Corporate social responsibility
Encyclopedia
Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business) is a form of corporate self-regulation
integrated into a business model
. CSR policy functions as a built-in, self-regulating mechanism whereby businesses monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norm
s. The goal of CSR is 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
.
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 a sexual 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. 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. Others argue 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.
an and the Anglo-Saxon
approaches to CSR. And even within Europe the discussion about CSR is very heterogeneous.
An approach for CSR that is becoming more widely accepted is a community-based development approach. In this approach, corporations work with local communities to better themselves. For example, the Shell Foundation
's involvement in the Flower Valley, South Africa. In Flower Valley they set up an Early Learning Centre to help educate the community's children as well as develop new skills for the adults. Marks and Spencer is also active in this community through the building of a trade network with the community - guaranteeing regular fair trade
purchases.
Often activities companies participate in are establishing education facilities for adults and HIV/AIDS education programmes. The majority of these CSR projects are established in Africa.
A more common approach of CSR is philanthropy. This includes monetary donations and aid given to local organizations and impoverished communities in developing countries. Some organizations do not like this approach as it does not help build on the skills of the local people, 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."
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.
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.
, 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.
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." An example of social accounting, to a limited extent, is found in an annual Director's Report
, under the requirements of UK company law.
A number of reporting guidelines or standards have been developed to serve as frameworks for social accounting, auditing and reporting including:
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. 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.
's Fourteen Points, balanced scorecard
s). Orlitzky, Schmidt, and Rynes 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.
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, 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 within a company will likely rest on one or more of these arguments:
and retention
, 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.
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.
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.
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. Several major brands, such as The Co-operative Group
, The Body Shop
and American Apparel
are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice.
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 neoliberalism
argue that improvements in health, longevity
and/or infant mortality
have been created by economic growth
attributed to free enterprise
.
Critics of this argument perceive neoliberalism 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.
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. 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
.
(BAT), 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.
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 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' 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
.'
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. 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.
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. However, this practice is far from consistent or universal.
, they have encountered new challenges that impose limits to their growth and potential profits. Government regulations, tariff
s, 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.
are exerting pressure on corporations to behave responsibly. Non-governmental organization
s 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. 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.
and Best Buy
are examples of organizations that have taken such steps.
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.
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.
The issues surrounding government regulation pose several problems. Regulation in itself is unable to cover every aspect in detail of a corporation's operations. 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).
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 organisations pay taxes to government to ensure that society and the environment are not adversely affected by business activities.
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. The required information includes:
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
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.
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. 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.
Basically, CSR means that a company's business model should be socially responsible and environmentally sustainable. By socially responsible it means that the company's activities should benefit the society and by environmentally sustainable it means that the activities of the company should not harm the environment.
But nowadays what we can see is that there is an outburst of enthusiasm for environmental causes only. For eg. controlling pollution,global warming, deforestation, mitigate carbon emissions etc. Whereas it can be said that the same enthusiasm is not seen for social welfare. This is because most of the social welfare activities of the companies contribute to the welfare of us able bodied people but do not take into account the disabled people who are also a part of the society in which the company exists and who amount to at least 10% of the population. Therefore, disability must be made a part of CSR policies of the companies and people with disabilities must be allowed to become stakeholders.
There should be non-discrimination or diversity management awareness-raising and training for employees in the companies, that include disability treatment. They should include the disability factor in employment/HR indicators (age distribution, gender, contract type, professional categories and/or activity areas, rotation) so that the situation of people with disabilities can be compared with that of other employees. The companies should take into account the characteristics of people with disabilities when managing human resources (recruitment, selection, contracting and induction, promotion, training, prevention of risks at work). Customer care staff training should be carried out by the companies aimed at guaranteeing appropriate treatment of people with disabilities. They should have a policy or directive aimed at considering or favouring suppliers and subcontractors that employ people with disabilities, including Sheltered Workshops.
Thus, carrying out business practice which includes disabled people will help improve the company's reputation and image in an increasingly competitive environment.
Finally, disability is one of the factors that can contribute to "Diversity" and Diversity is a rising value within companies’ management. However, disability is often pushed behind in favour of other diversity criteria, thus disability needs to be specifically included within the CSR.
Self-policing
Self-policing, a form of self-regulation, is the process whereby an organization is asked, or volunteers, to monitor its own adherence to legal, ethical, or safety standards, rather than have an outside, independent agency such as a governmental entity monitor and enforce those standards.-To the...
integrated into a business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...
. CSR policy functions as a built-in, self-regulating mechanism whereby businesses monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norm
Norm (sociology)
Social norms are the accepted behaviors within a society or group. This sociological and social psychological term has been defined as "the rules that a group uses for appropriate and inappropriate values, beliefs, attitudes and behaviors. These rules may be explicit or implicit...
s. The goal of CSR is 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
Public sphere
The public sphere is an area in social life where individuals can come together to freely discuss and identify societal problems, and through that discussion influence political action...
.
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 a sexual impact. It was used to describe corporate owners beyond shareholders as a result of an influential book by R. Edward Freeman
R. Edward Freeman
R. Edward Freeman is an American philosopher and professor of business administration at the Darden School of the University of Virginia. He has also taught at the University of Minnesota and the Wharton School. Freeman is particularly known for his work on stakeholder theory and on business works...
, Strategic management: a stakeholder approach in 1984. 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. Others argue CSR is merely window-dressing
Display window
A display window is a window in a shop displaying items for sale or otherwise designed to attract customers to the store. Usually, the term refers to larger windows in the front façade of the shop...
, 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
Business ethics
Business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.Business...
is one of the forms of applied ethics
Applied ethics
Applied ethics is, in the words of Brenda Almond, co-founder of the Society for Applied Philosophy, "the philosophical examination, from a moral standpoint, of particular issues in private and public life that are matters of moral judgment"...
that examines ethical principles and moral or ethical problems that can arise in a business environment. ISO 26000
ISO 26000
ISO, the International Organization for Standardization, has launched an International Standard providing guidelines for social responsibility named ISO 26000 or simply ISO SR and was released on 1 November 2010.-Guidance without certification:...
is the recognized international standard for CSR. Public sector organizations (the United Nations for example) adhere to the triple bottom line
Triple bottom line
The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
(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 EuropeContinental Europe
Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands....
an and the Anglo-Saxon
Anglosphere
Anglosphere is a neologism which refers to those nations with English as the most common language. The term can be used more specifically to refer to those nations which share certain characteristics within their cultures based on a linguistic heritage, through being former British colonies...
approaches to CSR. And even within Europe the discussion about CSR is very heterogeneous.
An approach for CSR that is becoming more widely accepted is a community-based development approach. In this approach, corporations work with local communities to better themselves. For example, the Shell Foundation
Shell Foundation
The Shell Foundation is an initiative of the oil major Royal Dutch Shell. Launched in1997, it is a worldwide, social investment initiative to concentrate on working with external partners to promote sustainable development...
's involvement in the Flower Valley, South Africa. In Flower Valley they set up an Early Learning Centre to help educate the community's children as well as develop new skills for the adults. Marks and Spencer is also active in this community through the building of a trade network with the community - guaranteeing regular fair trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
purchases.
Often activities companies participate in are establishing education facilities for adults and HIV/AIDS education programmes. The majority of these CSR projects are established in Africa.
A more common approach of CSR is philanthropy. This includes monetary donations and aid given to local organizations and impoverished communities in developing countries. Some organizations do not like this approach as it does not help build on the skills of the local people, 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
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
tea and coffee has been adopted by various businesses including KPMG
KPMG
KPMG is one of the largest professional services networks in the world and one of the Big Four auditors, along with Deloitte, Ernst & Young and PwC. Its global headquarters is located in Amstelveen, Netherlands....
. Its CSR manager commented, "Fairtrade fits very strongly into our commitment to our communities."
Another approach is garnering increasing corporate responsibility interest. This is called Creating Shared Value
Creating Shared Value
Creating Shared Value is a concept first introduced in Harvard Business Review article Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility and further expanded in the January 2011 follow-up piece entitled Creating Shared Value: Redefining Capitalism and...
, 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.
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.
Social accounting, auditing, and reporting
For a business to take responsibility for its actions, that business must be fully accountable. Social accountingSocial accounting
Social accounting is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at...
, 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.
Social accounting emphasizes the notion of corporate accountability
Accountability
Accountability is a concept in ethics and governance with several meanings. It is often used synonymously with such concepts as responsibility, answerability, blameworthiness, liability, and other terms associated with the expectation of account-giving...
. 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." An example of social accounting, to a limited extent, is found in an annual Director's Report
Director's Report
The Director's Report is a document produced by the board of directors under the requirements of UK company law, which details the state of the company and its compliance with a set of financial, accounting and corporate social responsibility standards....
, under the requirements of UK company law.
A number of reporting guidelines or standards have been developed to serve as frameworks for social accounting, auditing and reporting including:
- AccountAbilityAccountAbility (Institute of Social and Ethical AccountAbility)AccountAbility is an independent, global, not-for-profit organisation promoting accountability, sustainable business practices and corporate responsibility...
's AA1000 standard, based on John ElkingtonJohn ElkingtonJohn Elkington is a world authority on corporate responsibility and sustainable development. He is currently the Founding Partner & Executive Chairman of , a future-focused business working at the intersection of the sustainability, entrepreneurship and innovation movements...
's triple bottom lineTriple bottom lineThe triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
(3BL) reporting - The Prince's Accounting for Sustainability Project's Connected Reporting Framework
- The Fair Labor AssociationFair Labor AssociationThe Fair Labor Association , a non-profit labor rights organization, is a multi-stakeholder initiative bringing together companies, colleges and universities, and civil society organizations to improve working conditions worldwide by promoting adherence to international and national labor laws...
conducts audits based on its Workplace Code of Conduct and posts audit results on the FLA website. - The Fair Wear FoundationFair Wear FoundationFair Wear Foundation is an NGO working to improve workplace conditions in the garment and textile industry. Governed by labour unions, NGOs and business associations, FWF verifies that its member companies implement the FWF Code of Labour Practices in their supply chains...
takes a unique approach to verifying labour conditions in companies' supply chains, using interdisciplinary auditing teams. - Global Reporting InitiativeGlobal Reporting InitiativeThe Global Reporting Initiative produces one of the world's most prevalent standards for sustainability reporting - also known as ecological footprint reporting, Environmental Social Governance reporting, Triple Bottom Line reporting, Corporate Social Responsibility reporting...
's Sustainability Reporting Guidelines - GoodCorporation's Standard developed in association with the Institute of Business Ethics
- Earthcheck www.earthcheck.org Certification / Standard
- Social Accountability International's SA8000SA8000SA8000 is a global social accountability standard for decent working conditions, developed and overseen by Social Accountability International . Detailed guidance for implementing or auditing to SA8000 are available from its . SAI offers training in SA8000 and other workplace standards to managers,...
standard - Standard Ethics AeiStandard Ethics AeiStandard Ethics is a Sustainability Rating Agency based in Brussels. It is a European Economic Interest Grouping , a non profit organisation, which aims at promoting company ethics, Corporate Social Responsibility , Socially responsible investing and Corporate Governance according to the...
guidelines - The ISO 14000ISO 14000The ISO 14000 environmental management standards exist to help organizations minimize how their operations negatively affect the environment The ISO 14000 environmental management standards exist to help organizations (a) minimize how their operations (processes etc.) negatively affect the...
environmental management standard - The United Nations Global Compact promotes companies submitting a CSR/ sustainability report a Communication on Progress (COP). A COP report describes the company's implementation of the Compact's ten universal principles.
- The United NationsUnited NationsThe United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) provides voluntary technical guidance on eco-efficiency indicators, corporate responsibility reporting, and corporate governance disclosure. - Verite's Monitoring Guidelines
The FTSE Group
FTSE Group
FTSE Group is a world-leader in the provision of global index and analytical solutions. FTSE calculates indices across a wide range of asset classes, on both a standard and custom basis...
publishes the FTSE4Good Index
FTSE4Good Index
The FTSE4Good Index series is a series of ethical investment stock market indices launched in 2001 by the FTSE Group. A number of stock market indices are available, for example covering UK shares, US shares, European markets, and Japan, with inclusion based on a range of corporate social...
, 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
Sustainable development
Sustainable development is a pattern of resource use, that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come...
and CSR issues ("Triple Bottom Line Reports"), but the reports vary widely in format, style, and evaluation
Evaluation
Evaluation is systematic determination of merit, worth, and significance of something or someone using criteria against a set of standards.Evaluation often is used to characterize and appraise subjects of interest in a wide range of human enterprises, including the arts, criminal justice,...
methodology
Methodology
Methodology is generally a guideline for solving a problem, with specificcomponents such as phases, tasks, methods, techniques and tools . It can be defined also as follows:...
(even within the same industry). Critics dismiss these reports as lip service
Lip Service
Lip service is an idiom meaning 'giving approval or support insincerely' .Lip service may also refer to:- Television :* Lip Service , a 2010 dramatic series broadcast on BBC Three...
, citing examples such as Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
'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
Integrated reporting
Integrated reporting refers to the integrated representation of a company’s performance in terms of both financial and non-financial results. Integrated reporting provides greater context for performance data, clarifies how sustainability fits into operations or a business, and may help embed...
in place of an annual financial report and sustainability report. 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.
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., DemingW. Edwards Deming
William Edwards Deming was an American statistician, professor, author, lecturer and consultant. He is perhaps best known for his work in Japan...
's Fourteen Points, balanced scorecard
Balanced scorecard
The Balanced Scorecard is a strategic performance management tool - a semi-standard structured report, supported by proven design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the...
s). Orlitzky, Schmidt, and Rynes 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.
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
Philanthropy
Philanthropy etymologically means "the love of humanity"—love in the sense of caring for, nourishing, developing, or enhancing; humanity in the sense of "what it is to be human," or "human potential." In modern practical terms, it is "private initiatives for public good, focusing on quality of...
and volunteering
Volunteering
Volunteering is generally considered an altruistic activity, intended to promote good or improve human quality of life, but people also volunteer for their own skill development, to meet others, to make contacts for possible employment, to have fun, and a variety of other reasons that could be...
. CSR may be based within the human resources
Human resources
Human resources is a term used to describe the individuals who make up the workforce of an organization, although it is also applied in labor economics to, for example, business sectors or even whole nations...
, business development
Business development
A subset of the field of commerce, business development comprises a number of techniques and responsibilities which aim at:1. Researching new types of business/products/services with an emphasis on identifying gaps in the mitigation of needs of potential clients .2. Attracting new customers3...
or public relations
Public relations
Public relations is the actions of a corporation, store, government, individual, etc., in promoting goodwill between itself and the public, the community, employees, customers, etc....
departments of an organisation, or may be given a separate unit reporting to the CEO or in some cases directly to the board
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
. Some companies may implement CSR-type values without a clearly defined team or programme.
The business case
Business case
A business case captures the reasoning for initiating a project or task. It is often presented in a well-structured written document, but may also sometimes come in the form of a short verbal argument or presentation. The logic of the business case is that, whenever resources such as money or...
for CSR within a company will likely rest on one or more of these arguments:
Human resources
A CSR program can be an aid to recruitmentRecruitment
Recruitment refers to the process of attracting, screening, and selecting qualified people for a job. For some components of the recruitment process, mid- and large-size organizations often retain professional recruiters or outsource some of the process to recruitment agencies.The recruitment...
and retention
Retention
Retention may refer to:* Retention, in learning, the ability to retain facts and figures in memory ** Selective retention* Cultural retention* Customer retention...
, particularly within the competitive graduate
Graduate school
A graduate school is a school that awards advanced academic degrees with the general requirement that students must have earned a previous undergraduate degree...
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
Payroll giving
Payroll Giving or Give As You Earn - Is a tax free way for UK tax payers to give money to UK Registered Charities.Introduced in 1987, Payroll Giving is a simple, tax efficient scheme which allows employees to give money to the UK registered charity of their choice by having a deduction taken...
, fundraising
Fundraising
Fundraising or fund raising is the process of soliciting and gathering voluntary contributions as money or other resources, by requesting donations from individuals, businesses, charitable foundations, or governmental agencies...
activities or community volunteering. CSR has been found to encourage customer orientation among frontline employees.
Risk management
Managing riskRisk
Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...
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.
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.
Brand differentiation
In crowded marketplaces, companies strive for a unique selling propositionUnique selling proposition
The Unique Selling Proposition is a marketing concept that was first proposed as a theory to explain a pattern among successful advertising campaigns of the early 1940s. It states that such campaigns made unique propositions to the customer and that this convinced them to switch brands...
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. Several major brands, such as The Co-operative Group
The Co-operative Group
The Co-operative Group Ltd. is a United Kingdom consumer cooperative with a diverse range of business interests. It is co-operatively run and owned by its members. It is the largest organisation of this type in the world, with over 5.5 million members, who all have a say in how the business is...
, The Body Shop
The Body Shop
The Body Shop International plc, known as The Body Shop, has 2,400 stores in 61 countries, and is the second largest cosmetic franchise in the world, following O Boticario, a Brazilian company...
and American Apparel
American Apparel
American Apparel is a clothing manufacturer in the United States. It is a vertically integrated clothing manufacturer, wholesaler, and retailer that also performs its own design, advertising, and marketing...
are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice.
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.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 FriedmanMilton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...
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
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
and are in favor of neoliberalism
Neoliberalism
Neoliberalism is a market-driven approach to economic and social policy based on neoclassical theories of economics that emphasizes the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the...
argue that improvements in health, longevity
Longevity
The word "longevity" is sometimes used as a synonym for "life expectancy" in demography or known as "long life", especially when it concerns someone or something lasting longer than expected ....
and/or infant mortality
Infant mortality
Infant mortality is defined as the number of infant deaths per 1000 live births. Traditionally, the most common cause worldwide was dehydration from diarrhea. However, the spreading information about Oral Re-hydration Solution to mothers around the world has decreased the rate of children dying...
have been created by economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
attributed to free enterprise
Free enterprise
-Transport:* Free Enterprise I, a ferry in service with European Ferries between 1962 and 1980.* Free Enterprise II, a ferry in service with European Ferries between 1965 and 1982....
.
Critics of this argument perceive neoliberalism 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
Cultural imperialism
Cultural imperialism is the domination of one culture over another. Cultural imperialism can take the form of a general attitude or an active, formal and deliberate policy, including military action. Economic or technological factors may also play a role...
, noting that these countries usually have fewer labour protections, and thus their citizens are at a higher risk of exploitation by multinational corporations.
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. 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
Economic Justice for All
"Economic Justice for All" is the pastoral letter promulgated by the United States Conference of Catholic Bishops in 1986. It deals with the U.S. economy and with Catholic social teaching in the U.S. context...
). 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
Employee engagement
Employee engagement, also called worker engagement, is a business management concept. An "engaged employee" is one who is fully involved in, and enthusiastic about their work, and thus will act in a way that furthers their organization's interests...
.
Motives
Some critics believe that CSR programs are undertaken by companies such as British American TobaccoBritish American Tobacco
British American Tobacco p.l.c. is a global tobacco company headquartered in London, United Kingdom. It is the world’s second largest quoted tobacco company by global market share , with a leading position in more than 50 countries and a presence in more than 180 countries...
(BAT), the petroleum giant BP
BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
(well known for its high-profile advertising campaigns on environmental aspects of its operations), and McDonald's
McDonald's
McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 64 million customers daily in 119 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by the eponymous Richard and Maurice McDonald; in 1948...
(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.
Another concern is that sometimes companies claim to promote CSR and be committed to sustainable development
Sustainable development
Sustainable development is a pattern of resource use, that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come...
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 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' 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
Heart disease
Heart disease, cardiac disease or cardiopathy is an umbrella term for a variety of diseases affecting the heart. , it is the leading cause of death in the United States, England, Canada and Wales, accounting for 25.4% of the total deaths in the United States.-Types:-Coronary heart disease:Coronary...
.'
Royal Dutch Shell
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
has a much-publicized CSR policy and was a pioneer in triple bottom line
Triple bottom line
The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
reporting, but this did not prevent the 2004 scandal concerning its misreporting of oil reserves
Oil reserves
The total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is...
, 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
Investor state dispute settlement
Investor State Dispute Settlement provisions in international trade treaties grant investors covered by provisions with a right to initiate dispute settlement proceedings against foreign governments in their own right under international law....
provisions in trade or investment treaties if otherwise necessary public health or environment protection legislation has impeded corporate investments. 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
Corporate Social Entrepreneurship
A corporate social entrepreneur is defined as "an employee of the firm who operates in a socially entrepreneurial manner; identifying opportunities for and/ or championing socially responsible activity; in addition to helping the firm achieve its business targets. The CSE operates regardless of...
, whereby CSR can also be driven by employees' personal values, in addition to the more obvious economic and governmental drivers.
Ethical consumerism
The rise in popularity of ethical consumerismEthical consumerism
Ethical consumerism is the intentional purchase of products and services that the customer considers to be made ethically. This may mean with minimal harm to or exploitation of humans, animals and/or the natural environment...
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. However, this practice is far from consistent or universal.
Globalization and market forces
As corporations pursue growth through globalizationGlobalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
, they have encountered new challenges that impose limits to their growth and potential profits. Government regulations, tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s, 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.
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 investingSocially responsible investing
Socially responsible investing , also known as sustainable, socially conscious, or ethical investing, describes an investment strategy which seeks to consider both financial return and social good....
are exerting pressure on corporations to behave responsibly. Non-governmental organization
Non-governmental organization
A non-governmental organization is a legally constituted organization created by natural or legal persons that operates independently from any government. The term originated from the United Nations , and is normally used to refer to organizations that do not form part of the government and are...
s 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. In recent years, the traditional conception of CSR is being challenged by the more community-conscious Creating Shared Value
Creating Shared Value
Creating Shared Value is a concept first introduced in Harvard Business Review article Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility and further expanded in the January 2011 follow-up piece entitled Creating Shared Value: Redefining Capitalism and...
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. 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. CaterpillarCaterpillar Inc.
Caterpillar Inc. , also known as "CAT", designs, manufactures, markets and sells machinery and engines and sells financial products and insurance to customers via a worldwide dealer network. Caterpillar is the world's largest manufacturer of construction and mining equipment, diesel and natural gas...
and Best Buy
Best Buy
Best Buy Co., Inc. is an American specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Mexico, Canada & China. The company's subsidiaries include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates...
are examples of organizations that have taken such steps.
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.
Laws and regulation
Another driver of CSR is the role of independent mediators, particularly the government, in ensuring that corporations are prevented from harming the broader social good, including people and the environment. CSR critics such as Robert ReichRobert Reich
Robert Bernard Reich is an American political economist, professor, author, and political commentator. He served in the administrations of Presidents Gerald Ford and Jimmy Carter and was Secretary of Labor under President Bill Clinton from 1993 to 1997....
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.
The issues surrounding government regulation pose several problems. Regulation in itself is unable to cover every aspect in detail of a corporation's operations. This leads to burdensome legal processes bogged down in interpretations of the law and debatable grey areas (Sacconi 2004). For example, General Electric
General Electric
General Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
failed to clean up the Hudson River
Hudson River
The Hudson is a river that flows from north to south through eastern New York. The highest official source is at Lake Tear of the Clouds, on the slopes of Mount Marcy in the Adirondack Mountains. The river itself officially begins in Henderson Lake in Newcomb, New York...
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).
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
Kyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...
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
Kevin Rudd
Kevin Michael Rudd is an Australian politician who was the 26th Prime Minister of Australia from 2007 to 2010. He has been Minister for Foreign Affairs since 2010...
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 organisations pay taxes to government to ensure that society and the environment are not adversely affected by business activities.
Denmark
Denmark
Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. 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. 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 management is the CERES Principles that resulted after the Exxon ValdezExxon Valdez
Oriental Nicety, formerly Exxon Valdez, Exxon Mediterranean, SeaRiver Mediterranean, S/R Mediterranean, Mediterranean, and Dong Fang Ocean is an oil tanker that gained notoriety after running aground in Prince William Sound spilling hundreds of thousands of barrels of crude oil in Alaska...
incident in Alaska in 1989 (Grace and Cohen 2006). Other examples include the lead poisoning
Lead poisoning
Lead poisoning is a medical condition caused by increased levels of the heavy metal lead in the body. Lead interferes with a variety of body processes and is toxic to many organs and tissues including the heart, bones, intestines, kidneys, and reproductive and nervous systems...
paint used by toy giant Mattel
Mattel
Mattel, Inc. is the world's largest toy company based on revenue. The products it produces include Fisher Price, Barbie dolls, Hot Wheels and Matchbox toys, Masters of the Universe, American Girl dolls, board games, and, in the early 1980s, video game consoles. The company's name is derived from...
, 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
Magellan Metals
Magellan Metals operates a lead mine at Wiluna in Western Australia.Magellan Metals is wholly owned by and the principal operating asset of Ivernia Inc., an international base metals mining, exploration and development company listed on the Toronto Stock Exchange under the symbol IVW.The Magellan...
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
Escherichia coli
Escherichia coli is a Gram-negative, rod-shaped bacterium that is commonly found in the lower intestine of warm-blooded organisms . Most E. coli strains are harmless, but some serotypes can cause serious food poisoning in humans, and are occasionally responsible for product recalls...
spread through Odwalla apple
Apple
The apple is the pomaceous fruit of the apple tree, species Malus domestica in the rose family . It is one of the most widely cultivated tree fruits, and the most widely known of the many members of genus Malus that are used by humans. Apple grow on small, deciduous trees that blossom in the spring...
juice. The company ordered a recall of all apple or carrot
Carrot
The carrot is a root vegetable, usually orange in colour, though purple, red, white, and yellow varieties exist. It has a crisp texture when fresh...
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. 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.
Arguments for Including Disability in CSR
In recent years CSR is increasingly becoming a part of a large number of companies. It is becoming an important activity for businesses throughout the globe.Basically, CSR means that a company's business model should be socially responsible and environmentally sustainable. By socially responsible it means that the company's activities should benefit the society and by environmentally sustainable it means that the activities of the company should not harm the environment.
But nowadays what we can see is that there is an outburst of enthusiasm for environmental causes only. For eg. controlling pollution,global warming, deforestation, mitigate carbon emissions etc. Whereas it can be said that the same enthusiasm is not seen for social welfare. This is because most of the social welfare activities of the companies contribute to the welfare of us able bodied people but do not take into account the disabled people who are also a part of the society in which the company exists and who amount to at least 10% of the population. Therefore, disability must be made a part of CSR policies of the companies and people with disabilities must be allowed to become stakeholders.
There should be non-discrimination or diversity management awareness-raising and training for employees in the companies, that include disability treatment. They should include the disability factor in employment/HR indicators (age distribution, gender, contract type, professional categories and/or activity areas, rotation) so that the situation of people with disabilities can be compared with that of other employees. The companies should take into account the characteristics of people with disabilities when managing human resources (recruitment, selection, contracting and induction, promotion, training, prevention of risks at work). Customer care staff training should be carried out by the companies aimed at guaranteeing appropriate treatment of people with disabilities. They should have a policy or directive aimed at considering or favouring suppliers and subcontractors that employ people with disabilities, including Sheltered Workshops.
Thus, carrying out business practice which includes disabled people will help improve the company's reputation and image in an increasingly competitive environment.
Finally, disability is one of the factors that can contribute to "Diversity" and Diversity is a rising value within companies’ management. However, disability is often pushed behind in favour of other diversity criteria, thus disability needs to be specifically included within the CSR.
See also
- AccountabilityAccountabilityAccountability is a concept in ethics and governance with several meanings. It is often used synonymously with such concepts as responsibility, answerability, blameworthiness, liability, and other terms associated with the expectation of account-giving...
- BeneficiationBeneficiationIn mining, beneficiation is a variety of processes whereby extracted ore from mining is separated into mineral and gangue, the former suitable for further processing or direct use....
- Business in the CommunityBusiness in the CommunityBusiness in the Community is a British business-community outreach charity promoting responsible business, CSR, corporate responsibility, and is one of the Prince's Charities of Charles, Prince of Wales....
- Business ethicsBusiness ethicsBusiness ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.Business...
- Business philosophy
- The Business for Peace FoundationThe Business for Peace FoundationThe Business for Peace Foundation is a non-profit foundation based in Oslo, Norway. Each year, the foundation names seven Honourees who receive the Oslo Business for Peace Award, in recognition of their individual and outstanding businessworthy contribution to the building of trust, stability and...
- Carbon neutrality
- Carbon offsetCarbon offsetA carbon offset is a reduction in emissions of carbon dioxide or greenhouse gases made in order to compensate for or to offset an emission made elsewhere....
- Chief Green OfficerChief Green OfficerA Chief green officer , or Chief environmental commitment officer , is a corporate officer responsible for implementing and managing the corporation's commitment to reducing its carbon footprint and protecting the environment...
- Civil societyCivil societyCivil society is composed of the totality of many voluntary social relationships, civic and social organizations, and institutions that form the basis of a functioning society, as distinct from the force-backed structures of a state , the commercial institutions of the market, and private criminal...
- Corporate behaviourCorporate behaviourCorporate behaviour is the behaviour of an organisation when considered as a single body.The behaviour of an organisation is influenced by the arrangements for its ownership and control...
- Corporate benefitCorporate benefitThe interest of the company is a concept that the board of directors in corporations are in most legal systems required to use their powers for the commercial benefit of the company and its members...
- Corporate citizenshipCorporate citizenshipCorporate citizenship is a term used to describe a company's role in, or responsibilities towards society. For this reason it is sometimes used interchangeably with corporate social responsibility, and in fact many companies including Microsoft, IBM and Novartis have used it in this way to describe...
- Corporate governanceCorporate governanceCorporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled...
- Corporate personhoodCorporate personhoodCorporate personhood is the status conferred upon corporations under the law, which allows corporations to have rights and responsibilities similar to those of a natural person. There is a question about which subset of rights that are afforded to natural persons should also be afforded to...
- Corporate Social EntrepreneurshipCorporate Social EntrepreneurshipA corporate social entrepreneur is defined as "an employee of the firm who operates in a socially entrepreneurial manner; identifying opportunities for and/ or championing socially responsible activity; in addition to helping the firm achieve its business targets. The CSE operates regardless of...
- Corporate sustainabilityCorporate sustainabilityCorporate sustainability is a business approach that creates long-term consumer and employee value by not only creating a "green" strategy aimed towards the natural environment, but taking into consideration every dimension of how a business operates in the social, cultural, and economic environment...
- CorporationCorporationA corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
- Csrwire CanadaCSRWire CanadaCSRWire Canada is a commercial news release service formalized in 2006 and owned by Environmental Communication Options. CSRWire.ca is Canada's largest corporate social responsibility news source and only dedicated CSR wire service...
- Customer engagementCustomer engagementCustomer engagement refers to the engagement of customers with one another, with a company or a brand. The initiative for engagement can be either consumer- or company-led and the medium of engagement can be on or offline....
- Ethical bankingEthical bankingAn ethical bank, also known as a social, alternative, civic, or sustainable bank, is a bank concerned with the social and environmental impacts of its investments and loans. Ethical banks are part of a larger societal movement toward more social and environmental responsibility in the financial...
- Ethical jobEthical jobAn ethical job is a broad term to describe a job which accords with a person's ethics or values.Ethical jobs may include green jobs, community sector jobs and jobs in the international aid sector....
- Green jobGreen jobA green job, also called a green-collar job is, according to the United Nations Environment Program, "work in agricultural, manufacturing, research and development , administrative, and service activities that contribute substantially to preserving or restoring environmental quality...
- Green Standard
- Inclusive businessInclusive businessAn inclusive business is a sustainable business that benefits low-income communities. It is a business initiative that, keeping its for-profit nature, contributes to poverty reduction through the inclusion of low income communities in its value chain.In simple words inclusive business is all about...
- ISO 26000ISO 26000ISO, the International Organization for Standardization, has launched an International Standard providing guidelines for social responsibility named ISO 26000 or simply ISO SR and was released on 1 November 2010.-Guidance without certification:...
- Integrity ManagementIntegrity ManagementIntegrity Management Consulting is a fast-emerging global sector that advises individuals and corporations on how to apply the highest ethical standards to every aspect of their business. At the core of Integrity Management is the belief that companies have a strong interest, as well as a...
- Not Just For ProfitNot just for profitNot Just For Profit is a concept that captures an expanded set of values for defining and evaluating for-profit private sector organizations, not only by their ability to generate profit as is done traditionally, but also by their determination and success in driving a benefit for people and/or...
- OECD Guidelines for Multinational EnterprisesOECD Guidelines for Multinational EnterprisesOECD Guidelines for Multinational Enterprises are annex to the OECD Declaration on International Investment and Multinational Enterprises. They are recommendations providing voluntary principles and standards for responsible business conduct for multinational corporations operating in or from...
- Organizational JusticeOrganizational justiceThe term organizational justice was coined by Greenberg and is defined as an individual’s perception of and reactions to fairness in an organization. Justice or fairness refers to the idea that an action or decision is morally right, which may be defined according to ethics, religion, fairness,...
- Pole of excellence
- Principles for Responsible Investment (PRI)Principles for Responsible Investment (PRI)Principles of Responsible Investment is an initiative and a set of aspirational and voluntary guidelines for investment entities wishing to address environmental, social, and corporate governance issues...
- Public Eye AwardsPublic Eye AwardsThe Public Eye, held every year since 2000, is a counter-event to the annual meeting of the World Economic Forum in Davos. The Public Eye celebrated its ten-year anniversary on 28 January 2009....
- Renewable-energy economy
- Shareholder primacyShareholder primacyShareholder primacy is a theory in corporate governance holding that shareholder interests should be assigned first priority. A shareholder primacy approach often gives shareholders power to intercede directly and frequently in corporate decisionmaking, through such means as unilateral shareholder...
- SustainabilitySustainabilitySustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...
- The Corporation
- Voluntary complianceVoluntary complianceVoluntary compliance is one of possible ways of practicing corporate social responsibility.Voluntary compliance is seen as an alternative to the state-imposed regulations on company's behavior...
Further reading
- Carroll, A.; A. Buchholtz (2006). Business and Society: Ethics and Stakeholder Management, 6th ed. Mason, OH: Thomson/South-Western. ISBN 0324225814.
- Carroll, A. (1998). "The Four Faces of Corporate Citizenship". Business and Society Review. September, vol. 100, no. 1, pp. 1–7
- Commission of the European Communities (2006): 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 0070155240. - 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. Building a Responsibility Model Including Accountability, Capability and Commitment
- 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.
- 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.