (Essays, 2018); 3) JJ provides up to 5 days of paid CSR leave for employees who are engaged in community projects (Essays, 2018).

Griffin Hospital

Griffin hospital is a community hospital located in Derby Connecticut. Griffin was named to Fortune Magazine’s “100 Best Companies to Work for” list for ten consecutive years. In addition to this, Griffin was also recognized for having one of the highest patient satisfaction ratings. There are a number of reasons behind the high ranking. One of Griffins main focuses is to ensure everyone in its community receives proper care, regardless of their social and economic status. Based on recent reports, it was noted that $2 million worth of free care was allocated to individuals without insurance. In addition, Griffin provides $1 million worth of health professions education annually to help prepare the next generation of caregivers. In totality, the hospital provides nearly $14.2 million in community benefits.

Conclusion

Today’s competitive business arena commands companies to expand their business models to include CSR. With increased access to information and sensitivity by consumers, having a “good image” increases profits. Companies should strive to focus on formulating and implementing a concrete CSR strategy if they want to ensure future sustainability. CSR not only improves a company’s image and good faith, it also encourages its employees to give back and have a greater feeling of commitment to their communities.