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Business in society: making a positive and

responsible contribution
Corporate responsibility (CR) is gaining an increasing significance for businesses worldwide.
This creates a need for companies, of any size, to develop an approach to CR that suits their
specific needs and business circumstances.
To assist businesses through the process of developing their own CR codes and practices, ICC
has developed 9 practical steps, ICC 9 Steps to Responsible Business Conduct, that are
addressed to companies of all sizes including small and medium sized companies (SMEs).
This website provides an interactive environment to easily access the ICC 9 steps online. It
further provides additional commentary and examples to each step.
The role of business in an open market economy system is to create wealth for shareholders,
employees, customers and society at large. No other human activity matches private enterprise in
its ability to marshal people, capital and innovation under controlled risk-taking, in order to
create meaningful jobs and produce goods and services profitably profit being essential to
long-term business survival and job creation.
While all businesses have an implicit set of inherent values, the number of businesses that have
formally written values and principles is rapidly increasing. These principles have become more
and more explicit and provide the framework for corporate behaviour beyond their legal
obligations. At the same time, growing numbers of companies have been adding environmental
and social indicators to their economic and financial results in reports that are often entitled
social reports or sustainability reports. Indeed, sustained profits and principles are mutually
supportive and an increasing number of companies view corporate responsibility as integral to
their systems of governance. This is part of the requirements for doing business in today's global
In recent years there has also been substantial growth in the number of principles, guidelines or
codes produced for business by governmental and non-governmental organizations. Companies
face multiple, and sometimes conflicting, demands to endorse these initiatives.
This has led more companies to consider how they should approach corporate responsibility
issues and, more specifically, whether they should develop their own business principles and
which external codes they should use as reference points.
The main purpose of this document is to make practical suggestions to companies on how to
approach corporate responsibility issues. The intention is to help position individual company
principles in the existing framework of generic business principles, government codes, new
initiatives, and broader societal values. The document's secondary purpose is to explain to those
outside business how companies can approach corporate responsibility issues.
What is corporate responsibility?
There is no single, commonly accepted definition of the concept of "corporate responsibility",
which is also referred to as corporate social responsibility, responsible business conduct,
corporate citizenship, voluntary corporate initiatives, etc.
ICC prefers the terms "responsible business conduct" or "voluntary corporate initiatives".
However, this document also uses the term corporate responsibility, as this is most frequently
used in publications on the subject.
ICC proposes the following definition of corporate responsibility from a business perspective:
"the voluntary commitment by business to manage its activities in a responsible way".
A growing number of companies approach corporate responsibility as a comprehensive set of
values and principles, which are integrated into business operations through management
policies and practices and by means of decision-making processes.
Where does ICC stand on corporate responsibility?
Since its foundation more than 80 years ago, ICC has promoted the market economy and the
greatest possible economic freedom for business, based on self-regulation and responsible
business conduct.
ICC strongly encourages voluntary corporate responsibility initiatives by companies. Various
studies have shown that companies practice good corporate citizenship by spreading best practice
among customers and employees, suppliers and business associates in areas such as labour, the
environment and human rights in countries where they operate. Responsible, long-term
oriented entrepreneurship is the driving force for sustainable economic development and for
providing the managerial, technical and financial resources needed to meet social and
environmental challenges.
The role of government is to provide the basic national and international framework of laws and
regulations for business operations and that essential role will continue to evolve. Beyond this,
good corporate practice is usually spread most effectively by strong corporate principles and
example, rather than by codes of conduct. A commitment to responsible business conduct
requires consensus and conviction within a company. Voluntary business principles have the
advantage of bridging cultural diversity within enterprises and offering the flexibility to tailor
solutions to particular conditions. Voluntary approaches minimize competitive distortions, as
well as the transaction costs associated with regulatory compliance, and inspire many companies
to go beyond the regulatory baseline, thereby often eliminating the need for further legislation.
ICC recognizes the contribution that dialogue with responsible, transparent and constructive non-
governmental organizations (NGOs) can make in addressing business issues that have a societal
impact. Ultimately, however, the decision to engage NGOs in dialogue should be taken on a
case-by-case basis and rest with the specific company and NGO concerned. Careful choice of
dialogue partner is essential.
To be effective and relevant to an individual company's specific circumstances, business
principles should be developed and implemented by the companies themselves. The thousands of
multinational enterprises throughout the world face widely differing conditions in the various
countries in which they operate. Moreover, many more companies have international activities
directly or indirectly through purchasing and contracting. Company principles must be
sufficiently flexible to reflect the diversity of firms as well as that of their suppliers and business
partners. A "one-size-fits-all" approach is incompatible with the great diversity that exists within
business, although some examples mentioned below provide a useful checklist of possible areas
to cover. The great variety of individual company principles and other voluntary initiatives attest
to this diversity and should be encouraged.
Companies that do not have formal business principles often have unwritten values that guide
their operations, and may have internal policies, monitoring, appraisal and reporting procedures.
Often, business principles themselves are supplemented by internal guidelines and procedures on
specific issues, such as environmental management, safety and occupational health, or ethics and
In the final analysis, it is the behaviour of the company that counts.
Basic principles
ICC believes that, whether formal or implied, business principles should reflect the values
expressed in the ICC Business Charter for Sustainable Development, in the ICC Rules of
Conduct on Extortion and Bribery in International Business Transactions and in various ICC
marketing and advertising codes.
The value of external codes
While acknowledging that external observers may play a positive role in discussions about good
business practice, ICC is concerned by the widening scope of codes of conduct at the
intergovernmental level purporting to improve the "corporate social responsibility" of
enterprises. It is particularly concerned when this affects those companies trading or investing
outside their home countries. ICC urges governments to reject demands to impose codes on
companies. The international activities of companies have demonstrably contributed to the
positive aspects of globalization a process driven by the spread of technology and the rapid
development of communication and transportation. Through their international activities,
companies often make an important contribution to improving living and working conditions in
developing countries. By investing in production facilities and purchasing goods and services
from local firms, they help to create jobs, develop skills and know-how, act as a vehicle for the
transfer of technology and improve productivity and competitiveness, thereby strengthening the
economy in the countries where they operate.
A basis for action
The primacy of individual company principles
For individual companies, by far the most important considerations are whether to make their
voluntary business principles explicit, what these should be and how to ensure that they are acted
upon. Legal implications of individual company principles should also be considered, since
empty promises or claims could expose the company to liability. The principles themselves, and
associated arrangements, are likely to be in line with the needs and circumstances of the
particular company, reflecting upon its history, culture, geographical location, size, sector, and so
on. In devising them, there will be much to learn from the good practice of other companies and
from guidelines developed by business associations, whether national or international.
A framework for business principles
Codes, and various resolutions and declarations by governmental organizations, can serve as
useful benchmarks for large companies, as well as for small and medium-sized enterprises
(SMEs), in the development of their own individual formal principles and business conduct.
SMEs make an essential contribution to improving economic and social conditions where they
operate for instance, through the provision of employment and training. Companies must
therefore be given effective freedom of choice to subscribe to such codes.
Although ICC does not formally endorse any codes other than its own, the following are listed
below for research and reference purposes:
Broad recommendations:
the OECD Guidelines for Multinational Enterprises annexed to the Declaration on
International Investment and Multinational Enterprises of the Organisation for Economic
Cooperation and Development (OECD)
the International Labour Organization (ILO) Tripartite Declaration of Principles
Concerning Multinational Enterprises and Social Policy
the Caux Principles (Caux Round Table)
the Global Sullivan Principles
Specific or sectoral guidance:
the Responsible Care programme (chemical industry)
the Ceres Principles from the Coalition for Environmentally Responsible Economics
Principles, guidelines or codes suggested by governments, intergovernmental agencies and
non-governmental organizations (NGOs):
European Parliament resolution on "EU standards for European enterprises operating in
developing countries: towards a European code of conduct"
Principles for Global Corporate Responsibility: Benchmarks for Measuring Business
Performance, from the Inter-Faith Centre on Corporate Responsibility/Ecumenical
Council for Corporate Responsibility/Taskforce on the Churches and Corporate
Responsibility (ICCR/ECCR/TCCR)
Amnesty International Human Rights Guidelines for Companies
A recent OECD study listed 128 such initiatives, and that number is still growing.
Various UN declarations of core values that have a broad sweeping impact:
the Universal Declaration of Human Rights (1948) (directed to "all organs of society")
the ILO Declaration on Fundamental Principles and Rights at Work (1998)
the Rio Declaration on Sustainable Development (1992)
The three declarations were cited by UN Secretary General Kofi Annan in his speech at Davos in
January 1999, inviting business to adopt universally agreed values in the areas of human rights,
labour standards and environmental protection as a "Global Compact for the 21st Century". ICC
has welcomed Mr Annan's appeal. Various initiatives are under way between the UN, ICC and
other business organizations to demonstrate how companies are contributing to these values in
the way they conduct their business. The Global Compact can play a useful role in promoting
best corporate practice in response to the challenges of globalization, sustainable growth, and
responsible business conduct.
ICC applauds the primacy accorded to human rights by the UN. The making and enforcement of
laws for protecting human rights are tasks for governments.
A voluntary approach
A company must develop its own understanding of how its principles or behaviour relate to
external expectations or to external codes or guidelines. Internal monitoring of compliance,
external reporting of performance and independent assurance are matters that should be decided
by the companies themselves.
Relations with suppliers
Supply chain responsibility is an issue of growing concern for companies, particularly in those
sectors in which production is largely outsourced (for example, clothing and footwear). While, in
most cases, companies cannot be held legally accountable for their suppliers' conduct, a
responsible business approach encourages companies where reasonable and appropriate to
engage in a constructive dialogue and direct cooperation with their suppliers and subcontractors,
especially in developing countries. Companies should encourage their suppliers to abide by and
apply the same business principles that they themselves uphold, thereby promoting good practice
throughout the supply chain. This can be done using several incentives, including information
and training, as well as audits of the supplier's practices. Corporate buyers are increasingly
requesting that their suppliers provide comprehensive social and environmental information on
the products and materials that they purchase.
Some companies may also require independent certification of conformity standards of social
responsibility from their suppliers. In these instances, companies could alleviate the burden on
suppliers in developing countries by accepting third party certification that is similar, but perhaps
not identical, to their own requirements.
Conditions for corporate responsibility
Only when companies are profitable can they contribute effectively to the improvement of social
conditions by creating jobs and economic growth. Prosperous companies are therefore the best
guarantee of economic development and job creation. It cannot be assumed that companies that
adopt a responsible business conduct are also automatically economically successful or vice-
versa. However, corporate responsibility can contribute to the success of a business and is a part
of good management.
To be successful, companies cannot be indifferent to the society in which they operate. Peaceful
conditions, legal certainty and good human relations within the company are key elements of
business success. They create the stability and confidence that encourage investment, improve
productivity and foster customer loyalty.
These are arguments in favour of corporate policies that include social, environmental and
economic considerations that will benefit a broader constituency than those directly involved in
the company's fortunes.
What is the rationale for responsible business conduct?
Responsible business conduct may place companies in a more favourable legal and political
environment, improve their public image, give them a strategic advantage over competitors in
the long-term and help them to make their management systems more effective. Market forces,
the demands of customers, and scope for pre-empting government legislation, all provide further
incentives. Responsible business conduct may improve long-term profitability and the ability of
companies to obtain a greater share of world markets. These positive consequences of the
exercise of corporate responsibility make it a farsighted and profitable business policy.
Companies that have had experience in developing their own voluntary business principles have
found that adopting such principles may:
(legal and political aspects)
Set a positive example by encouraging emulation and the spread of best business practice
Anticipate new external pressures from regulatory bodies
Improve relations with regulatory bodies and be helpful regarding decisions on operating
Reduce exposure to litigation or criminal and civil sanctions
Contribute to the development of economically efficient solutions, sometimes more
efficient than those arrived at through regulation
(Aspects relating to relations with customers, suppliers and the public)
Help build customer attraction, satisfaction and loyalty, at a time when customers are
increasingly exercising their right to choose
Reduce risks of negative publicity, boycotts and tarnished public image
Improve product image, brand name and reputation
(Organizational aspects)
Increase morale, transparency and trust among company personnel
Help diffuse new technologies and best management practices
Induce better supervision of supply-chain management;
(Economic and financial aspects)
Reduce operating costs through systematic management of resources
Reduce the cost of doing business and attract new business through rigorous business
integrity policies
Increase productivity by means of a motivated workforce
Attract a new range of investors
Offer opportunity for inclusion in socially-responsible investment indices
Nine practical steps to responsible business conduct
If a company is considering whether to develop its own business principles or to support external
codes of conduct, the following steps are suggested.
1. Confirm CEO/board commitment to give priority to responsible business conduct
A basic requirement is the commitment of senior management to treat responsible business
conduct as a corporate priority. Rather than reacting to outside pressures, a company's voluntary
adoption of its own business principles should be motivated by the desire to express the values
that guide its approach to doing business.
2. State company purpose and agree on company values
Responsible business conduct is built upon the values and goals of the company itself, as well as
on legal requirements and stakeholder expectations. Business principles commonly include a
statement of mission, values and operating principles. All companies should consider articulating
their core values as an underpinning for their own principles.
3. Identify key stakeholders
Business principles set out what companies see as their responsibilities to employees,
shareholders, customers, business partners and other groups in society. Finding out from
stakeholders what issues are important to them is therefore essential. Stakeholders defined as
those constituencies that have a direct stake in a company typically can include shareholders
and investors, company employees, trade unions, client companies and consumers, and local
communities directly affected by a company's operations. A company may also wish to broaden
its consultations to include other participants in the production chain, as well as government
authorities, the media and non-governmental organizations. Companies should be mindful of the
differences that may exist within stakeholder groups such as local communities who are
becoming increasingly emphatic about their concerns and with whom it may be useful to
establish a dialogue.
4. Define business principles and policies
Each company needs to think through its principles for itself (rather than just take an existing
code "off the shelf"). Some companies choose to do this through open dialogue and collaboration
with selected stakeholders. Some companies' business principles are just high-level statements of
principle. Others contain more detailed statements of policy, while some prepare separate
materials on policies, management systems, implementation and monitoring procedures. The
underlying reasons why business principles make good economic sense should be borne in mind
in defining the principles. Companies should consider legislation, social expectations, reputation
indicators, risk management, bottom-line benefits, corporate and product image and strategic
5. Establish implementation procedures and management systems
Companies must raise awareness among their own personnel and other stakeholders if business
principles are to be effective and command wide support. Processes or formal management
systems for developing, adopting and implementing individual principles should therefore
include internal consultation and communication. Companies offer many examples of
management systems covering areas ranging from health, safety and the environment to business
integrity, human resources and sustainable development. There are also international standards
for these systems, such as those of the International Organization for Standardization (ISO). In
some sectors, management processes and guidelines also apply both to joint ventures and to
contractors and suppliers. The range of issues covered varies between sectors but continues to
develop to include, for example, diversity of the work force, climate change, biodiversity, waste
management and recycling. In order to implement effectively its business principles a company
should define objectives and targets and a structured programme to achieve them.
6. Benchmark against selected external codes and standards
Government-mandated or other external codes are unlikely to be a viable alternative to voluntary
business principles developed by the company itself, although these may have significant value
as external benchmarks. Some companies choose to express public support for one or more of
these external codes. It is for an individual company or industry sector to decide what the most
useful benchmark codes are and to develop their own understanding of how business principles
relate to external codes and guidelines, and to societal expectations. Support for external codes
can be time-consuming since they may imply additional commitments. Companies should be
selective, bearing in mind their own needs. ICC can provide guidance on the implications of
supporting some of the existing international code offerings.
7. Set up internal monitoring
Corporate policies and their implementation need to be kept under constant review to keep
abreast of developments in technology and scientific understanding, customer needs and wider
societal expectations. It is for the company to assess its social performance through internal
consultation and periodic review by management. Equally, it is the company's responsibility to
check that its business principles are being acted upon. The extent and manner of external
reporting of performance is, of course, for the company to decide. Given the wide differences
between industries and individual companies, the contents of such reports are bound to vary.
Various international initiatives are being undertaken to develop a common yardstick for
voluntary reporting of the economic, environmental and social impact of company activity. An
example is the work being done by the Global Reporting Initiative, which is supported by the
UN and other international organizations, to agree on a set of common core indicators. They
would enable investors and other stakeholders to make global comparisons. Companies should
retain the flexibility to adapt such voluntary indicators to their particular circumstances. A key
way for companies to create confidence and trust in their commitment to responsible business
conduct is to provide timely and reliable information on their financial, environmental and social
performance and to communicate this to their stakeholders. Markets all over the world provide
examples of companies who enjoy sustained public goodwill and respect by doing this
8. Use language that everyone can understand
Principles, policies and guidelines must be clearly expressed, particularly if the material is to be
translated. The same is true of any external reports.
9. Set pragmatic and realistic objectives
These recommendations require the commitment of executives running the business and the
development of expertise and internal processes. Above all, responsible business conduct
requires a sustained effort by everybody in the company. A key element of a company's
organizational development is promoting the importance of responsible business conduct and
ensuring that new managers are well versed in this area.
This document sets out why ICC is convinced that it is in a company's interest to make corporate
responsibility a priority in today's competitive world of instant communication in which
stakeholders have access to a wealth of information and enjoy an abundance of choice. Having
stated the case for responsible business conduct, and its benefits to profitable business
operations, this document aims to provide practical advice on how to make corporate
responsibility to society an integral part of business conduct.
The very act of formulating business principles can be of great value in articulating a company's
view of its place in society and what can and should be expected of it. Setting and implementing
guidelines is not a once-and-for-all affair, but a dynamic process. Once established, principles
must be subject to continuous review to keep up with the times we live in and the expectations of
all stakeholders, especially a company's customers.
Business makes a huge contribution to economic and social development. Companies are eager
to encourage environmental and social progress by remaining true to their own business
principles. Whether these are formal or informal, they play an important role in bridging cultural
diversity within companies and in enhancing awareness of societal values and concerns.
Finally, voluntary principles are much more effective than prescriptive regulation because self-
regulation is far more easily adaptable to the vast differences in circumstances, objectives,
operating methods and resources of individual companies. Principles that are freely adopted
without external constraint enable companies to find solutions and make improvements that
regulations alone could not achieve
- See more at: http://www.iccwbo.org/products-and-services/trade-facilitation/9-steps-to-

Business ethics
From Wikipedia, the free encyclopedia
Business ethics (also corporate 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

Business ethics has both normative and descriptive dimensions. As a corporate practice and a
career specialization, the field is primarily normative. Academics attempting to understand
business behavior employ descriptive methods. The range and quantity of business ethical issues
reflects the interaction of profit-maximizing behavior with non-economic concerns. Interest in
business ethics accelerated dramatically during the 1980s and 1990s, both within major
corporations and within academia. For example, today most major corporations promote their
commitment to non-economic values under headings such as ethics codes and social
responsibility charters. Adam Smith said, "People of the same trade seldom meet together, even
for merriment and diversion, but the conversation ends in a conspiracy against the public, or in
some contrivance to raise prices."
Governments use laws and regulations to point business
behavior in what they perceive to be beneficial directions. Ethics implicitly regulates areas and
details of behavior that lie beyond governmental control. The emergence of large corporations
with limited relationships and sensitivity to the communities in which they operate accelerated
the development of formal ethics regimes.

Responding to social responsibilities and ethics
Businesses work in a wider social environment in which they have a responsibility to a range of
stakeholders including the wider community.

The term Corporate Social Responsibility (CSR) refers to the responsibility that modern business
organisations have to creating a healthy and prosperous society. Businesses do not work in
isolation, e.g:
the products and services that they provide are consumed by large numbers of consumers, their
employees are part of wider communities, in which they have responsibilities to families and
other social groupings.
business activity impacts on the lives of people in many ways, ranging from the creation of a
safe and clean environment, through clean and careful production, to the creation of jobs, and
opportunities for all members of the community.
Responsible businesses are responsible citizens. This responsibility is reflected through ethical
practice. Ethical practice involves doing the right thing rather than the wrong one - and is based
on operating in a 'moral way'.
Corporate social responsibility involves making sure that:
your goods and services meet customer requirements, and are provided in a fair way.
your employees are given responsibility and opportunities to work with the organisation in
supporting community projects.
the organisation is involved in relevant sponsorship and 'corporate giving' activities that are
relevant and helpful to the community.
the organisation is involved in activities and programmes that support the development of the
whole community.
Many organisations today realise the importance of building a prosperous 'inclusive society'.
This involves including members of society by providing them with opportunities and futures
rather than marginalising and excluding them. In addition large companies like Cadbury
Schweppes and Nestl have strong corporate social responsibility programmes involving
employees working on community projects and the sponsorship of relevant community activities.

Read more: http://businesscasestudies.co.uk/business-theory/external-environment/responding-to-
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Business Ethics and Corporate Social Responsibility in the e-Economy: A
By: Zoe S. Dimitriades [biography]
The paper addresses the concepts of business ethics and corporate social responsibility in the old
vis--vis the new economy. The effects of globalization and its impact on the transition from the
industrial to the digital era are explored. Although the behaviour of business organizations has
always had a profound worldwide impact, with the decline of the nation state economic power
has, for the first time, eroded political power. Simultaneously, the undergoing revolution in
contemporary information and communication technologies has significantly empowered the
customer. Responding to enhanced customer awareness and sensitivity to business and social
responsibility issues -coupled with consumers' increasing ability to react- companies in the
digital age may be expected to develop even stronger cultures of corporate social responsibility,
proactively seeking to increasingly honour their moral obligations to society in the 21st century.
Keywords: Business Ethics, Corporate Social Responsibility, Global Standards, Social
Accountability 8000, e-Economy.
1. Business Ethics and Corporate Social Responsibility: Conceptual Definitions
The concepts of business ethics and social responsibility are often used interchangeably,
although each has a distinct meaning. The term business ethics represents a combination of two
very familiar words, namely "business" and "ethics". The word business is usually used to mean
"any organization whose objective is to provide goods or services for profit" (Shaw and Barry,
1995, p. 3; also see Velasquez, 1998, p.14), whereas organizations are defined as "(1) social
entities that (2) are goal oriented, (3) are designed as deliberately structured and coordinated
activity systems and (4) are linked to the external environment" (Daft, 2001, p. 12). One of the
most important organizational elements highlighted by this definition is that organizations are
indeed open systems, i.e. they must interact with the environment in order to survive. . "The
organization has to find and obtain needed resources, interpret and act on environmental
changes, dispose of outputs, and control and coordinate internal activities in the face of
environmental disturbances and uncertainty" (ibid, p. 14). The fact that business organizations
are open systems means that although businesses must make a profit in order to survive they
must balance their desire for profit against the needs and desires of the society within which they
operate. Hence, despite the fact that in market economies business organizations are traditionally
allowed some degree of discretion being "ostensibly free to choose what goods and services
they produce, the markets they aim to serve and the processes by which they produce" (Smith
and Johnson, 1996, p. 28), organized societies around the world did indeed establish principles
and developed rules or standards of conduct - both legal and implicit - in order to guide
businesses in their efforts to earn profits in ways that do not harm society as a whole.
The word ethics in the term business ethics comes from the Greek word ethos meaning
"character or custom" (Shaw and Barry, op.cit, p.3). Ethics has been defined in a variety of ways,
inter alia, as: "the study of morality" (Velasquez, 1998, p.7); "inquiry into the nature and grounds
of morality where the term morality is taken to mean moral judgments, standards and rules of
conduct" (Ferrell and Fraedrich, 1997, p.5); and/or as "the code of moral principles and values
that governs the behaviors of a person or group with respect to what is right or wrong" (Daft,
opcit, p. 326). Based on these conceptualizations, the definition of business ethics adopted here
comprises "the moral principles and standards that guide behavior in the world of business"
(Ferrell and Fraedrich, opcit, p. 6), whereas "an organization's obligation to maximize its positive
impact, and minimize its negative impact, on society" is being termed corporate social
responsibility (Ferrell and Fraedrich, p. 67).
Corporate social responsibility is a multidimensional construct comprising four subsets of (1)
economic; (2) legal; (3) ethical; and (4) voluntary philanthropic responsibilities (Carroll, 1989,
pp 30-33; Ferrell and Fraedrich, ibid, p.6). The economic responsibilities of a business are to
produce goods and services that society needs and wants at a price that can perpetuate the
business and satisfy its obligations to investors. Thus social responsibility, as it relates to the
economy, encompasses a number of specific issues including how businesses relate to
competition, shareholders, consumers, employees, the local community and the physical
environment. The legal responsibilities of businesses are simply the laws and regulations they
must obey. It is the bare minimum required of business organizations by society in return for
allowing them to obtain the inputs they need from the environment, transform inputs into outputs
and dispose of outputs -- in the form of goods and services acquired by consumers in order to
satisfy their individual needs and wants. The legal dimension of corporate social responsibility
thus refers to obeying local, national and international law regulating competition
(procompetitive legislation) and protecting: workers' human rights (equity and safety
legislation); the consumer (consumer protection legislation); and the natural environment
(environmental protection laws). Ethical responsibilities are those behaviours or activities
expected of business by society -- yet not codified in law. This subset of corporate social
responsibilities may be interpreted as expressing the 'spirit of the law' vis--vis the 'letter of the
law' in the previous case. Lastly voluntary philanthropic responsibilities are those behaviours
and/or activities desired of business by society and referring to business contributions to society
in terms of quality of life and society's welfare - for example, giving to charitable organizations
and/or supporting community projects.
Although there would appear to be little disagreement about the need for organizations to act
responsibly toward the wider society and the natural environment in which they operate,
organizations themselves have adopted a wide range of positions regarding corporate social
responsibility. The various organizational stances vis--vis social responsibility in free-market
economies fall along a continuum, ranging from a low to high degree of socially responsible
organizational practices (Barney and Griffin, 1992, pp. 734-735). The few organizations that take
a social obstruction approach to social responsibility usually do as little as possible to solve
social and/or environmental problems. In such a case .. "the organization does stand apart from
society and functions best when it gets back to basics, when it is freed of government regulation
and constraints and discards social engineering in favor of just plain engineering" (Schwartz and
Gibb, 1999, p.96). One step removed from social obstruction is social obligation, whereby the
organization does everything that is required of it legally but does nothing more. A firm that
adopts the social response approach generally meets its legal and ethical requirements and
sometimes voluntarily even goes beyond these requirements in selected cases. Finally, the
highest degree of social responsibility that a firm can exhibit is the social contribution approach.
Firms adopting this approach view themselves as citizens of a society and, as a result,
proactively seek opportunities to contribute.
2. Business Ethics and Corporate Social Responsibility in the Old Economy: A Theoretical
Economy has been defined as "a systematic way of describing how goods and services are
exchanged among members of a given community" (Aldrich, 1999, p. 4). The earliest economies
were agricultural in nature and centered on producing, exchanging and consuming products
derived from the natural world. In agricultural economies land and labour were understandably
the most important factors determining economic and business success. The emergence of
industrial economies, following the Industrial Revolution, was characterized by a drive of
business organizations to produce goods for mass markets. In the industrial era capital and labour
were by far the most important ingredients of success, leading to a hundred years of astonishing
economic progress: "the industrialised countries are about 20 times better off at the end of this
century than they were a hundred years earlier" (Coyle, 1999).
The close link between economy and the nation state constitutes one of the most prominent
features of the industrial era, with political power significantly surpassing economic power
(Coyle, 1999; Schwartz and Gibb, 1999). Traditionally, national governments in industrialized
countries tended to focus on economic growth and full employment via creating a business
environment characterized by a fairly low degree of uncertainty. The most successful type of
organization in this environment was the "make-and-sell" organization, namely the organization
that was able to accurately predict what the market should demand, made the product and then
went out and sold it (Tapscott, Lowy and Ticoll, 1998, p. 37). The dominant business-strategy
adopted by make-and-sell organizations was internally-driven and management-centered -- i.e. it
was the manufacturers themselves who made all the hard decisions: what sorts of consumer
needs they would attempt to meet; what markets they would serve; what products they would
offer; and what prices they would charge (Zenger, Musselwhite, Hurson and Perrin, 1994, p.14).
Moreover, due to the fairly high degree of environmental predictability, enhanced emphasis was
placed by organizations on stability, efficiency and hence rigid bureaucratic organizational
cultures stressing that "shareholder value is the only value that matters" (Schwartz and Gibb,
opcit, p. 96). Being a consumer in the industrial era meant "having very little direct power over
what goods were available" (Aldrich, ibid, p. 9), while public opinion regarding the social
obligation and/or social response approach to corporate social responsibility was in fact mediated
by government in the form of legislation and direct or indirect regulation (Barney and Griffin,
1992, p. 736-737; Schwartz and Gibb, ibid, p. 4).
3. Globalization and Society's Changing Expectations of Business
Recently, however, society's perception of corporate social responsibility issues has commenced
to change in response to globalization. The term globalization is perhaps one of the most widely
used and least precisely defined concepts in contemporary business. According to Schwartz and
Gibb (1999) the term 'globalization' does not refer to a single process but "serves as shorthand
for several related processes", namely:
an increasingly shared awareness across many publics
a new international financial web
new open space into which dominating cultures can move
progress from 'inter-national' to 'global' institutions
declining importance of geography
dangerous new linkages possible
greater speed of events
trend away from nation-states
whereby "shared awareness across publics" highlights the remarkable growth of the
contemporary NGO community: non-governmental organizations (NGOs) currently represent
millions of citizens around the globe, while the new international media can mobilize those
millions overnight if it chooses; the "new international financial web" implies that
'transparency, probity and rule of law are nowadays more important to more people than ever';
"open space for dominating cultures" indicates more and deeper debate over international values;
the creation of "global" as opposed to "inter-national" institutions refers to the entrance of new
unfamiliar players, the 'stateless corporations', in the business terrain; "declining importance of
geography" suggests that the traditional link between production and place, between economy
and the nation state is now breaking down, while more and more people all over the world
consider themselves stakeholders in decisions made by businesses anywhere; "dangerous new
linkages" relates to any number of emerging networks whose impacts the public (rightly) feels
unsure of; the "greater speed" at which the world now operates emphasizes that companies that
become insulated from their markets or communities can be blindsided by changing attitudes
more quickly than ever; finally, the shift of power away from nation-states means that the public
in general requires more accountability from other powerful actors, such as business, and expects
them to respond directly to the demands of public opinion rather than waiting for that opinion to
be mediated by government legislation or regulation (Schwartz and Gibb, ibid, p.4).
Thus, society's perception of corporate social responsibility seems to undergo a phase of
fundamental change. A variety of forces -geopolitical, socio-economic, demographic and
technological- appear to influence society's changing expectations of business. First, the recent
collapse of several communist regimes, such as the former Soviet Union, around the world has
led to the development of a new integrated global business environment with market economies
being the clear winner (Tapscott, 2000, p. 18). Second, new problems are emerging -shaking up
existing assumptions about our world- including: biotechnology and information technology
concerns; the ageing of industrial nations; and mass unemployment. Profound technological
change always involves economic upheaval and the impact of computerization is likely to prove
of equal or even greater importance than that of electrification (Coyle, 1999, xi). Moreover,
genetic engineering technologies being explored today raise more complex issues of scientific
and social responsibility than corporate decision makers have ever faced (Schwartz and Gibb, p.
The population of the industrial nations is ageing rapidly. The proportion over 60 in the
industrialized countries that make up the OECD is predicted to rise from less than a fifth in 1990
to a third in 2030 (Coyle, opcit, p. xi). While in one half of the modern industrialized world,
continental Europe, more than a tenth of the population of working age is currently unemployed -
- and mass unemployment is here to stay as technology is making more and more workers
obsolete (ibid, pp xi, xv and 238). The combined effect of rapid technological progress, ageing
and unemployment exerts an unbearable pressure on the kind of welfare state almost all the
Western European nations have had in place since World War II, as the proportion of population
that pays tax - both of working age and still employed - is continually thinning.
A shrinking world, radical technological advancement and the unavoidable end of welfare
resulted in enhanced uncertainty and at the same time led to a realization that "problems are
increasingly global and demand solutions that presuppose a framework of values acceptable
everywhere" (Kidder and Cleveland, 1994). Cultures around the world thus converged towards
adopting some core values, comprising: truthfulness; fairness; freedom; community; tolerance;
responsibility; and respect for life (Kidder and Cleveland, opcit). These universally shared values
led to establishing international principles regarding the ethical responsibilities of contemporary
business to society -the Caux Round Table (CRT) Principles of Business- endorsed by the
overwhelming majority of the world's nations (Schwartz and Gibb, 1999, p. 75). This recognition
of fundamental international rights and corresponding responsibilities was further codified into a
global corporate code of conduct -- grounded on the United Nations Universal Declaration of
Human Rights (1948); the European Convention on Human Rights (1950); the Helsinki Final
Act (1975); the OECD Guidelines for Multinational Enterprises (1976); the International Labour
Office Tripartite Declaration of Principles Concerning Multinational Enterprises and Social
Policy (1977); and the United Nations Code of Conduct on Transnational Corporations (1972) --
covering five major business areas: employee practices and policies; basic human rights and
fundamental freedoms; consumer protection; environmental protection; and political
involvements (Ferrell and Fraedrich, 1997, pp 202-206).
Last but not least, new relationships are currently emerging among the traditional social partners.
A major development in this respect has been a significant shift in NGO strategy. For years non-
governmental organizations (NGOs) focused on changing national government policies, while
later they expanded their focus to include intergovernmental or supranational organizations such
as the United Nations, the Organization of American States and the European Commission
(Schwartz and Gibb, opcit, p. 132). Recently however NGOs have begun paying increased
attention to the general subject of business and social responsibility, moving away from the
traditional "NGO-government" relationship toward a dynamic "NGO-corporate" relationship.
The importance of this development has been highlighted by Peter Sutherland, former head of
the GATT: "the only organizations now capable of global thought and action - the ones who will
conduct the most important dialogues of the 21st century - are the multinational corporations and
the NGOs" (ibid, p. 139).
4. Business Ethics and Corporate Social Responsibility in the New Economy
Just as the industrial economy gradually evolved from the agricultural economy, so the industrial
economy is currently giving way to the emerging digital economy. In the new economy
technology becomes the dominant factor of wealth generation "rather than land, labor and
particularly capital", whereas "information and its proper management through information
technology are making the difference and separating the winners from the losers" (Aldrich, 1999,
pp. 6 and 7).
In the digital environment the balance of power shifts inexorably from the manufacturer to the
consumer. To be competitive in the new economy companies must offer products and services
that are specifically customized to meet the needs of individual consumers (Daft, 2001, p. 207).
This implies that "businesses in the digital age must employ product development processes that
interact dynamically with customers; that they perform a more constant-and precise- monitoring
of overall market trends; that cycle times get dramatically reduced; that raw materials are
procured rapidly and in a cost-effective manner; and that distribution methods that suit the
customer's, not the company's convenience are put into place. In short, the free flow of
information made possible in the digital age will put the customer at the center of business
priorities and strategies" (Aldrich, opcit, pp. 11-12).
Consumer empowerment in turn implies a 180-degree change in business strategy from a 'make-
and-sell' to a 'sense-and-respond' organization "an adaptive system for responding to
unpredictable requests. It is built around dynamically linked sub-processes and relies on
economies of scope rather than economies of scale. The people in a sense-and respond
environment are empowered and accountable, and spend their time producing customized
outcomes in accordance with an adaptive business design" (Tapscott et al, 1998, p. 37). Sense-
and-respond organizations are thus customer-driven, process-focused and employee-involved
(Zenger et al, 1994, p. 14). Due to the considerable increase in uncertainty, enhanced emphasis is
being placed on flexibility, change and hence adaptive, entrepreneurial cultures stressing that
"customer value is the only value that matters" (Daft, pp 319 and 483-487).
At the same time -responding to society's changing expectations of business- a growing number
of companies seem to take pride in corporate citizenship, committing themselves to social
responsibility. Companies that have received Corporate Conscience Awards in recent years
include Kellogg, Sainsbury, Hewlett-Packard, Pfizer Pharmaceuticals, and Fuji Xerox (Schwartz
and Gibb, p. 78). A most notable evolution in this respect has been the development of Social
Accountability 8000 (SA-8000) - a global standard "providing a framework for the independent
verification of the ethical production of all goods, made in companies of any size, anywhere in
the world" . a major opportunity for companies "to demonstrate their commitment to best
practice in the ethical manufacture and supply of the goods they sell" (Fabian, 1998, p.1). SA-
8000 involves auditing companies by independent assessors on a wide range of issues,
comprising: child labour, health and safety, freedom of association, the right to collective
bargaining, discrimination, disciplinary practices and compensation (Fabian, opcit, p. 2).
Organizations meeting the standard earn a certificate attesting to their "social accountability
policies, management and operations" (ibid, p. 3).
5. Concluding Remarks
Business behaviour has always had a significant worldwide impact - in the eighteenth, nineteenth
and twentieth centuries, and even before then. In the industrial era however political power
generally surpassed economic power since governments were able to control their national
economies (Coyle, 1999, pp 18 and 219). The effects of globalization, though, have led to a
considerable erosion of power traditionally exercised by national governments. In view of the
decline of the nation-state "it has become government, as well as corporate, policy to let the
market decide" (Schwartz and Gibb, p. 139). Indeed, the International Labour Organisation
(ILO) has repeatedly underlined that public opinion will attain increasing importance over the
next few years "as will the sanction of the market" (opcit, p. 140).
The role played by public opinion in shaping corporate behaviour is, of course, not new. What is
new is the empowerment of the customer in the new economy, as a result of the undergoing
revolution in information and communication technologies. Consumers are nowadays informed
and use this information to wield power over companies. Hence, companies experiencing crises
as a result of perceived irresponsible social behaviour include Nestle, Royal Dutch/Shell, Union
Carbide, Texaco and Nike (Schwartz and Gibb, 1999, pp. 25-65). Responding to enhanced
customer information -coupled with consumers' increasing ability to react- companies may be
expected to develop even stronger cultures of responsibility, proactively seeking to increasingly
honour their moral obligations to society in the 21st century.