Businesses operate in communities that either directly or indirectly affect their transactions. Companies interact with the various sectors in the larger community and part of this is the government. So, in the perspective of corporate social responsibility or CSR, many people feel that the government sector must also play a role in the business activities.

Since the government is responsible for regulating the laws and upholding the security of a state, it is just right to engage them in the aspect of social responsibility. The government is considered an external stakeholder that indirectly affects the CSR practices of a corporation.

Role of Government in Promoting CSR

The government plays a very important role in promoting corporate social responsibility for various reasons. For one, this sector can encourage the business sector to advocate an ethical, social, and environmentally-conscious business transaction with their stakeholders. This is because they primarily enforce compliance with the legislative and regulatory structure of the business sector. For example, the government must enforce compliance in matters of sustainable development for natural resources. Another reason is they maintain the observance of smooth and peaceful business operations in the community through programs that demonstrate social responsibility and responsible investment.

With the enactment of these state laws and regulations, the interests of the consumers are safeguarded and the environment is protected from unethical practices by certain abusive companies. The laws governing a state or a nation differ from one state to another. Wherever a corporation establishes business and operates, the firm adheres to the imposed laws of that particular region. These regulations can be as broad as human rights protection, clean environmental acts, and responsible investment.

Responsibility towards the Government and its Advantages to Corporations

The best way for corporations to show social responsibility to the government is to provide strict compliance to the regulations which is, in fact, the primary expectation of the government from companies. When it comes to laws, nothing much can be done but to offer cooperation with the law enforcers. Next, the state or local authorities require companies to manifest improved competitiveness after adhering to the business regulations.

All business sectors can benefit from the regulations imposed by the government in one way or another. Business transactions run smoothly where clear rules and laws are defined. The business environment prospers where companies find it convenient to operate their business and avoid possible abuses to the consumers and other stakeholders.

One advantage of these government policies is that business operations will make it a point to run business that will not harm or risk the society and the environment. Corporations will keep a good relationship with the community at large and vice versa. So when a firm violates the laws, they will be sanctioned accordingly to help them iron out any shortcomings in their dealings with the consumers and the community.

Another advantage is that companies are recognized for complying with the rules by providing incentives and grants to those who are compliant enough. For example, when a company has certain requests in terms of their operations and business activities, they may have greater chances of being permitted to conduct them.

Lastly, the government provides protection to the interests of the stakeholders and the investors. Stakeholders are guarded from unfair business practices while shareholders are principled by corporate governance.

The government laws and policies are designed to assist both the consumers and the companies in carrying out their roles with efficiency. So when companies comply with these policies, the government finds it easier to regulate and uphold security and protection to everyone involved.

Corporate Governance

Corporate governance pertains to a set of policies, processes, laws, and customs that affect the administration and control of a certain company. This concept embraces the interaction of various stakeholders involved as well as the corporate objectives of a firm. There are many agencies regulating corporate governance and the government is considered one of the external controls exercising this practice over corporations. Corporate governance aims to ensure accountability of certain individuals in a company. For example, the shareholder or investor’s welfare is well-protected with corporate governance.

Good corporate governance manifests values of honesty and truthfulness, trust and integrity, responsibility and accountability, mutual respect, performance orientation, and commitment to the corporation.