While corporate social initiatives may be not that effective as being a advertising tactic, reputational damage can cost businesses dearly.
Even though the direct effect of CSR initiatives might not be strong, the potential consequences of reputational harm really should not be neglected. Companies and countries that ignore ethical sourcing risk reputational damage, which can usually trigger boycotts and monetary losses. To prevent this, companies must be aware and concerned with the state of human rights within the states they operate in. Some governments, as seen with Ras Al Khaimah human rights reforms, took severe measures to improve their transparency and ensure that human rights laws are honored inside their borders. This will not merely avoid ramifications related to reputational damage but also build trust of their rule of law and governance, which will attract FDIs.
Evidence shows that disregarding human rights may have significant costs for businesses and governments. Information demonstrates multinational corporations have faced monetary damages and backlash from customers and investors whenever allegations of human rights abuses, such as when a recent case of forced labour appeared on the web. In 2021, several businesses had been boycotted because of negative coverage after allegations of using forced labour in their supply chains came to light. This is one of many similar incidents showing that people are willing to work once they perceive that the company is involved in something morally repugnant. For this reason it is crucial for governments globally to align their legal guidelines with the international convention on human rights as well as ethical business practices. A few governments have ratified reforms in that vein, as seen with Bahrain human rights and Oman human rights laws.
People are getting increasingly environmentally and socially conscious when compared with decades ago when only price and quality mattered. However, research investigating the relationship between corporate social responsibility campaigns and consumer responses indicates a poor association. In a recently available study which used several research techniques, such as questionnaires and experiments, consumers were questioned about different CSR initiatives and their attitudes toward them. What they thought their motives were, and their willingness to support the business. For example, customers were told to rate the probability of purchasing a product from a business that donates a percentage of its earnings to charitable causes. Additionally, the writers analysed responses to real incidents, such as item recalls or proxies related to the trustworthiness of the companies. They found that despite the fact that an important portion of consumers think it is laudable to buy and support socially responsible companies, the majority prioritise facets such as price and quality over CSR considerations. Additionally, positive attitudes towards businesses involved in CSR initiatives do not regularly translate into purchasing. Having said that, they found that people are skeptical of businesses' true motivations behind CSR initiatives, and many regard them as mere marketing strategies rather than genuine commitments to social and environmental causes.