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Corporate Citizenship

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Corporate Citizenship

Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business)[1] is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. In some models, a firm's implementation of CSR goes beyond compliance and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law."[2][3] CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.

The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, meaning those on whom an organization's activities have an impact. It was used to describe corporate owners beyond shareholders as a result of an influential book by R. Edward Freeman, Strategic management: a stakeholder approach in 1984.[4]

Proponents argue that corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts from the economic role of businesses. McWilliams and Siegel's article (2000) published in Strategic Management Journal, cited by over 1000 academics, compared existing econometric studies of the relationship between social and financial performance. They concluded that the contradictory results of previous studies reporting positive, negative, and neutral financial impact, were due to flawed empirical analysis. McWilliams and Siegel demonstrated that when the model is properly specified; that is, when you control for investment in Research and Development, an important determinant of financial performance, CSR has a neutral impact on financial outcomes.[5]

In his widely cited book[6][7] entitled Misguided Virtue: False Notions of Corporate Social Responsibility (2001) David Henderson argued forcefully against the way in which CSR broke from traditional corporate value-setting. He questioned the "lofty" and sometimes "unrealistic expectations" in CSR.[8]

Some argue that CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.

CSR is titled to aid an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. Development business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. ISO 26000 is the recognized international standard for CSR. Public sector organizations (the United Nations for example) adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities.

Approaches

Some commentators have identified a difference between the Canadian (Montreal school of CSR), the Continental European and the Anglo-Saxon approaches to CSR.[9] And even within Europe the discussion about CSR is very heterogeneous.[10]

A more common approach to CSR is corporate philanthropy. This includes monetary donations and aid given to local and non-local nonprofit organizations and communities, including donations in areas such as the arts, education, housing, health, social welfare, and the environment, among others, but excluding political contributions and commercial sponsorship of events.[11] Some organizations do not like a philanthropy-based approach as it might not help build on the skills of local populations, whereas community-based development generally leads to more sustainable development.

Another approach to CSR is to incorporate the CSR strategy directly into the business strategy of an organization. For instance, procurement of Fair Trade tea and coffee has been adopted by various businesses including KPMG. Its CSR manager commented, "Fairtrade fits very strongly into our commitment to our communities."[12]

Another approach is garnering increasing corporate responsibility interest. This is called Creating Shared Value, or CSV. The shared value model is based on the idea that corporate success and social welfare are interdependent. A business needs a healthy, educated workforce, sustainable resources and adept government to compete effectively. For society to thrive, profitable and competitive businesses must be developed and supported to create income, wealth, tax revenues, and opportunities for philanthropy. CSV received global attention in the Harvard Business Review article Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility [1] by Michael E. Porter, a leading authority on competitive strategy and head of the Institute for Strategy and Competitiveness at Harvard Business School; and Mark R. Kramer, Senior Fellow at the Kennedy School at Harvard University and co-founder of FSG Social Impact Advisors. The article provides insights and relevant examples of companies that have developed deep linkages between their business strategies and corporate social responsibility. Many approaches to CSR pit businesses against society, emphasizing the costs and limitations of compliance with externally imposed social and environmental standards. CSV acknowledges trade-offs between short-term profitability and social or environmental goals, but focuses more on the opportunities for competitive advantage from building a social value proposition into corporate strategy. CSV has a limitation in that it gives the impression that only two stakeholders are important - shareholders and consumers — and belies the multi-stakeholder approach of most CSR advocates.

Many companies use the strategy of benchmarking to compete within their respective industries in CSR policy, implementation, and effectiveness. Benchmarking involves reviewing competitor CSR initiatives, as well as measuring and evaluating the impact that those policies have on society and the environment, and how customers perceive competitor CSR strategy. After a comprehensive study of competitor strategy and an internal policy review performed, a comparison can be drawn and a strategy developed for competition with CSR initiatives.

Cost-benefit analysis with a resource-based view

In competitive markets the cost-benefit analysis regarding positive financial outcomes upon implementing a CSR-based strategy, can be examined with a lens of the resource-based-view (RBV) of sustainable competitive advantage. According to Barney’s (1990) "formulation of the RBV, sustainable competitive advantage requires that resources be valuable (V), rare (R), inimitable (I) and non-substitutable (S)."[13][14] A firm can conduct a cost benefit analysis through a RBV-based lens to determine the optimal and appropriate level of investment in CSR, as it would with any other investments. A firm introducing a CSR-based strategy might only sustain high returns on their investment if their CSR-based strategy were inimitable (I) by their competitors. In competitive markets, a firm introducing a CSR-based strategy might only sustain high returns on their investment and there may only be a short-lived strategic competitive advantage to implementing CSR as their competitors may adopt similar strategies. There is however, a long-term advantage in that competitors may also imitate CSR-based strategies in a socially responsible way. Even if a firm chooses CSR for strategic financial gain, the firm is also acting responsibly.[3] Attention to CSR as an element in corporate strategy led to examining CSR activities through the lens of the resource-based-view (RBV) of the firm. The RBV, as introduced by Wernerfelt (1984) and refined by Barney (1991), presumes that firms are bundles of heterogeneous resources and capabilities that are imperfectly mobile across firms. Accordingly, the imperfect mobility of heterogeneous resources can result in competitive advantages for firms that have superior resources or capabilities. McWilliams and Siegel (2001) used a model based on RBV to address optimal investment in CSR. In their model, CSR activities and attributes may be used in a differentiation strategy. They conclude that managers can determine the appropriate level of investment in CSR by conducting cost benefit analysis in the same way that they analyze other investments. Applying the RBV to CSR naturally leads to the question of whether firms can use CSR to achieve a sustainable competitive advantage. Reinhardt (1998) addressed this issue and found that a firm engaging in a CSR-based strategy could only sustain an abnormal return if it could prevent competitors from imitating its strategy.[15]

Incidents like the 2013 Savar building collapse with more than 1,100 victims have led to a shift from company-individual thinking towards supply-chain thinking in order to increase social responsibility. Thus, best practices from supply chain management are increasingly applied to the CSR context. Wieland and Handfield (2013) suggest that companies need to audit products and suppliers and that supplier auditing needs to go beyond direct relationships with first-tier suppliers. They also demonstrate that visibility needs to be improved if supply cannot be directly controlled and that smart and electronic technologies play a key role to improve visibility across the supply chain. Finally, they highlight that collaboration with local partners, across the industry and with universities is crucial to successfully managing social responsibility in supply chains.[16]

Social accounting, auditing, and reporting

Main article: Social accounting

For a business to take responsibility for its actions, that business must be fully accountable. Social accounting, a concept describing the communication of social and environmental effects of a company's economic actions to particular interest groups within society and to society at large, is thus an important element of CSR.[17]

Social accounting emphasizes the notion of corporate accountability. D. Crowther defines social accounting in this sense as "an approach to reporting a firm’s activities which stresses the need for the identification of socially relevant behavior, the determination of those to whom the company is accountable for its social performance and the development of appropriate measures and reporting techniques."[18] An example of social accounting, to a limited extent, is found in an annual Director's Report, under the requirements of UK company law.[19]

A number of reporting guidelines or standards have been developed to serve as frameworks for social accounting, auditing and reporting including:

  • AccountAbility's AA1000 standard, based on John Elkington's triple bottom line (3BL) reporting
  • The Prince's Accounting for Sustainability Project's Connected Reporting Framework
  • The Fair Labor Association conducts audits based on its Workplace Code of Conduct and posts audit results on the FLA website.
  • The Fair Wear Foundation takes a unique approach to verifying labour conditions in companies' supply chains, using interdisciplinary auditing teams.
  • Global Reporting Initiative's Sustainability Reporting Guidelines
  • Economy for the Common Good's Common Good Balance Sheet
  • GoodCorporation's Standard developed in association with the Institute of Business Ethics
  • Synergy Codethic 26000[20] Social Responsibility and Sustainability Commitment Management System (SRSCMS) Requirements — Ethical Business Best Practices of Organizations - the necessary management system elements to obtain a certifiable ethical commitment management system. The standard scheme has been build around ISO 26000 and UNCTAD Guidance on Good Practices in Corporate Governance.The standard is applicable by any type of organization.;
  • Earthcheck www.earthcheck.org Certification / Standard
  • Social Accountability International's SA8000 standard
  • Standard Ethics Aei guidelines
  • The ISO 14000 environmental management standard
  • The
  • The corporate governance disclosure.

The FTSE Group publishes the FTSE4Good Index, an evaluation of CSR performance of companies.

In some nations, legal requirements for social accounting, auditing and reporting exist (e.g. in the French bilan social), though international or national agreement on meaningful measurements of social and environmental performance is difficult. Many companies now produce externally audited annual reports that cover Sustainable Development and CSR issues ("Triple Bottom Line Reports"), but the reports vary widely in format, style, and evaluation methodology (even within the same industry). Critics dismiss these reports as lip service, citing examples such as Enron's yearly "Corporate Responsibility Annual Report" and tobacco corporations' social reports.

In South Africa, as of June 2010, all companies listed on the Johannesburg Stock Exchange (JSE) were required to produce an integrated report in place of an annual financial report and sustainability report.[22] An integrated report includes environmental, social and economic performance alongside financial performance information and is expected to provide users with a more holistic overview of a company. However, this requirement was implemented in the absence of any formal or legal standards for an integrated report. An Integrated Reporting Committee (IRC) was established to issue guidelines for good practice in this field.

Social license

“Social license” generally refers to a local community’s acceptance or approval of a company’s project or ongoing presence in an area. It is increasingly recognized by various stakeholders and communities as a prerequisite to development. The development of social license occurs outside of formal permitting or regulatory processes, and requires sustained investment by proponents to acquire and maintain social capital within the context of trust-based relationships. Often intangible and informal, social license can nevertheless be realized through a robust suite of actions centered on timely and effective communication, meaningful dialogue, and ethical and responsible behavior.

Local conditions, needs, and customs vary considerably and are often opaque, but have a significant impact on the likely success of various approaches to building social capital and trust. These regional and cultural differences demand a flexible and responsive approach and must be understood early in order to enable the development and implementation of an effective strategy to earn and maintain social license. Governments could facilitate the necessary stakeholder mapping in regions for which they are responsible and provide a regulatory framework that sets companies on the right path for engagement with communities and stakeholders. Social media tools empower stakeholders and communities to access and share information on company behaviors, technologies, and projects as they are implemented around the world. Understanding and managing this reality will be important for companies seeking social license. Voluntary measures integral to corporate-responsibility frameworks contribute to achieving social license, particularly through enhancing a company’s reputation and strengthening its capacity for effective communication, engagement, and collaboration. However, such measures do not obviate the need for project-specific action to earn and maintain social license. The growing reliance on social media tools by stakeholders and proponents alike, and the risks associated with disclosure through them, may lead to an increase.Pacific Energy Summit.

Potential business benefits

The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones (e.g., Deming's Fourteen Points, balanced scorecards). Orlitzky, Schmidt, and Rynes[24] found a correlation between social/environmental performance and financial performance. However, businesses may not be looking at short-run financial returns when developing their CSR strategy. Intel employs a 5-year CSR planning cycle.[25]

The definition of CSR used within an organization can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering. CSR may be based within the human resources, business development or public relations departments of an organisation,[26] or may be given a separate unit reporting to the CEO or in some cases directly to the board. Some companies may implement CSR-type values without a clearly defined team or programme.

The business case for CSR[27] within a company will likely rest on one or more of these arguments:

Triple bottom line

People planet profit, also known as the triple bottom line, are words that should be used and practiced in every move an organization makes. People relates to fair and beneficial business practices toward labour, the community and region where corporation conducts its business. Planet refers to sustainable environmental practices. A triple bottom line company does not produce harmful or destructive products such as weapons, toxic chemicals or batteries containing dangerous heavy metals for example. Profit is the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It therefore differs from traditional accounting definitions of profit.[28][29]

Human resources

A CSR program can be an aid to recruitment and retention,[30] particularly within the competitive graduate student market. Potential recruits often ask about a firm's CSR policy during an interview, and having a comprehensive policy can give an advantage. CSR can also help improve the perception of a company among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering. CSR has been found to encourage customer orientation among frontline employees.[31]

Risk management

Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents.[32] These can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks.[33]

Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values.[34] Several major brands, such as The Co-operative Group, The Body Shop and American Apparel[35] are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice.

Engagement plan

An engagement plan will assist in reaching a desired audience. A corporate social responsibility team, or individual is needed to effectively plan the goals and objectives of the organization. Determining a budget should be of high priority. The function of corporate social responsibility planning: 1. To add discussion and analysis of a new set of risks into corporate decision-making. 2. To represent issues within the corporation that watchdogs, NGOs and advocates represent within society. 3. To assess the future. An organizations long term and short term future needs to be thought of. 4. To help prioritize consideration of socially and environmentally friendly projects that might otherwise lack a corporate advocate. 5. To keep corporations aware of potential major societal impacts even when a negative impact may not be immediate, and thus lessen liability. 6. To positively influence decision making where societal impacts are maximized, whilst ensuring efforts are within a given budget.

Developing an engagement plan

Commit to coming up with and improving on your companies goals. CSR commitments communicate the nature and direction of the firm's social and environmental activities and, will help others understand how the organization is likely to behave in a particular situation 1. Do a scan of CSR commitments 2. Hold discussions with major stakeholders 3. Create a working group to develop the commitments 4. Prepare a preliminary draft 5. Consult with affected stakeholders 6. Revise and publish the commitments 7. Consider what is feasible within the budget • To ensure employee buy-in, include employees in the process of developing the vision and values. To spark the process, create a CSR working group or hold a contest for the best suggestions, encouraging employees and their representatives to put some thought into their submissions. • Host a visioning session and ask participants to think about what the firm could look like in the future as a CSR leader. • Review the CSR priorities to determine which codes of ethics or conduct fit best with the firm's goals.

Consultants are recommended when planning for CSR activities involving small, medium and large sized corporations. All levels of management should be on board, and the support of high ranking corporate officials should be given.

License to operate

Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps, they can persuade governments and the wider public that they are taking issues such as health and safety, diversity, or the environment seriously as good corporate citizens with respect to labour standards and impacts on the environment.

Supplier relations

Businesses are constantly relying on suppliers to reduce overall costs, while improving the quality of their goods or services. Many North American companies have downgraded the volume of suppliers they do business with, and award contracts to a select few, in order to lower operating costs. By establishing a strong supply chain, companies are able to push for continuous quality improvements, and price reductions. The long-term benefits of the listed above create a better value for stakeholders.

Some multi-national companies like General Motors can shift suppliers, if a lower offer is made by the competition. As a result, competitiveness, and greater profits are created, in turn contributing to a stronger market

The strategic use of supplier relations can benefit single, double and triple bottom-lines. Corporations excelling in supply relations include Wal-Mart, Ford, General Motors, Toyota and Nestle. All companies listed above have gained tangeable results through the practice of ensuring sound supply chains, and sourcing materials from ethical sources.

Emphasizing the importance of practicing CSR to suppliers, researching their existing supply chain, and sending out CSR check-sheets to existing suppliers is important to staying on-track of a company’s implemented CSR activity.

Criticisms and concerns

Critics of CSR as well as proponents debate a number of concerns related to it. These include CSR's relationship to the fundamental purpose and nature of business and questionable motives for engaging in CSR, including concerns about insincerity and hypocrisy.

Nature of business

Milton Friedman and others have argued that a corporation's purpose is to maximize returns to its shareholders, and that since only people can have social responsibilities, corporations are only responsible to their shareholders and not to society as a whole. Although they accept that corporations should obey the laws of the countries within which they work, they assert that corporations have no other obligation to society. Some people perceive CSR as in-congruent with the very nature and purpose of business, and indeed a hindrance to free trade. Those who assert that CSR is contrasting with capitalism and are in favor of the free market argue that improvements in health, longevity and/or infant mortality have been created by economic growth attributed to free enterprise.[36]

Critics of this argument perceive the free market as opposed to the well-being of society and a hindrance to human freedom. They claim that the type of capitalism practiced in many developing countries is a form of economic and cultural imperialism, noting that these countries usually have fewer labour protections, and thus their citizens are at a higher risk of exploitation by multinational corporations.[37]

A wide variety of individuals and organizations operate in between these poles. For example, the REALeadership Alliance asserts that the business of leadership (be it corporate or otherwise) is to change the world for the better.[38] Many religious and cultural traditions hold that the economy exists to serve human beings, so all economic entities have an obligation to society (see for example Economic Justice for All). Moreover, as discussed above, many CSR proponents point out that CSR can significantly improve long-term corporate profitability because it reduces risks and inefficiencies while offering a host of potential benefits such as enhanced brand reputation and employee engagement.

Motives

Some critics believe that CSR programs are undertaken by companies such as British American Tobacco (BAT),[39] the petroleum giant BP (well known for its high-profile advertising campaigns on environmental aspects of its operations), and McDonald's (see below) to distract the public from ethical questions posed by their core operations. They argue that some corporations start CSR programs for the commercial benefit they enjoy through raising their reputation with the public or with government. They suggest that corporations which exist solely to maximize profits are unable to advance the interests of society as a whole.[40]

Another concern is that sometimes companies claim to promote CSR and be committed to sustainable development but simultaneously engage in harmful business practices. For example, since the 1970s, the McDonald's Corporation's association with Ronald McDonald House has been viewed as CSR and relationship marketing. More recently, as CSR has become mainstream, the company has beefed up its CSR programs related to its labor, environmental and other practices[41] All the same, in McDonald's Restaurants v Morris & Steel, Lord Justices Pill, May and Keane ruled that it was fair comment to say that McDonald's employees worldwide 'do badly in terms of pay and conditions'[42] and true that 'if one eats enough McDonald's food, one's diet may well become high in fat etc., with the very real risk of heart disease.'[43]

Royal Dutch Shell has a much-publicized CSR policy and was a pioneer in triple bottom line reporting, but this did not prevent the 2004 scandal concerning its misreporting of oil reserves, which seriously damaged its reputation and led to charges of hypocrisy. Since then, the Shell Foundation has become involved in many projects across the world, including a partnership with Marks and Spencer (UK) in three flower and fruit growing communities across Africa.

Critics concerned with corporate hypocrisy and insincerity generally suggest that better governmental and international regulation and enforcement, rather than voluntary measures, are necessary to ensure that companies behave in a socially responsible manner. A major area of necessary international regulation is the reduction of the capacity of corporations to sue states under investor state dispute settlement provisions in trade or investment treaties if otherwise necessary public health or environment protection legislation has impeded corporate investments.[44] Others, such as Patricia Werhane, argue that CSR should be considered more as a corporate moral responsibility, and limit the reach of CSR by focusing more on direct impacts of the organization as viewed through a systems perspective to identify stakeholders. For a commonly overlooked motive for CSR, see also Corporate Social Entrepreneurship, whereby CSR can also be driven by employees' personal values, in addition to the more obvious economic and governmental drivers.

Principles

The main principles involving corporate social responsibility involve economic, legal, ethical and discretionary aspects. A corporation needs to generate profits, while operating within the laws of the state. The corporation also needs to be ethical, but has the right to be discretional about the decisions it makes. Levels of corporate social responsiveness to an issue include being reactive, defensive, responsive and interactive. All terms are useful in issues management. Selecting when and how to act can make a difference in the outcome of the action taken.

Ethical consumerism

The rise in popularity of ethical consumerism over the last two decades can be linked to the rise of CSR. As global population increases, so does the pressure on limited natural resources required to meet rising consumer demand (Grace and Cohen 2005, 147). Industrialization, in many developing countries, is booming as a result of both technology and globalization. Consumers are becoming more aware of the environmental and social implications of their day-to-day consumer decisions and are therefore beginning to make purchasing decisions related to their environmental and ethical concerns.[45] However, this practice is far from consistent or universal.

Globalization and market forces

As corporations pursue growth through globalization, they have encountered new challenges that impose limits to their growth and potential profits. Government regulations, tariffs, environmental restrictions and varying standards of what constitutes "labor exploitation" are problems that can cost organizations millions of dollars. Some view ethical issues as simply a costly hindrance, while some companies use CSR methodologies as a strategic tactic to gain public support for their presence in global markets, helping them sustain a competitive advantage by using their social contributions to provide a subconscious level of advertising. (Fry, Keim, Meiners 1986, 105) Global competition places a particular pressure on multinational corporations to examine not only their own labor practices, but those of their entire supply chain, from a CSR perspective. that all government is controlling.

Social awareness and education

The role among corporate stakeholders is to work collectively to pressure corporations that are changing. Shareholders and investors themselves, through socially responsible investing are exerting pressure on corporations to behave responsibly. The extension of SRI bodies driving corporations to include an element of ‘ethical investment’ into their corporate agenda’s generates socially embedded issues. The main issue correlates to the development and overall idea of ‘ethical investing’ or SRI, a concept that is constructed as a general social perspective.[46] The problem becomes defining what is classified as ‘ethical investing’. The ethics or values of one SRI body will likely different from the next since ethical opinions are inherently paradoxical. For example, some religious investors in the US have withdrawn investment from companies that fail to fulfill their ethical expectations.[46] The Non-governmental organizations are also taking an increasing role, leveraging the power of the media and the Internet to increase their scrutiny and collective activism around corporate behavior. Through education and dialogue, the development of community awareness in holding businesses responsible for their actions is growing.[47] In recent years, the traditional conception of CSR is being challenged by the more community-conscious Creating Shared Value concept (CSV), and several companies are refining their collaboration with stakeholders accordingly.

Ethics training

The rise of ethics training inside corporations, some of it required by government regulation, is another driver credited with changing the behavior and culture of corporations. The aim of such training is to help employees make ethical decisions when the answers are unclear. Tullberg believes that humans are built with the capacity to cheat and manipulate, a view taken from Trivers (1971, 1985), hence the need for learning normative values and rules in human behavior.[48] The most direct benefit is reducing the likelihood of "dirty hands" (Grace and Cohen 2005), fines and damaged reputations for breaching laws or moral norms. Organizations also see secondary benefit in increasing employee loyalty and pride in the organization. Caterpillar and Best Buy are examples of organizations that have taken such steps.[49]

Increasingly, companies are becoming interested in processes that can add visibility to their CSR policies and activities. One method that is gaining increasing popularity is the use of well-grounded training programs, where CSR is a major issue, and business simulations can play a part in this.

One relevant documentary is The Corporation, the history of organizations and their growth in power is discussed. Corporate social responsibility, what a company does in trying to benefit society, versus corporate moral responsibility (CMR), what a company should morally do, are both important topics to consider when looking at ethics in CSR. For example, Ray Anderson, in The Corporation, takes a CMR perspective in order to do what is moral and he begins to shift his company's focus towards the biosphere by utilizing carpets in sections so that they will sustain for longer periods. This is Anderson thinking in terms of Garret Hardin's "The Tragedy of the Commons," where if people do not pay attention to the private ways in which we use public resources, people will eventually lose those public resources.

Geography

In a geographical context, CSR is fundamentally an intangible populist idea without a conclusive definition.[50] Corporations who employ CSR behaviors are empirically dissimilar in various parts of the world.[51] The issue of CSR diversity is produced through the perpetual differences embedded in the social, political, cultural, and economic structures within individual countries.[51] The immense geographical separations feasibly contribute to the loosely defined concept of CSR and difficulty for corporate regulation.

Public policies

CSR has inspired national governments to include CSR issues into their national public policy agendas. The increased importance driven by CSR, has prompted governments to promote socially and environmentally responsible corporate practices.[52] Over the past decade governments have considered CSR as a public issue that requires national governmental involvement to address the very issues relevant to CSR. The heightened role of government in CSR has facilitated the development of numerous CSR programs and policies.[52] Specifically, various European governments have implemented public policies on CSR enhancing their competence to develop sustainable corporate practices.[53] CSR critics such as Robert Reich argue that governments should set the agenda for social responsibility by the way of laws and regulation that will allow a business to conduct themselves responsibly. Actors engaged in CSR:

  • governments
  • corporations
  • civil societies

Recently, 15 European Union countries have actively engaged in CSR regulation and public policy development.[53] Recognizably, the CSR efforts and policies are vastly different amongst countries resultant to the complexity and diversity of governments’, corporations’, and civil societies’ roles. Scholars have analyzed each body that promotes CSR based policies and programs concluding that the role and effectiveness of these actors are case-specific.[52] Global issues so broadly defined such as CSR generate numerous relationships between the different socio-geographic players.

A key debate in CSR is determining what actors are responsible to ensure that corporation’s are behaving in a socio-economic and environmentally sustainable manner.

Regulation

The issues surrounding corporate regulation pose several problems. The concept of regulation is inherently difficult to address because of the numerous corporations that exist are vastly dissimilar in terms of corporate behavior and nature. Thus, regulation in itself is unable to cover every aspect in detail of a corporation's operations. For example, This leads to burdensome legal processes bogged down in interpretations of the law and debatable grey areas (Sacconi 2004). For example, General Electric failed to clean up the Hudson River after contaminating it with organic pollutants. The company continues to argue via the legal process on assignment of liability, while the cleanup remains stagnant. (Sullivan & Schiafo 2005). Government regulation or public institutional regulation is difficult to achieve. Depending on the political regime and form of government – democracy, parliamentary, presidential – issues of governmental ineffectiveness may transpire. As a result, attempts at CSR policy development and implementation may be unattainable.

The second issue is the financial burden that regulation can place on a nation's economy. This view shared by Bulkeley, who cites the Australian federal government's actions to avoid compliance with the Kyoto Protocol in 1997, on the concerns of economic loss and national interest. The Australian government took the position that signing the Kyoto Pact would have caused more significant economic losses for Australia than for any other OECD nation (Bulkeley 2001, pg 436). On the change of government following the election in November 2007, Prime Minister Kevin Rudd signed the ratification immediately after assuming office on 3 December 2007, just before the meeting of the UN Framework Convention on Climate Change. Critics of CSR also point out that organizations pay taxes to government to ensure that society and the environment are not adversely affected by business activities.

The government of Canada has adopted a national position that expects Canadian corporations to practice behaviors parallel to CSR. In 2007, Prime Minister Harper was aware of Canada’s abundant investment into the resource/mineral extractive sector and encouraged the Canadian mining companies to meet Canada’s newly developed CSR standards and expectations.[54] The method of developing and implementing CSR policies was achieved through government-company consultation and government stakeholder cooperation.[54] The successful relationship between the CSR actors within Canada’s government and country, may advocate that cooperation amongst constituencies is the most imperative element to CSR regulation.

The European Union has recently done extensive work to try and find the best form of regulation. Some critics argue that the creation of a CSR organization with a democratically appointed minister focused solely on monitoring and enforcing socially responsible behaviour will be extremely effective.[53]

Laws

The laws legally binding the corporation’s behavior and activity are quite insignificant in relation to the global consequences. Only recently have countries included CSR policies in government agendas legislature.[53] Common types of countries who have implemented legislation and CSR laws generally consist of socio-economic and politically sophisticated countries. The level of political stability and effectiveness is inextricably linked to a countries capacity to ensure national CSR policies.

The increasing ability and influence corporations have on the economic, political, and social dynamics of society correlate to the recent studies by the UN Commission on Human Rights.[55] More research and international political instruments are being explored to protect and prevent corporations from violating human rights.[56]

Denmark has a law on CSR. On 16 December 2008, the Danish parliament adopted a bill making it mandatory for the 1100 largest Danish companies, investors and state-owned companies to include information on corporate social responsibility (CSR) in their annual financial reports. The reporting requirements became effective on 1 January 2009.[57] The required information includes:

  • information on the companies’ policies for CSR or socially responsible investments (SRI)
  • information on how such policies are implemented in practice, and
  • information on what results have been obtained so far and managements expectations for the future with regard to CSR/SRI.

CSR/SRI is still voluntary in Denmark, but if a company has no policy on this it must state its positioning on CSR in their annual financial report. More on the Danish law can be found at CSRgov.dk

Crises and their consequences

Often it takes a crisis to precipitate attention to CSR. One of the most active stands against environmental mismanagement is the CERES Principles that resulted after the Exxon Valdez incident in Alaska in 1989 (Grace and Cohen 2006). Other examples include the lead poisoning paint used by toy giant Mattel, which required a recall of millions of toys globally and caused the company to initiate new risk management and quality control processes. In another example, Magellan Metals in the West Australian town of Esperance was responsible for lead contamination killing thousands of birds in the area. The company had to cease business immediately and work with independent regulatory bodies to execute a cleanup. Odwalla also experienced a crisis with sales dropping 90%, and the company's stock price dropping 34% due to several cases of E. coli spread through Odwalla apple juice. The company ordered a recall of all apple or carrot juice products and introduced a new process called "flash pasteurization" as well as maintaining lines of communication constantly open with customers.

Stakeholder priorities

Increasingly, corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. Understanding what causes are important to employees is usually the first priority because of the many interrelated business benefits that can be derived from increased employee engagement (i.e. more loyalty, improved recruitment, increased retention, higher productivity, and so on). Key external stakeholders include customers, consumers, investors (particularly institutional investors), communities in the areas where the corporation operates its facilities, regulators, academics, and the media.

Branco and Rodrigues (2007) describe the stakeholder perspective of CSR as the inclusion of all groups or constituents (rather than just shareholders) in managerial decision making related to the organization’s portfolio of socially responsible activities.[58] This normative model implies that the CSR collaborations are positively accepted when they are in the interests of stakeholders and may have no effect or be detrimental to the organization if they are not directly related to stakeholder interests. The stakeholder perspective suffers from a wheel and spoke network metaphor that does not acknowledge the complexity of network interactions that can occur in cross sector partnerships. It also relegates communication to a maintenance function, similar to the exchange perspective.[59]

Industries considered void of CSR

Several industries are often absent from CSR research. The absence is due to the presumption that these particular industries fail to achieve ethical considerations of their consumers. Typical industries include tobacco and alcohol producers ("sin industry" manufacturers), as well as defense firms[60]

See also

Notes

References

  • Baker, M. "[3]". "Companies in Crisis- What to do when it all goes wrong."
  • Bhattacharya, CB, Sankar Sen and Daniel Korschun (2011) Leveraging Corporate Social Responsibility: The Stakeholder Route to Business and Social Value, Cambridge University Press, Cambridge: UK.
  • Bulkeley, H. (2001). "Governing Climate Change: The Politics and Risk Society". Transactions of the Institute of British Geographers, New Series, Vol.26, No.4, pp. 430–447.
  • Brand Strategy (2007). "10 key things to know about CSR". London. pg.47.
  • Catalyst Consortium (2002). "What is Corporate Social Responsibility?"
  • Feltus, C.; Petit, M.; Dubois, E.(2009). Strengthening employee's responsibility to enhance governance of IT: COBIT RACI chart case study, Proceedings of the first ACM workshop on Information security governance (WISG'09), Chicago, Il, USA. ISBN 978-1-60558-787-5
  • Fialka. J. (2006). "Politics & Economics: Big Businesses Have New Take on Warming; Some Companies Move From Opposition to Offering Proposals on Limiting Emissions". Wall Street Journal. pg.A.4.
  • Fields, S. (2002). "Sustainable Business Makes Dollars and Cents". Environmental Health Perspectives, Vol.110, No.3, pp.A142-A145.
  • Grace, D., S. Cohen (2005). Business Ethics: Australian Problems and Cases. Oxford University Press. ISBN 0-19-550794-0.
  • International Court of Justice. "How the Court Works".
  • Pitts, C. (ed.), M. Kerr, R. Janda, & C. Pitts (2009) ISBN 978-0-433-45115-0.
  • Roux, M. (2007). "Climate conducive to corporate action: 1 All-round Country Edition". The Australian. Canberra, A.C.T. pg.15. online article
  • Sacconi, L. (2004). A Social Contract Account for CSR as Extended Model of Corporate Governance (Part II): Compliance, Reputation and Reciprocity. Journal of Business Ethics, No.11, pp. 77–96.
  • Sullivan, N.; R. Schiafo (2005). Talking Green, Acting Dirty (Op-Ed). New York Times, June 12, 2005.
  • Sun, William (2010), How to Govern Corporations So They Serve the Public Good: A Theory of Corporate Governance Emergence, New York: Edwin Mellen, ISBN 978-0-7734-3863-7.
  • Thilmany, J. 2007. "Supporting Ethical Employees." HR Magazine, Vol. 52, No.2, September 2007, pp. 105–110.
  • K. C. John Wei (2011). Corporate Social Responsibility – A Comparison Between Vietnam and China, International Journal of Governance. Vol. 1, No.1, July 2011.
  • Visser, W., D. Matten, M. Pohl, Nick Tolhurst (eds.) (2008). ISBN 978-0-470-72395-1.

External links

  • Foundation for Corporate Social Responsibility [4]

Further reading

  • Carroll, A.; A. Buchholtz (2006). Business and Society: Ethics and Stakeholder Management, 6th ed. Mason, OH: Thomson/South-Western. ISBN 0-324-22581-4.
  • Carroll, A. (1998). "The Four Faces of Corporate Citizenship". Business and Society Review. September, vol. 100, no. 1, pp. 1–7
  • IMPLEMENTING THE PARTNERSHIP FOR GROWTH AND JOBS: MAKING EUROPE A POLE OF EXCELLENCE ON CORPORATE SOCIAL RESPONSIBILITY
  • Davis, K.; R. Blomstrom (1975). Business and Society: Environment and Responsibility, New York: McGraw-Hill. ISBN 0-07-015524-0.
  • - advantages and limitations of CSR
  • Feltus, C.; Petit, M. (2009). "Building a Responsibility Model Including Accountability, Capability and Commitment", Proceedings of the Fourth International Conference on Availability, Reliability and Security, Institute of Electrical and Electronics Engineers ( IEEE ), Fukuoka, 2009.
  • Fombrun, C. (2000). "The value to be found in corporate reputation". Financial Times, December 4, 2000.
  • Habisch, A; Jonker, J.; Wagner, M; Schmidpeter, R.(2005): Corporate Social Responsibility Across Europe. Springer. ISBN 3-540-23251-6.
  • Halpern, Barton H. and Keith F. Snider. (2012) Armed Forces & Society, Vol. 38, No. 4
  • International Business Report (2008). Corporate Social Responsibility: a necessity not a choice, Grant Thornton.
  • Jastram, Sarah (2007). "The Link Between Corporate Social Responsibility and Strategic Management". CIS Papers No.17. Centre of International Studies, Hamburg.
  • Joseph, Amita (2010). "A Picture of CSR in India", CSR360 Global Partner Network.
  • Lin-Hi, Nick (2008). "Corporate Social Responsibility: An Investment in Social Cooperation for Mutual Advantage", Wittenberg Center for Global Ethics Discussion Paper 2008-6.
  • "Millennium Poll on Corporate Responsibility", Environics International Ltd., in cooperation with The Prince of Wales Trust, September 1999.
  • Jones, I., M. Pollitt, D. Bek (2006). "Multinationals in their communities: A social capital approach to corporate citizenship projects", University of Cambridge Working Paper 337.
  • Sen, Sankar, C. B. Bhattacharya and Daniel Korschun (2006). "The Role of Corporate Social Responsibility in Strengthening Multiple Stakeholder Relationships: A Field Experiment." Journal of the Academy of Marketing Science, 34 (2), 158-66.
  • SMEs Focus. "Making Europe a Pole of Excellence on Corporate Social Responsibility (CSR)".
  • Spence, L.; Habisch, A.; Schmidpeter R. (Editors) (2004). Responsibility and Social Capital. The World of Small and Medium Sized Enterprises. Palgrave. ISBN 0-333-71459-8.
  • Totikidis, V. & Heenitigala, K. (2008) "Corporate Social Responsibility in a Troubled World: Keeping Sight of Local and Global Community Problems". Poster presented at: Managing in the Pacific Century: The Australian and New Zealand Academy of Management 22nd Annual Conference. The University of Auckland Business School. 2–5 December 2008.
  • Visser, Wayne, Dirk Matten, Manfred Pohl, and Nick Tolhurst (Editors) (2007). The A to Z of Corporate Social Responsibility. London, England; New York, NY: Wiley. ISBN 978-0-470-72395-1.
  • World Business Council for Sustainable Development (2001), The Business Case for Sustainable Development: Making a difference toward the Johannesburg Summit 2002 and beyond.
  • World Business Council for Sustainable Development (2000), Corporate Social Responsibility: Making good business sense.
  • World Business Council for Sustainable Development (1999), Corporate Social Responsibility: Meeting changing expectations.

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